Act on Special Measures Concerning Taxation

Where an individual has made a transfer (including the creation of a superficies right or right of lease or any other act specified by Cabinet Order of having another person (including, where the individual is a nonresident, a place of business, etc. prescribed in Article 161, paragraph (1), item (i) of the Income Tax Act) use land for a long period of time under a contract (referred to in the following paragraph and paragraph (3), item (i) as the "creation of a right of lease, etc."), and an act of receiving remuneration for acting as an agent or intermediary in the sale or exchange of land, etc. and any other act specified by Cabinet Order as being equivalent to the transfer of land, etc.; referred to in this Article as "transfer, etc. of land") of land (limited to land located in Japan; the same applies hereinafter in this Article) or a right existing on land (referred to in this Article as "land, etc.") that the individual acquired from another person (including, where the individual is a nonresident, a place of business, etc. prescribed in that item) and that gives rise to business income or miscellaneous income, whose holding period as of January 1 of that year is five years or less (including land, etc. acquired during that year that is specified by Cabinet Order), the business income and miscellaneous income from that transfer, etc. of land are, notwithstanding the provisions of Article 22, Article 89, and Article 165 of that Act, separated from other income, and income tax is imposed on the amount calculated, pursuant to the provisions of Cabinet Order, as the amount of business income and the amount of miscellaneous income pertaining to that transfer, etc. of land during that year (referred to in this Article as the "amount of business income, etc. relating to land, etc.") in an amount equivalent to the greater of the following amounts:

the amount equivalent to 40 percent of the amount of business income, etc. relating to land, etc. (where the provisions of Articles 72 through 87 of the Income Tax Act as read with the replacement of terms pursuant to the provisions of paragraph (5), item (ii) apply, the amount after that application; referred to in the following item as the "amount of taxable business income, etc. relating to land, etc.");

the amount equivalent to 110 percent of the amount calculated, pursuant to the provisions of Cabinet Order, as the amount of income tax that would be computed on the amount of taxable business income, etc. relating to land, etc. if the provisions of this paragraph did not apply.

The holding period prescribed in the preceding paragraph means the period specified by Cabinet Order as the period during which the individual has continuously held the land, etc. that the individual has transferred (including by the creation of a right of lease, etc.) since the day following the day of its acquisition.

The provisions of paragraph (1) do not apply to a transfer for which it has been certified, pursuant to the provisions of Order of the Ministry of Finance, that it falls under any of the following transfers of land, etc.:

transfer of land, etc. (including the creation of a right of lease, etc.; the same applies hereinafter in this paragraph) to the State, a local government, or any other corporation equivalent thereto which is specified by Cabinet Order;

transfer of land, etc. to the Urban Renaissance Agency, a Land Development Public Corporation, or any other corporation equivalent thereto which is specified by Cabinet Order as a corporation aiming to conduct business for the provision of residential land or housing or advance acquisition of land, for which the transferred land, etc. is deemed to be directly necessary for conducting the business (in the case of a transfer of land, etc. to a corporation specified by Cabinet Order where the area of the transferred land, etc. is 1,000 square meters or more, limited to a transfer that meets the requirement listed in item (iv), (a), and, in the case of a transfer of land, etc. to a Land Development Public Corporation, excluding a transfer of land, etc. specified by Cabinet Order);

transfer of land, etc. by expropriation or exchange, etc. prescribed in Article 33-4, paragraph (1) (in the case of a transfer of land, etc. by expropriation or exchange, etc. specified by Cabinet Order where the area of the transferred land, etc. is 1,000 square meters or more, limited to a transfer that meets the requirement listed in (a) of the following item, and excluding a transfer that falls under the transfers listed in the preceding two items);

transfer by an individual who has obtained the permission referred to in Article 29, paragraph (1) of the City Planning Act (Act No. 100 of 1968) (limited to a permission pertaining to a development activity prescribed in Article 4, paragraph (12) of that Act carried out within a city planning area prescribed in paragraph (2) of that Article; referred to in this paragraph as a "development permit") (including an individual who has succeeded to the status based on a development permit) of all or part of a single tract of residential land (limited to land with an area of 1,000 square meters or more) developed by that individual, that meets the following requirements (where the transfer falls under a transfer specified by Cabinet Order, the requirements listed in (a) and (b)):

that the amount of consideration for the transfer is equal to or less than the amount specified by Cabinet Order as the appropriate amount of consideration for the transfer;

that the development of the residential land pertaining to the transfer conforms to the details of that development permit;

that the transfer has been made by the method of public offering.

transfer by an individual of all or part of a single tract of residential land (limited to land with an area of 1,000 square meters or more) developed by the individual in a case where a development permit is not required for the development of that residential land, that meets the following requirements (where the transfer falls under a transfer specified by Cabinet Order, the requirements listed in (a) and in (a) of the preceding item):

that the development of the residential land pertaining to the transfer has been carried out with the certification of the prefectural governor, given pursuant to the provisions of Cabinet Order, that it contributes to the provision of good-quality residential land, and that the development conforms to the details of that certification;

that the transfer meets the requirements listed in (a) and (c) of the preceding item.

transfer by an individual of all or part of a single tract of residential land (limited to land with an area of 1,000 square meters or more) used as the site of a house newly built by the individual on the individual's own account or a house newly built by a method of contracting specified by Cabinet Order (limited to a house whose new construction has been certified by the prefectural governor, pursuant to the provisions of Cabinet Order, as contributing to the provision of good-quality housing), that meets the requirements listed in item (iv), (a) and (c) (excluding a transfer that falls under the transfers listed in the preceding two items);

transfer by that individual of all or part of any of the following single tracts of residential land (limited to land with an area of less than 1,000 square meters), for which the amount of consideration for the transfer is equal to or less than the amount specified by Cabinet Order as the appropriate amount of consideration for the transfer:

a single tract of residential land developed by that individual whose development has been certified by the mayor of the municipality or the head of the special ward (where the development has received a development permit, the person who granted that permit), pursuant to the provisions of Cabinet Order, as contributing to the provision of good-quality residential land;

a single tract of residential land used as the site of a house newly built by that individual on the individual's own account or a house newly built by a method of contracting specified by Cabinet Order (limited to a house whose new construction has been certified by the mayor of the municipality or the head of the special ward, pursuant to the provisions of Cabinet Order, as contributing to the provision of good-quality housing) (excluding land that falls under the residential land listed in (a)).

out of transfers of land, etc. (limited to land, etc. used as the site of a house which is specified by Cabinet Order) made by an individual who is a real estate broker prescribed in Article 2, item (iii) of the Real Estate Brokerage Act (Act No. 176 of 1952) within the period specified by Cabinet Order after the acquisition, those specified by Cabinet Order as being similar to an act of receiving remuneration for acting as an agent or intermediary in the sale of land, etc.

Beyond what is provided for in paragraph (1) and the preceding paragraph, matters concerning the method of public offering referred to in item (iv), (c) of that paragraph and other necessary matters concerning the application of the provisions of paragraph (1) and the preceding paragraph are specified by Cabinet Order.

Where the provisions of paragraph (1) apply, the following applies:

with regard to the application of the provisions of Article 2, paragraph (1), items (xxx) through (xxxiv)-5 of the Income Tax Act, the phrase "amount of timber income" in the provisions of item (xxx) of that paragraph is deemed to be replaced with "amount of timber income and amount of business income, etc. relating to land, etc. prescribed in Article 28-4, paragraph (1) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation of Business Income, etc. Relating to Transfer, etc. of Land) (hereinafter referred to as the 'amount of business income, etc. relating to land, etc.')";

with regard to the application of the provisions of Article 44-2, paragraph (2), Article 69, Article 70, Article 71, and Articles 72 through 87 of the Income Tax Act, the phrase "amount of gross income" in those provisions is deemed to be replaced with "amount of gross income, amount of business income, etc. relating to land, etc.";

with regard to the application of the provisions of Article 92, Article 95, and Article 165-6 of the Income Tax Act, the phrase "the preceding Section (Tax Rates)" in Article 92, paragraph (1) of that Act is deemed to be replaced with "the preceding Section (Tax Rates) and Article 28-4, paragraph (1) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation of Business Income, etc. Relating to Transfer, etc. of Land)", the phrase "taxable gross income" is deemed to be replaced with "the total of taxable gross income and the amount of taxable business income, etc. relating to land, etc. prescribed in Article 28-4, paragraph (1) of the Act on Special Measures Concerning Taxation", the phrase "amount of income tax on taxable gross income" in paragraph (2) of that Article is deemed to be replaced with "amount of income tax on taxable gross income, amount of income tax on the amount of taxable business income, etc. relating to land, etc. prescribed in that paragraph", and the phrase "the amount of income tax for that year" in Article 95 and Article 165-6 of that Act is deemed to be replaced with "the amount of income tax for that year and the amount of income tax under the provisions of Article 28-4, paragraph (1) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation of Business Income, etc. Relating to Transfer, etc. of Land)";

beyond what is provided for in the preceding three items, special provisions on applications or returns under the provisions of Part II, Chapter V of the Income Tax Act and other necessary matters concerning the application of the provisions of laws and regulations concerning income tax in the case where the provisions of paragraph (1) apply are specified by Cabinet Order.

The provisions of paragraph (1) do not apply to a transfer, etc. of land made by an individual during the period from January 1, 1998 to March 31, 2029.