Act on Special Measures Concerning Taxation

Where an individual who is a director, executive officer, or employee of a stock company that has adopted a resolution under Article 238, paragraph (2) of the Companies Act (Act No. 86 of 2005) (including a determination of the offering matters prescribed in Article 239, paragraph (1) of that Act based on a delegation by a resolution under that paragraph, and a resolution of the board of directors under the provisions of Article 240, paragraph (1) of that Act) by which the individual was made a person to be granted share options (limited to those specified by Cabinet Order; referred to in this paragraph as "share options") (that resolution is referred to in this Article as a "grant resolution"), or of a corporation that has a relationship with that stock company whereby the stock company directly or indirectly holds shares (limited to those with voting rights) or capital contributions exceeding 50 percent of the total number or the total amount of the corporation's issued shares (limited to those with voting rights) or capital contributions, or any other relationship specified by Cabinet Order (excluding an individual who held a number of shares of that stock company specified by Cabinet Order on the day of that grant resolution (referred to in this paragraph and the following paragraph as a "major shareholder"), and an individual who, on that day, had a special relationship specified by Cabinet Order with a person who falls under the category of a major shareholder of that stock company, such as the spouse of that person (referred to in this paragraph and the following paragraph as a "person specially related to a major shareholder"); referred to in this paragraph, the following paragraph, and paragraph (6) as a "director, etc."), or an heir of that director, etc. (limited to one specified by Cabinet Order; referred to in this paragraph, the following paragraph, and paragraph (6) as an "heir succeeding to the rights"), or an individual other than an individual who is a director, executive officer, or employee of that stock company or that corporation (limited to outside highly skilled personnel prescribed in Article 2, paragraph (8) of the Act on Strengthening the Management of Small and Medium-Sized Enterprises, etc. (excluding a major shareholder and a person specially related to a major shareholder) engaged in the development of new business fields using outside highly skilled personnel prescribed in that paragraph that is carried out, in accordance with a certified plan for developing new business fields using outside highly skilled personnel prescribed in Article 9, paragraph (2) of that Act (excluding a plan whose certification under the provisions of that paragraph was revoked on or before the day of exercise of the share options), by that stock company that falls under the category of a certified new small and medium-sized enterprise, etc. prescribed in Article 13 of that Act (limited to personnel granted the share options in accordance with that certified plan for developing new business fields using outside highly skilled personnel; the same applies hereinafter in this paragraph), who have continuously been residents from the start date of the implementation period listed in Article 8, paragraph (2), item (ii) of that Act of that certified plan for developing new business fields using outside highly skilled personnel (for outside highly skilled personnel who have newly come to engage in that development of new business fields using outside highly skilled personnel due to a change to that certified plan, the date of the certification under the provisions of Article 9, paragraph (1) of that Act received for that change; referred to in item (ii) of the following paragraph as the "start date of implementation, etc.") to the day of exercise of the share options; referred to in this Article as a "specified engaged person") has acquired the shares pertaining to specified share options by exercising, in accordance with the contract, the share options granted under a contract concluded between that stock company and that director, etc. or that specified engaged person based on that grant resolution (limited to share options for which the contract pertaining to those share options sets out the following requirements (where the share options were granted to that director, etc., the requirements listed in items (i) through (vi)); referred to in this Article as "specified share options"), income tax is not imposed on the economic benefit pertaining to the acquisition of those shares; provided, however, that where, through the exercise of the specified share options by that director, etc., heir succeeding to the rights, or specified engaged person (referred to in this paragraph and the following paragraph as a "right holder"), the total of the amount to be paid in upon that exercise in that year (referred to in this paragraph and item (iii) of the following paragraph as the "exercise price") (where, on the day of the grant resolution pertaining to the specified share options, the stock company that concluded the contract pertaining to the specified share options is one for which the period since the day of its incorporation is less than five years, the amount calculated by dividing that exercise price by two, and where that stock company meets the requirements specified by Order of the Ministry of Finance, such as that the period since the day of its incorporation is five years or more and less than 20 years, the amount calculated by dividing that exercise price by three; the same applies hereinafter in this paragraph (excluding item (iii)) and in item (iii) of the following paragraph) and the exercise prices pertaining to the exercise of those specified share options and other specified share options that the right holder has already made in that year comes to exceed 12,000,000 yen, this does not apply to the economic benefit pertaining to the acquisition of shares through the exercise of the specified share options by which 12,000,000 yen comes to be exceeded.

that the share options must be exercised during the period from the day on which two years have elapsed after the day of the grant resolution pertaining to the share options to the day on which 10 years elapse after the day of that grant resolution (where, on the day of that grant resolution, the stock company that concluded the contract pertaining to the share options meets the requirements specified by Order of the Ministry of Finance, such as that the period since the day of its incorporation is less than five years, the day on which 15 years elapse after the day of that grant resolution);

that the annual total of the exercise prices pertaining to the exercise of the share options does not exceed 12,000,000 yen;

that the exercise price per share pertaining to the exercise of the share options is equal to or more than the amount equivalent to the value per share of the shares of the stock company that concluded the contract pertaining to the share options at the time of the conclusion of that contract;

that the share options are not permitted to be transferred;

that the delivery of shares pertaining to the exercise of the share options is made without violating the matters prescribed in Article 238, paragraph (1) of the Companies Act for which the grant resolution was adopted for that delivery;

that, with regard to the shares to be acquired through the exercise of the share options, any of the following requirements is met:

that, in accordance with an arrangement concluded in advance between the stock company pertaining to the exercise and a financial instruments business operator or financial institution specified by Cabinet Order (referred to in this Article as a "financial instruments business operator, etc.") concerning entries or records in the transfer account book (meaning the transfer account book prescribed in the Act on Book-Entry Transfer of Corporate Bonds and Shares; the same applies hereinafter in this Article), custody, or a trust for management and disposition (referred to in this Article as a "trust for management, etc.") of the shares of that stock company to be delivered through the exercise of share options (limited to an arrangement that sets out the requirements specified by Cabinet Order, such as that the account for entries or records in that transfer account book or for custody, or the contract for that trust for management, etc., is opened or concluded separately for each right holder, and that no shares other than the shares of that stock company delivered through the exercise of share options are accepted into that account or under that contract), pursuant to the provisions of Cabinet Order, immediately after the acquisition, the shares receive entries or records in the transfer account book of that financial instruments business operator, etc., or are placed in custody or in a trust for management, etc. with a business office or other office of that financial instruments business operator, etc. (referred to in paragraph (4) as a "business office or similar place"), through that stock company;

that, in accordance with an arrangement concluded in advance between the stock company pertaining to the exercise and the person granted the share options under the contract concerning the management of the shares of that stock company (limited to shares with restriction on transfer; the same applies in (b)) to be delivered through the exercise of share options (limited to an arrangement that sets out the requirements specified by Cabinet Order, such as that the contract pertaining to that management is concluded separately for each right holder, and that the stock company manages the shares of that stock company delivered through the exercise of share options separately from other shares of the same class as those shares by keeping books for those shares and stating or recording in them, for each right holder, matters concerning the acquisition of those shares and other changes in their status), pursuant to the provisions of Cabinet Order, immediately after the acquisition, the shares are managed by that stock company.

that a person granted the share options under the contract must, in the case of making a departure from Japan (meaning ceasing to have a domicile or residence in Japan; the same applies hereinafter in this item and paragraph (5)) during the period from the day of conclusion of the contract to the day of exercise of the share options, notify the stock company that concluded the contract pertaining to the share options to that effect by the time of that departure from Japan;

that, where the certification under the provisions of Article 9, paragraph (2) of the Act on Strengthening the Management of Small and Medium-Sized Enterprises, etc. of the certified plan for developing new business fields using outside highly skilled personnel prescribed in that paragraph (referred to in items (ii) and (iv) of the following paragraph as a "certified plan for developing new business fields using outside highly skilled personnel") pertaining to a person granted the share options under the contract has been revoked under the provisions of paragraph (2) of that Article on or before the day of exercise of the share options, the stock company that concluded the contract pertaining to the share options must promptly notify that person to that effect.

The provisions of the main clause of the preceding paragraph apply only if, when a right holder exercises specified share options, the following requirements (where the specified share options exercised by the right holder were granted to a director, etc., the requirements listed in items (i) and (iii)) are met:

that the right holder has submitted to the stock company pertaining to the exercise a document pledging that the right holder (where the right holder is an heir succeeding to the rights, the director, etc. who is that heir's decedent) was neither a major shareholder nor a person specially related to a major shareholder of that stock company on the day of the grant resolution pertaining to the specified share options (including the provision, by electronic or magnetic means (meaning a method using an electronic data processing system or any other method using information and communications technology; the same applies hereinafter in this paragraph and the following paragraph), of the matters to be stated in that document in lieu of the submission of that document);

that the right holder has submitted to the stock company pertaining to the exercise a document pledging that the right holder has continuously been a resident from the start date of implementation, etc. of the certified plan for developing new business fields using outside highly skilled personnel pertaining to the right holder to the day of that exercise (including the provision, by electronic or magnetic means, of the matters to be stated in that document in lieu of the submission of that document);

that the right holder has submitted to the stock company pertaining to the exercise a document stating whether the right holder has exercised other specified share options in the year that includes the day of exercise of the specified share options (where the other specified share options have been exercised, the exercise price pertaining to that exercise and the date of exercise), and any other matters specified by Order of the Ministry of Finance (including the provision, by electronic or magnetic means, of the matters to be stated in that document in lieu of the submission of that document; the same applies in the following item);

that the stock company pertaining to the exercise has confirmed that the certification of the certified plan for developing new business fields using outside highly skilled personnel pertaining to the right holder has not been revoked under the provisions of Article 9, paragraph (2) of the Act on Strengthening the Management of Small and Medium-Sized Enterprises, etc., and has stated or recorded the fact of that confirmation in the document referred to in the preceding item submitted by the right holder (including an electronic or magnetic record (meaning a record made in an electronic form, a magnetic form, or any other form not recognizable to human senses, which is used in information processing by computers; the same applies in the following paragraph) in which the matters to be stated in that document provided by electronic or magnetic means are recorded).

The stock company referred to in items (i) through (iii) of the preceding paragraph must, when it has received the submission prescribed in items (i) through (iii) of that paragraph of the documents referred to in items (i) through (iii) of that paragraph, preserve those documents (including electronic or magnetic records in which the matters to be stated in those documents provided by electronic or magnetic means are recorded) pursuant to the provisions of Order of the Ministry of Finance.

Where, due to any of the following events, all or part of the shares acquired by an individual who has received the application of the provisions of the main clause of paragraph (1) (referred to in this paragraph and the following paragraph as a "person granted the special rule") upon receiving that application, or any other shares specified by Cabinet Order as similar thereto, held by that individual (limited to those that have received entries or records in the transfer account book of a financial instruments business operator, etc. or are placed in custody or in a trust for management, etc. with the business office or similar place of a financial instruments business operator, etc. in accordance with the arrangement prescribed in paragraph (1), item (vi), (a), or that are managed, in accordance with the arrangement prescribed in (b) of that item, by the stock company prescribed in (b) of that item (including the merging corporation prescribed in Article 2, item (xii) of the Corporation Tax Act pertaining to a merger in which that stock company is the merged corporation prescribed in item (xi) of that Article, which has received the transfer of the contract pertaining to the management prescribed in paragraph (1), item (vi), (b) through that merger, and any other corporation specified by Order of the Ministry of Finance; the same applies hereinafter in this paragraph and paragraph (7)); referred to in this Article as "specified shares") have been returned or transferred (excluding the case where an individual who has acquired specified shares (excluding shares acquired through the exercise of specified share options granted to a specified engaged person and any other shares specified by Cabinet Order as similar thereto; referred to in this paragraph and the following paragraph as "specified shares of directors, etc.") from a person granted the special rule by inheritance (excluding inheritance pertaining to a qualified acceptance) or bequest (excluding a bequest to the trustee of a public interest trust prescribed in Article 2, paragraph (1), item (i) of the Act on Public Interest Trusts (Act No. 30 of 2024) made for inclusion in its trust property, and a universal legacy pertaining to a qualified acceptance) (referred to in this paragraph as a "successor subject to the special provisions") continues to have those specified shares of directors, etc. receive entries or records in the transfer account book of the financial instruments business operator, etc. pertaining to those specified shares of directors, etc., or to place them in custody or in a trust for management, etc. with the business office or similar place of the financial instruments business operator, etc., in accordance with the arrangement prescribed in paragraph (1), item (vi), (a), or continues to have those specified shares of directors, etc. managed, in accordance with the arrangement prescribed in (b) of that item, by the stock company prescribed in (b) of that item that had been managing those specified shares of directors, etc.), the provisions of Article 37-10 and Article 37-11 and other provisions of laws and regulations concerning income tax apply by deeming that, for the specified shares so returned or transferred, a transfer was made, at the time the event occurred, for an amount equivalent to their value at that time, and that a person granted the special rule who has received a return due to the event listed in item (i) acquired, at the time the event occurred, shares of the same class as those specified shares, in a number equivalent to the number of the specified shares returned, for an amount equivalent to their value at that time. The same applies where, due to any of the following events, all or part of the inherited specified shares (meaning specified shares of directors, etc. acquired from a person granted the special rule by that inheritance or bequest, and any other shares specified by Cabinet Order as similar thereto, which continue to receive entries or records in the transfer account book of the financial instruments business operator, etc. pertaining to those specified shares of directors, etc., or to be placed in custody or in a trust for management, etc. with the business office or similar place of the financial instruments business operator, etc., in accordance with the arrangement prescribed in paragraph (1), item (vi), (a), or continue to be managed, in accordance with the arrangement prescribed in (b) of that item, by the stock company prescribed in (b) of that item that had been managing those specified shares of directors, etc.; the same applies hereinafter in this Article) held by a successor subject to the special provisions have been returned or transferred.

cancellation or termination of the contract pertaining to entries or records in the transfer account book of that financial instruments business operator, etc., custody, or a trust for management, etc., or to management by the stock company prescribed in paragraph (1), item (vi), (b) (excluding a termination pertaining to a transfer made in accordance with the arrangement prescribed in (a) or (b) of that item and any other termination specified by Cabinet Order);

gift (excluding a gift to a corporation and a gift to an individual who is the trustee of a public interest trust prescribed in Article 2, paragraph (1), item (i) of the Act on Public Interest Trusts (referred to in this item as a "public interest trust") (limited to a gift made for inclusion in its trust property)), or inheritance (excluding inheritance pertaining to a qualified acceptance) or bequest (excluding a bequest to a corporation, a bequest to an individual who is the trustee of a public interest trust (limited to a bequest made for inclusion in its trust property), and a universal legacy to an individual pertaining to a qualified acceptance);

a transfer other than a transfer made in accordance with the arrangement prescribed in paragraph (1), item (vi), (a) or (b), which is made at a price lower than the value at the time of the transfer (excluding a transfer that falls under the transfer prescribed in Article 59, paragraph (1), item (ii) of the Income Tax Act).

Where a person granted the special rule makes a departure from Japan, with regard to those of the specified shares (excluding specified shares of directors, etc.) held at the time of that departure from Japan for which the amount specified by Cabinet Order as the amount equivalent to their value at the time of that departure from Japan (referred to in this paragraph as the "value at the time of departure from Japan") exceeds the amount specified by Cabinet Order as the amount spent on their acquisition, and which are specified by Cabinet Order (referred to in this paragraph as the "specified engaged person's specified shares"), the provisions of Article 37-10 and Article 37-11 and other provisions of laws and regulations concerning income tax apply by deeming that a transfer was made, at the time of that departure from Japan, at the value at exercise (meaning the lesser of the value at the time of departure from Japan of those specified engaged person's specified shares and the amount specified by Cabinet Order as the amount equivalent to the value of those specified engaged person's specified shares on the day on which the person granted the special rule exercised the specified share options pertaining to those specified engaged person's specified shares; the same applies hereinafter in this paragraph), and that the person granted the special rule acquired, at the time of that departure from Japan, shares of the same class as those specified engaged person's specified shares, in a number equivalent to the number of those specified engaged person's specified shares, for that value at exercise.

A stock company that grants specified share options to a director, etc., an heir succeeding to the rights, or a specified engaged person under a contract based on a grant resolution must submit a report on the grant of those specified share options (referred to in this Article as a "report on the grant of specified share options") to the district director by January 31 of the year following the year that includes the day of the grant, pursuant to the provisions of Cabinet Order.

A financial instruments business operator, etc. that, in accordance with the arrangement prescribed in paragraph (1), item (vi), (a) or (b), makes entries or records in the transfer account book for, accepts custody of, or accepts a trust for management, etc. of, specified shares or inherited specified shares, or the stock company prescribed in (b) of that item that manages them, must submit a report on the acceptance or acquisition, delivery, or other changes in the status of those specified shares or inherited specified shares (referred to in this Article as a "report on changes in specified shares, etc.") to the district director by January 31 of each year, pursuant to the provisions of Cabinet Order.

Special provisions on the calculation of the acquisition cost of shares in the case where the provisions of the main clause of paragraph (1) are applied, special provisions on the scope of domestic source income pertaining to the transfer of shares and on the method of taxation of nonresidents in the case where the provisions of the main clause of that paragraph are applied, special provisions on the provisions of Article 224-3 and Article 225 of the Income Tax Act pertaining to the transfer of specified shares or inherited specified shares, special provisions on the provisions of Article 228-2 of that Act pertaining to the acquisition of specified shares, and other necessary matters concerning the application of the provisions of paragraph (1), paragraph (4), and paragraph (5) are specified by Cabinet Order.

The relevant official of the National Tax Agency, the Regional Taxation Bureau, or the tax office may, when necessary for an investigation concerning the submission of a report on the grant of specified share options or a report on changes in specified shares, etc., ask questions of a person who is obliged to submit that report on the grant of specified share options or report on changes in specified shares, etc., inspect that person's books and documents and other articles concerning the grant of specified share options or the acceptance or acquisition, delivery, or other changes in the status of specified shares or inherited specified shares, or request the presentation or submission of those articles (including copies thereof).

The relevant official of the National Tax Agency, the Regional Taxation Bureau, or the tax office may, when necessary for an investigation concerning the submission of a report on the grant of specified share options or a report on changes in specified shares, etc., retain articles submitted in that investigation.

The relevant official of the National Tax Agency, the Regional Taxation Bureau, or the tax office, when asking questions, conducting an inspection, or requesting presentation or submission pursuant to the provisions of paragraph (9), must carry an identification card and present it to the person concerned when requested.

The authority of the officials under the provisions of paragraph (9) and paragraph (10) must not be construed as being granted for the purpose of criminal investigation.

Beyond what is provided for in the preceding paragraph, necessary matters concerning the application of the provisions of paragraph (10) are specified by Cabinet Order.