Act on General Rules for National Taxes

Where a return filed by the due date (including a return of refund claim; the same applies in paragraph (3)) has been filed (including where a return filed after the due date has been filed and the proviso to paragraph (1) or paragraph (9) of the following Article applies), if an amended return has been filed or a reassessment has been made, penalty tax for understatement is imposed on the taxpayer in an amount equivalent to the amount calculated by multiplying the tax amount payable under the provisions of Article 35, paragraph (2) (Payment of National Tax using the Self-Assessment System) based on the amended return or reassessment by 10% (or by 5% if the amended return was not filed in anticipation that a reassessment would be made of the national tax pertaining to the return because an examination had been conducted with regard to that national tax).

In the case falling under the provisions of the preceding paragraph (excluding where the provisions of paragraph (6) apply), if the payable tax amount prescribed in the preceding paragraph (if, before the amended return or reassessment referred to in that paragraph, an amended return had been filed or a reassessment had been made of the national tax to which that amended return or reassessment pertains, the amount obtained by adding the cumulative increased tax amount for that national tax) exceeds the amount equivalent to the tax amount on the return filed by the due date for that national tax or 500,000 yen, whichever is greater, the amount of penalty tax for understatement referred to in that paragraph is, notwithstanding the provisions of that paragraph, to be the amount obtained by adding, to the amount calculated under the provisions of that paragraph, the amount calculated by multiplying the tax amount equivalent to the excess portion (if the payable tax amount prescribed in that paragraph is less than the tax amount equivalent to that excess portion, that payable tax amount) by 5%.

In the preceding paragraph, the meanings of the terms listed in the following items are as prescribed respectively in those items:

cumulative increased tax amount: the total of the tax amounts payable under the provisions of Article 35, paragraph (2) based on amended returns filed or reassessments made of that national tax before the amended return or reassessment referred to in paragraph (1) (if, with regard to that national tax, there has been a reassessment that reduces that payable tax amount or a change to the original disposition through a decision, determination or judgment on an appeal against or action for a reassessment, the amount obtained by deducting the amount equivalent to the tax amount of the portion reduced thereby, and if the provisions of paragraph (5) have been applied, the amount obtained by deducting the amount that should have been deducted under the provisions of that paragraph);

tax amount on the return filed by the due date: the tax amount payable under the provisions of Article 35, paragraph (1) or (2) based on the filing of a return filed by the due date (if the proviso to paragraph (1) or paragraph (9) of the following Article applies, including a return filed after the due date; the same applies in paragraph (5), item (ii)) (if, with regard to the national tax pertaining to these returns, there are any of the following amounts, the amount obtained by adding those amounts, and if there is a tax amount equivalent to the amount of a refund stated in these returns pertaining to income tax, corporation tax, local corporation tax, inheritance tax or consumption tax, the amount obtained by deducting that tax amount):

The amount to be deducted under the provisions of Article 95 (Foreign Tax Credit) or Article 165-6 (Credit for Foreign Taxes of Nonresidents) of the Income Tax Act, the amount equivalent to the amount of tax withheld at source prescribed in Article 120, paragraph (1), item (iv) (Final Return of Income) of that Act (including as applied mutatis mutandis pursuant to Article 166 (Return, Payment and Refund) of that Act) pertaining to the amended return or reassessment referred to in paragraph (1), the amount of estimated tax prepayment prescribed in Article 120, paragraph (2) of that Act (including as applied mutatis mutandis pursuant to Article 166 of that Act), or the amount of income tax reduced or released under the provisions of Article 2 (Reduction of or Release from Income Tax) of the Act on Reduction or Release, Deferment of Collection and Other Measures Related to Tax Imposed on Disaster Victims (Act No. 175 of 1947);

The interim payment amount prescribed in Article 2, item (xxxviii) (Definitions) of the Corporation Tax Act, the amount to be deducted under the provisions of Article 68 (Credit for Income Tax) (including as applied mutatis mutandis pursuant to Article 144 (Credit for Income Tax of Foreign Corporations) of that Act), Article 69 (Credit for Foreign Taxes) or Article 144-2 (Credit for Foreign Taxes of Foreign Corporations) of that Act, or the amount of corporation tax payable under the provisions of Article 90 (Payment by Interim Return for Retirement Pension Reserves, etc.) of that Act (including as applied mutatis mutandis pursuant to Article 145-13 (Return and Payment) of that Act) (if an amended return has been filed or a reassessment has been made with regard to that amount, the amount of corporation tax after that return or reassessment);

The interim payment amount prescribed in Article 2, item (xviii) (Definitions) of the Local Corporation Tax Act, the amount to be deducted under the provisions of Article 12 (Credit for Foreign Taxes) of that Act, or the amount of local corporation tax payable under the provisions of Article 20, paragraph (2) (Payment by Interim Return) of that Act (if an amended return has been filed or a reassessment has been made with regard to that amount, the amount of local corporation tax after that return or reassessment);

The amount to be deducted under the provisions of Article 20-2 (Credit for Inheritance Tax on Overseas Property), Article 21-8 (Credit for Gift Tax on Overseas Property), and Article 21-15, paragraph (3) and Article 21-16, paragraph (4) (Inheritance Tax Amount under the Settlement at the Time of Inheritance Taxation) of the Inheritance Tax Act;

The interim payment amount prescribed in Article 2, paragraph (1), item (xx) (Definitions) of the Consumption Tax Act.

In the case falling under the provisions of paragraph (1), if, before the amended return was filed or the reassessment was made (hereinafter referred to as an "amended return, etc." in this paragraph) with regard to matters to be entered or recorded in the books (limited to those specified by Ministry of Finance Order, and including, where an electronic or magnetic record has been prepared or retained in lieu of the preparation or retention of the books, that electronic or magnetic record; the same applies hereinafter in this paragraph and in paragraph (5) of the following Article), the taxpayer was requested by the relevant official of the National Tax Agency, a Regional Taxation Bureau or a tax office (hereinafter referred to as the "relevant official" in this paragraph and in paragraph (5) of that Article) to present or submit those books, and the case falls under any of the following cases (excluding where the taxpayer is not responsible), the amount of penalty tax for understatement referred to in paragraph (1) is, notwithstanding the provisions of that paragraph and paragraph (2), to be the amount obtained by adding, to the amount calculated under those provisions, the amount calculated by multiplying the payable tax amount prescribed in paragraph (1) (if there are facts that are to form the basis for the calculation of that tax amount other than those relating to matters to be entered or recorded in the books that are the cause of the amended return, etc. (hereinafter referred to as "facts other than those relating to matters to be recorded in the books" in this paragraph), the tax amount obtained by deducting the amount calculated, as provided for by Cabinet Order, as the tax amount based on the facts other than those relating to matters to be recorded in the books) by 10% (or by 5% if the case falls under the case listed in item (ii)):

where the taxpayer did not present or submit the books to the relevant official, or where the entry or record, among the matters to be entered or recorded in the books presented or submitted to the relevant official, of the matters specified by Ministry of Finance Order as important matters forming the basis for the preparation of a tax return (referred to as "specified matters" in the following item and in paragraph (5) of the following Article) is extremely insufficient, as specified by Ministry of Finance Order; or

where the entry or record of specified matters, among the matters to be entered or recorded in the books presented or submitted to the relevant official, is insufficient, as specified by Ministry of Finance Order (excluding the case listed in the preceding item).

In the cases listed in the following items, the provisions of paragraph (1) or (2) apply with the amount calculated, as provided for by Cabinet Order, as the tax amount specified in the relevant item being deducted from the payable tax amount prescribed in those paragraphs:

where, among the facts that formed the basis for the calculation of the payable tax amount prescribed in paragraph (1) or (2), there are facts for which there is found to be a justifiable reason for their not having been taken as a basis for the calculation of the tax amount before the amended return or reassessment (including the tax amount equivalent to the amount of a refund): the tax amount based on the facts for which there is found to be a justifiable reason; and

where, before the amended return or reassessment referred to in paragraph (1), a reassessment that reduces the tax amount payable by filing a return filed by the due date, or any other reassessment specified by Cabinet Order as being similar thereto (excluding a reassessment based on a request for reassessment), has been made with regard to the national tax pertaining to that amended return or reassessment: the tax amount up to the tax amount pertaining to that return filed by the due date (including the tax amount equivalent to the amount of a refund).

The provisions of paragraph (1) do not apply where the filing of an amended return was not made in anticipation that a reassessment would be made of the national tax pertaining to the return because an examination had been conducted with regard to that national tax, and was made before notification of the matters listed in Article 74-9, paragraph (1), items (iv) and (v) (Advance Notice of Examination to Persons with Tax Liability, etc.) and other matters specified by Cabinet Order with regard to the examination concerning the national tax pertaining to the return (referred to as "examination notification" in paragraph (6), item (ii) and paragraph (8) of the following Article).