Article 60-3Special Provisions on Capital Gains upon Transfer of Assets to a Nonresident by Gift or Similar Transfer

①If Securities and similar interests held by a Resident are transferred to a Nonresident by gift, hereditary succession, or a legacy (hereinafter referred to as a "gift or similar transfer" in this Article), for the calculation of that Resident's business income, capital gains, or miscellaneous income, unless otherwise provided, the Securities and similar interests are deemed to have been transferred at the time of the gift or similar transfer, for the amount equivalent to their value at that time.

②If a contract for unsettled margin transactions or similar transactions to which a Resident is a party is transferred to a Nonresident by a gift or similar transfer, for the calculation of that Resident's business income or miscellaneous income, the amount equivalent to the amount of profit or loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled margin transactions or similar transactions were settled is deemed to have arisen at the time of the gift or similar transfer.

③If a contract for unsettled derivatives transactions to which a Resident is a party is transferred to a Nonresident by a gift or similar transfer, for the calculation of that Resident's business income or miscellaneous income, the amount equivalent to the amount of profit or loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled derivatives transactions were settled is deemed to have arisen at the time of the gift or similar transfer.

④If an individual (including the individual's heir) who received a transfer of Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions from a Resident to whom the provisions of the preceding three paragraphs (including as applied pursuant to paragraph (8) (including as applied mutatis mutandis pursuant to paragraph (10); the same applies in item (i)) or paragraph (11)) have applied with regard to income tax for the year that includes the date of the gift or the date of commencement of the succession (hereinafter referred to as the "date of the gift or similar transfer" in this Article) transfers (meaning a transfer as prescribed in paragraph (4) of the preceding Article; the same applies in paragraph (9)) or settles those Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions, the calculation of business income, capital gains, or miscellaneous income is governed by the following; provided, however, that this does not apply to those Securities and similar interests, unsettled margin transactions or similar transactions, and unsettled derivatives transactions in the case where neither a Tax Return has been filed nor a determination has been made with regard to income tax for the year that includes the date of the gift or similar transfer, to those Securities and similar interests, unsettled margin transactions or similar transactions, and unsettled derivatives transactions for which the amount equivalent to the value of the Securities and similar interests at the time of the gift or similar transfer, or the amount equivalent to the amount of profit or loss on the unsettled margin transactions or similar transactions or unsettled derivatives transactions, has not been included in the gross revenue used to calculate business income, capital gains, or miscellaneous income for the year that includes the date of the gift or similar transfer, or to Securities and similar interests, unsettled margin transactions or similar transactions, and unsettled derivatives transactions to which the first sentence of paragraph (6) (including as applied pursuant to paragraph (7)) has applied.

⑤The provisions of the preceding paragraphs do not apply to a Resident for whom the total of the amount equivalent to the value of the Securities and similar interests, the amount equivalent to the amount of profit or loss prescribed in paragraph (2) on the unsettled margin transactions or similar transactions, and the amount equivalent to the amount of profit or loss prescribed in paragraph (3) on the unsettled derivatives transactions, as of the time of the gift or similar transfer, for the Securities and similar interests held, and the unsettled margin transactions or similar transactions and unsettled derivatives transactions to whose contracts the Resident is a party, at the time of the gift or similar transfer is less than 100,000,000 yen, or to a Resident for whom the total of the periods prescribed by Cabinet Order as periods during which the Resident had a domicile or residence in Japan within the 10 years before the date of the gift or similar transfer is five years or less.

⑥With regard to those of the Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions transferred, through the gift or similar transfer, from a Resident to whom the provisions of paragraphs (1) through (3) are to apply with regard to income tax for the year that includes the date of the gift or similar transfer, to a donee, heir, or legatee who is a Nonresident, that are prescribed in each of the following items for the category of case set forth in that item, all of the transfers of Securities and similar interests, the settlements of unsettled margin transactions or similar transactions, and the settlements of unsettled derivatives transactions that were deemed to have been made pursuant to the provisions of paragraphs (1) through (3) in the calculation of the business income, capital gains, or miscellaneous income for that year of the Resident referred to in those paragraphs may be treated as not having occurred. In such a case, the provisions of the proviso to paragraph (6) of the preceding Article apply mutatis mutandis.

⑦For the purpose of applying the provisions of the preceding paragraph to an individual to whom the provisions of paragraphs (1) through (3) have applied with regard to income tax for the year that includes the date of the gift (referred to as a "donor whose gift is taxed as a sale" in the following paragraph) and who, pursuant to Article 137-3, paragraph (3) (Tax Payment Grace Period Where the Special Provisions on Capital Gains upon Transfer of Assets to a Nonresident by Gift or Similar Transfer Apply), has been granted a tax payment grace period under paragraph (1) of that Article, or to an individual to whom the provisions of paragraphs (1) through (3) have applied with regard to income tax for the year that includes the date of commencement of the succession (referred to as a "decedent whose estate is taxed as a sale" in the following paragraph and paragraph (11)) and whose heir, pursuant to paragraph (3) of that Article, has been granted a tax payment grace period under paragraph (2) of that Article, the term "five years" in that paragraph is deemed to be replaced with "10 years".

⑧If a donee of a donor whose gift is taxed as a sale and who has been granted a tax payment grace period under Article 137-3, paragraph (1) (including as applied pursuant to paragraph (3) of that Article; the same applies in the following paragraph) (referred to as a "donor with deferred tax" in the following paragraph and paragraph (11)), or an heir of a decedent whose estate is taxed as a sale who has been granted a tax payment grace period under paragraph (2) of that Article (including as applied pursuant to paragraph (3) of that Article; the same applies in the following paragraph) (referred to as an "heir with deferred tax" in paragraphs (11) and (12)), has, by the base date for that tax payment grace period (meaning the gift reference expiry date prescribed in paragraph (1) of that Article or the inheritance reference expiry date prescribed in paragraph (2) of that Article; the same applies in the following paragraph), transferred (meaning a transfer as prescribed in paragraph (8) of the preceding Article; hereinafter the same applies in this paragraph and paragraph (10)) or settled the Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions that were transferred to a Nonresident through the gift or similar transfer, or has transferred them by a gift or inheritance with limited liability prescribed in paragraph (8) of the preceding Article (hereinafter referred to as a "gift or inheritance with limited liability" in this paragraph through paragraph (10)), and the transfer price for the transfer or the amount equivalent to the value of the Securities and similar interests at the time of the gift or inheritance with limited liability, or the amount of profit or loss arising from the settlement or the deemed margin transaction profit or loss at a gift or inheritance with limited liability or deemed derivatives profit or loss at a gift or inheritance with limited liability for that gift or inheritance with limited liability, falls under any of the following cases, then, for the purpose of applying the provisions of paragraphs (1) through (3) with regard to the income tax of the donor whose gift is taxed as a sale or the decedent whose estate is taxed as a sale for the year that includes the date of the gift or similar transfer, the phrase "the amount equivalent to their value at that time" in paragraph (1) may be deemed to be replaced with "the transfer price for the transfer of those Securities and similar interests prescribed in paragraph (8) or the amount equivalent to the value of those Securities and similar interests at the time of the gift or inheritance with limited liability", the phrase "the amount equivalent to the amount of profit or loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled margin transactions or similar transactions were settled" in paragraph (2) may be deemed to be replaced with "the amount of profit or loss arising from the settlement prescribed in paragraph (8) or the deemed margin transaction profit or loss at a gift or inheritance with limited liability", and the phrase "the amount equivalent to the amount of profit or loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled derivatives transactions were settled" in paragraph (3) may be deemed to be replaced with "the amount of profit or loss arising from the settlement prescribed in paragraph (8) or the deemed derivatives profit or loss at a gift or inheritance with limited liability":

⑨If, with regard to Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions transferred by gift from a donor with deferred tax, a Nonresident receiving that transfer who has received from that donor with deferred tax (including the donor's heir; hereinafter the same applies in this paragraph) notice that the donor has been granted a tax payment grace period under Article 137-3, paragraph (1) or (2) with regard to income tax for the year that includes the date of the gift and notice of the base date for that tax payment grace period (including that Nonresident's heir) has, during the period from the date of the gift until the base date for that tax payment grace period, transferred or settled those Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions, or transferred them by a gift or inheritance with limited liability, that person must notify that donor with deferred tax, within two months from the date of the transfer, settlement, or gift or inheritance with limited liability (or, for an heir in the gift or inheritance with limited liability, the date on which the heir learned of the commencement of the succession), that the person has transferred, settled, or transferred by a gift or inheritance with limited liability those Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions, and of the type, the name of the issue, and the number of the Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions so transferred, settled, or transferred by a gift or inheritance with limited liability, and other particulars that serve as a reference.

⑪If Securities and similar interests that a donee of a donor with deferred tax or an heir with deferred tax has continued to hold since the date of the gift or similar transfer, or unsettled margin transactions or similar transactions or unsettled derivatives transactions that the donee or heir has not settled, fall under any of the following cases on the day on which five years have elapsed from the date of the gift or similar transfer (or, if the donor with deferred tax or heir with deferred tax has been granted a tax payment grace period under paragraph (1) or (2) of Article 137-3 pursuant to paragraph (3) of that Article, the day on which 10 years have elapsed; hereinafter the same applies in this paragraph), then, for the purpose of applying the provisions of paragraphs (1) through (3) with regard to the income tax of the donor with deferred tax, or of the decedent whose estate is taxed as a sale of the heir with deferred tax, for the year that includes the date of the gift or similar transfer, the phrase "the time of the gift or similar transfer" in those provisions may be deemed to be replaced with "the day on which five years have elapsed from the date of the gift or similar transfer (or, if the donor with deferred tax or heir with deferred tax prescribed in paragraph (11) with regard to the gift or similar transfer has been granted a tax payment grace period under paragraph (1) or (2) of Article 137-3 pursuant to paragraph (3) of that Article (Tax Payment Grace Period Where the Special Provisions on Capital Gains upon Transfer of Assets to a Nonresident by Gift or Similar Transfer Apply), the day on which 10 years have elapsed)":

⑫For the purpose of applying the provisions of paragraph (6) through the preceding paragraph, Securities and similar interests that a donee, heir, legatee, or heir with deferred tax prescribed in those provisions has acquired after the date of the gift or similar transfer prescribed in those provisions due to an event set forth in any of the items of paragraph (11) of the preceding Article are deemed to have been continuously held by that donee, heir, legatee, or heir with deferred tax.

⑬Beyond what is provided for in paragraph (6) through the preceding paragraph, Cabinet Order provides for the necessary particulars concerning the application of the provisions of paragraphs (1) through (5).