Act on Special Measures Concerning Taxation

Where an individual who files a blue return and who engages in mining, in each year that includes a day within the period from April 1, 1965 to March 31, 2028 (referred to in item (i) as the "designated period") (excluding the year that includes the day on which the business was discontinued), in preparation for the expenditure of new mineral deposit exploration expenses pertaining to minerals specified by Cabinet Order as those for which it is particularly necessary to secure a stable supply, sets aside as a reserve for exploration an amount not exceeding the lower of the amounts listed in item (i) and item (ii) (where the individual did not make any expenditure of new mineral deposit exploration expenses pertaining to minerals in any of the years within the five years preceding the relevant year, the amount obtained by deducting the amount listed in item (iii) from that lower amount), the amount so set aside is included in necessary expenses in calculating the amount of business income for the year in which it was set aside.

the amount equivalent to 12 percent of the amount specified by Cabinet Order as the revenue within the designated period of the relevant year from the sale of those minerals mined by the individual;

the amount equivalent to 50 percent of the amount specified by Cabinet Order as the amount of income pertaining to the revenue prescribed in the preceding item;

the balance obtained by deducting the amount listed in paragraph (1), item (i) of the following Article for the relevant year from the sum of the following amounts (where that balance exceeds the amount calculated by multiplying the lower of the amounts listed in the preceding two items by 25 percent, that calculated amount):

the amount of the reserve for exploration for which the five years referred to in paragraph (3) have elapsed that is to be included in gross revenue in the relevant year pursuant to the provisions of that paragraph;

the amount specified in paragraph (4), item (ii) pertaining to the amount of the reserve for exploration prescribed in that item that has been included, or is to be included, in gross revenue in the relevant year pursuant to the provisions of that paragraph.

The new mineral deposit exploration expenses prescribed in the preceding paragraph means the expenses required for geological surveys, boring or the excavation of tunnels for exploration, and other expenses required for exploration, which are specified by Cabinet Order.

Where, as of December 31 of the relevant year, the amount of the reserve for exploration of the individual prescribed in paragraph (1) carried over from the preceding year (where there are amounts that have been included, or are to be included, in gross revenue by that day pursuant to the provisions of the following paragraph, or amounts that were included in gross revenue by December 31 of the year preceding the relevant year pursuant to the provisions of this paragraph, the amount obtained by deducting those amounts; hereinafter the same applies in this Article) includes an amount for which five years have elapsed from January 1 of the year following the year in which it was set aside, the amount of the reserve for exploration for which those five years have elapsed is included in gross revenue in calculating the amount of business income for the year that includes the day on which those five years elapsed.

Where an individual who has set aside the reserve for exploration referred to in paragraph (1) comes to fall under any of the cases listed in the following items, the amount equivalent to the amount specified in that item is included in gross revenue in calculating the amount of business income for the year that includes the day on which the individual came to fall under that case. In this case, where the individual falls under the case listed in item (ii), the amounts into which the amount of the reserve for exploration prescribed in that item is divided by the year in which they were set aside are to be included in gross revenue in order beginning with the amount with the earliest year of setting aside.

where the individual has discontinued mining or has transferred the whole of the business pertaining to mining: the amount of the reserve for exploration as of the day of the discontinuation or transfer;

where the individual has reversed the amount of the reserve for exploration in a case other than the cases referred to in the preceding paragraph, the preceding item and the following paragraph: the amount equivalent to the amount reversed out of the amount of the reserve for exploration as of the day of the reversal.

Where an individual who has set aside the reserve for exploration referred to in paragraph (1) has had the approval for filing blue returns revoked, or has submitted a written notification to the effect that the individual will discontinue filing returns by blue return, the amount of the reserve for exploration as of the day on which the fact that gave rise to the revocation of the approval occurred or the day on which the written notification was submitted (where the day on which the written notification was submitted falls in the year following the year in which the individual discontinued filing returns by blue return, December 31 of the year of that discontinuation) is included in gross revenue in calculating the amount of business income for the year that includes that day. In this case, the provisions of the preceding two paragraphs and paragraph (7) do not apply.

The provisions of paragraph (7) of the preceding Article apply mutatis mutandis to the application of the provisions of paragraph (1).

The provisions of paragraphs (8) through (10) of the preceding Article apply mutatis mutandis where, upon the death of an individual who has set aside the reserve for exploration referred to in paragraph (1), the individual's heir has succeeded to the mining referred to in that paragraph.

Where an individual who holds the amount of the reserve for exploration referred to in paragraph (1) of the preceding Article (excluding that subject to the provisions of paragraph (5) of that Article) has, in any year, made an expenditure of new mineral deposit exploration expenses prescribed in paragraph (1) of that Article, or has an amount to be included in necessary expenses as the depreciation allowance for exploration machinery and equipment specified by Cabinet Order (referred to in item (i) as "exploration machinery and equipment") in calculating the amount of business income, the amount equivalent to the smallest of the following amounts is included in necessary expenses in calculating the amount of business income for that year, in addition to the amount to be included in necessary expenses pertaining to that expenditure or depreciation allowance.

the sum of the amount equivalent to the amount of the new mineral deposit exploration expenses expended in the relevant year (where there is a subsidy from the national government granted for carrying out exploration in the relevant year, the amount obtained by deducting the amount equivalent to that subsidy) and the amount of depreciation allowance for that exploration machinery and equipment included in necessary expenses for the relevant year pursuant to the provisions of this Act and Article 49, paragraph (1) of the Income Tax Act;

the amount equivalent to the amount of the reserve for exploration referred to in paragraph (1) of the preceding Article that has been included, or is to be included, in gross revenue in the relevant year pursuant to the provisions of paragraph (3) or paragraph (4) of that Article;

the amount calculated, as specified by Cabinet Order, as the amount of business income for the relevant year.

The provisions of the preceding paragraph apply only where the tax return for the year for which the individual seeks the application of the provisions of that paragraph contains a statement regarding the inclusion in necessary expenses of the amount to be included in necessary expenses pursuant to the provisions of that paragraph, and has a written statement concerning the calculation of that amount attached. In this case, the amount to be included in necessary expenses pursuant to the provisions of that paragraph is limited to the amount stated as that amount.