Act on Special Measures Concerning Taxation

In each year from 2017 onward of a nonresident who has a permanent establishment, where, because the amount set as the amount of consideration (referred to as the "internal dealing price" in paragraphs (22) and (23)) for an internal dealing prescribed in Article 161, paragraph (1), item (i) of the Income Tax Act (referred to as an "internal dealing" in this Article) between a place of business or similar place of that nonresident (meaning a place of business or similar place prescribed in that item; the same applies in paragraphs (5) and (26)) and the permanent establishment differs from the arm's length price, the amount to be included in revenue or the amount to be included in gross revenue is understated, or the amount to be included in necessary expenses or the amount to be included in the amount of expenditures is overstated, in calculating the amount of each type of income prescribed in Article 2, paragraph (1), item (xxii) of that Act, calculated mutatis mutandis pursuant to the provisions of Article 165, paragraph (1) of that Act, with regard to the domestic source income listed in Article 164, paragraph (1), item (i), (a) of that Act of that nonresident for each year, then with regard to the application of the provisions of that Act and other laws and regulations concerning income tax with respect to the income pertaining to the domestic source income listed in Article 164, paragraph (1), item (i), (a) of that Act of that nonresident for that year, that internal dealing is deemed to have been conducted at the arm's length price.

The arm's length price prescribed in the preceding paragraph means the amount calculated by the method that is most appropriate for calculating the amount that should be the amount of consideration for an internal dealing if that internal dealing were conducted between independent enterprises under normal transaction terms, taking into account the details of that internal dealing, the functions performed by the parties to that internal dealing, and other circumstances, from among the methods specified in the following items according to the category of transaction listed in each of those items into which that internal dealing falls:

sale or purchase of inventory assets (meaning inventory assets prescribed in Article 2, paragraph (1), item (xvi) of the Income Tax Act; the same applies hereinafter in this item): the following methods:

comparable uncontrolled price method (meaning the method which uses, as the amount that should be the amount of the consideration for an internal dealing, the amount equivalent to the amount of the consideration for a transaction wherein a seller and a buyer who do not have a relationship specified by Cabinet Order as a special relationship (referred to as a "special relationship" in (b) and paragraph (7)) with each other have sold or bought inventory assets of the same type as the inventory assets pertaining to the internal dealing, under circumstances where the transaction level, transaction volume and any other conditions are similar to those of the internal dealing (in the case where such inventory assets of the same type have been sold or bought under circumstances where the transaction level, transaction volume and any other conditions are different from those of the internal dealing, and any variance arising from such difference in the conditions can be adjusted, the amount of the consideration as adjusted is included));

resale price method (meaning the method which uses, as the amount that should be the amount of the consideration for an internal dealing, the amount calculated by deducting, from the amount of the consideration gained by the buyer of the inventory assets involved in the internal dealing for having sold the inventory assets to a person with no special relationship thereto (referred to as the "resale price" in (b)), the amount of normal profit (meaning the amount calculated by multiplying the resale price by the normal profit margin specified by Cabinet Order));

cost plus method (meaning the method which uses, as the amount that should be the amount of the consideration for an internal dealing, the amount calculated by adding, to the amount of the cost incurred by the seller of the inventory assets involved in the internal dealing for having acquired the inventory assets by purchase, manufacture or any other acts, the amount of normal profit (meaning the amount calculated by multiplying the amount of cost by the normal profit margin specified by Cabinet Order)); or

a method equivalent to the methods listed in (a) through (c) or any other method specified by Cabinet Order.

transactions other than those listed in the preceding item: methods equivalent to the methods listed in (a) through (d) of that item.

A nonresident who has an internal dealing in a year must prepare or obtain, by the due date for filing a tax return for income tax for that year, the documents specified by Order of the Ministry of Finance as documents found to be necessary for calculating the arm's length price prescribed in paragraph (1) pertaining to that internal dealing (including, where an electronic or magnetic record (meaning a record that is made in an electronic form, a magnetic form, or any other form that cannot be perceived by the human senses, and that is used in information processing by computers; the same applies hereinafter in this Article) has been prepared in lieu of preparing those documents, that electronic or magnetic record), and must retain them pursuant to the provisions of Order of the Ministry of Finance.

With regard to the documents found to be necessary for calculating the arm's length price prescribed in paragraph (1) pertaining to the internal dealings of a nonresident in a year, the provisions of the preceding paragraph do not apply where the internal dealings of that nonresident in the year preceding that year (where that nonresident has come to have a permanent establishment in that year, the internal dealings in that year) fall under both of the following, or in the case specified by Cabinet Order as a case where there are no internal dealings in the year preceding that year:

the total of the amounts set as the amount of consideration for internal dealings is less than 5 billion yen;

the total of the amounts set as the amount of consideration for internal dealings (limited to those equivalent to the transfer or lending of an intangible asset (meaning an asset specified by Cabinet Order as an asset other than tangible assets and financial assets; the same applies hereinafter in this item and the following paragraph) (including the creation of rights pertaining to an intangible asset and any other act of having another person use an intangible asset), or to transactions similar thereto) is less than 300 million yen.

Where, with regard to an internal dealing in specified intangible assets (meaning, among internal dealings, those equivalent to the transfer or lending of a specified intangible asset (meaning an intangible asset specified by Cabinet Order as one that is difficult to value at the time of the internal dealing; the same applies hereinafter in this paragraph) (including the creation of rights pertaining to a specified intangible asset and any other act of having another person use a specified intangible asset), or to transactions similar thereto; the same applies hereinafter in this paragraph) between a place of business or similar place of a nonresident who has a permanent establishment and the permanent establishment in each year, facts that differ from the details of the matters that formed the basis for calculating the amount set as the amount of consideration for that internal dealing in specified intangible assets (limited to those that the nonresident predicted at the time of that internal dealing in specified intangible assets) have come to light, the district director may make a reassessment prescribed in Article 2, paragraph (1), item (xliii) of the Income Tax Act (referred to as a "reassessment" in this Article) or a determination prescribed in item (xliv) of that paragraph (referred to as a "determination" in paragraphs (9), (11) and (22)) with regard to the amount calculated in accordance with the provisions of Article 22 of that Act pursuant to the provisions of Article 165, paragraph (1) of that Act for the domestic source income listed in Article 164, paragraph (1), item (i), (a) of that Act of that nonresident for that year, or the amount of net loss prescribed in Article 2, paragraph (1), item (xxv) of that Act, by deeming the amount calculated by the method most appropriate for calculating the amount that should be the amount of consideration for that internal dealing in specified intangible assets if that internal dealing in specified intangible assets were conducted between independent enterprises under normal transaction terms, taking into account the details of that internal dealing in specified intangible assets, the functions performed by the parties to that internal dealing in specified intangible assets, and other circumstances (including those differing facts and the probability of occurrence of the cause of that discrepancy (limited to a probability that satisfies the requirements specified by Cabinet Order, such as having been calculated based on objective facts at the time of that internal dealing in specified intangible assets)), from among the methods specified in the items of paragraph (2) according to the category of transaction listed in each of those items into which it falls, to be the arm's length price prescribed in paragraph (1); provided, however, that this does not apply in the case specified by Cabinet Order as a case where the amount set as the amount of consideration for that internal dealing in specified intangible assets does not significantly differ from the amount that would be deemed to be the arm's length price prescribed in paragraph (1) if the provisions of the main clause of this paragraph were applied.

The provisions of the main clause of the preceding paragraph do not apply where a nonresident has prepared or obtained documents stating all of the following matters pertaining to the internal dealing in specified intangible assets referred to in that paragraph (including, where an electronic or magnetic record has been prepared in lieu of preparing those documents, that electronic or magnetic record):

the matters specified by Order of the Ministry of Finance as the details of the matters that formed the basis for calculating the amount set as the amount of consideration for that internal dealing in specified intangible assets (limited to those that that nonresident predicted at the time of that internal dealing in specified intangible assets; the same applies in the following item);

the fact that, where facts that differ from the details of the matters that formed the basis for calculating the amount set as the amount of consideration for that internal dealing in specified intangible assets have come to light, it was difficult for that nonresident to predict, at the time of that internal dealing in specified intangible assets, the occurrence of the cause of that discrepancy (referred to as the "cause of discrepancy" in this item) because it was a disaster or other similar event, or the fact that that nonresident had calculated the amount set as the amount of consideration for that internal dealing in specified intangible assets by taking into account the probability of occurrence of that cause of discrepancy (limited to a probability that satisfies the requirements specified by Cabinet Order, such as having been calculated based on objective facts at the time of that internal dealing in specified intangible assets).

Where the amount of profit that was predicted to arise from the use of, or other acts concerning, the specified intangible asset referred to in paragraph (5) during the determination period pertaining to an internal dealing in specified intangible assets referred to in that paragraph of a nonresident (meaning the period from January 1 of the year that includes the day on which revenue from the use of, or other acts concerning, that specified intangible asset received from a person who has no special relationship with that nonresident first arose (where that day is before the day on which that internal dealing in specified intangible assets was conducted, the day on which that internal dealing in specified intangible assets was conducted) until the day on which five years have elapsed; the same applies hereinafter in this paragraph) and the amount of profit that arose from the use of, or other acts concerning, that specified intangible asset during that determination period fall under the case specified by Cabinet Order as a case where they do not significantly differ, the provisions of the main clause of paragraph (5) do not apply to that internal dealing in specified intangible assets after the day on which that determination period elapses.

Where the relevant official of the National Tax Agency, or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over the place for tax payment of a nonresident, has requested the nonresident to present or submit documents certifying that the provisions of the preceding two paragraphs apply (including, where an electronic or magnetic record has been prepared or retained in lieu of preparing or retaining those documents, that electronic or magnetic record; the same applies hereinafter in this paragraph) or copies thereof, if they are not presented or submitted by the day designated by that official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 60 days from the day on which the presentation or submission was requested (where the documents or copies requested fall under the documents specified by Order of the Ministry of Finance prescribed in paragraph (3) (including, where an electronic or magnetic record has been prepared or retained in lieu of preparing or retaining those documents, that electronic or magnetic record; the same applies in the following paragraph and paragraph (13)) pertaining to an internal transaction subject to contemporaneous documentation (meaning an internal dealing other than an internal dealing to which the provisions of paragraph (4) apply; the same applies in the following paragraph and paragraph (13)) or copies thereof, 45 days from the day on which the presentation or submission was requested), the provisions of the preceding two paragraphs are not to apply.

Where the relevant official of the National Tax Agency, or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over the place for tax payment of a nonresident, has requested the nonresident to present or submit the documents specified by Order of the Ministry of Finance prescribed in paragraph (3) pertaining to an internal transaction subject to contemporaneous documentation or copies thereof, and they are not presented or submitted by the day designated by that official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 45 days from the day on which the presentation or submission was requested, or where such an official has requested the nonresident to present or submit the documents specified by Order of the Ministry of Finance as documents found to be important for calculating the arm's length price prescribed in paragraph (1) (including an amount deemed to be that arm's length price pursuant to the provisions of the main clause of paragraph (5)) pertaining to an internal transaction subject to contemporaneous documentation (including, where an electronic or magnetic record has been prepared or retained in lieu of preparing or retaining those documents, that electronic or magnetic record; the same applies hereinafter in this paragraph and in paragraph (13)) or copies thereof, and they are not presented or submitted by the day designated by that official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 60 days from the day on which the presentation or submission was requested, the district director may make a reassessment or determination with regard to the amount calculated in accordance with the provisions of Article 22 of the Income Tax Act pursuant to the provisions of Article 165, paragraph (1) of that Act for the domestic source income listed in Article 164, paragraph (1), item (i), (a) of that Act of that nonresident for that year, or the amount of net loss prescribed in Article 2, paragraph (1), item (xxv) of that Act, by presuming the amount calculated by the methods listed in the following items (the method listed in item (ii) may be used only where the method listed in item (i) cannot be used) to be the arm's length price prescribed in paragraph (1); provided, however, that this does not apply where the provisions of paragraph (5) or (6) apply to that internal transaction subject to contemporaneous documentation for that year.

the method listed in paragraph (2), item (i), (b) or (c) or the method specified in paragraph (2), item (ii) (limited to the method equivalent to the method listed in paragraph (2), item (i), (b) or (c)), which is applied based on the gross profit margin gained by an individual from the individual's business on condition that such individual's business is the same type as the nonresident's business involving the internal dealing, and that the size and other details are similar between the two businesses, or any other ratio specified by Cabinet Order as a ratio equivalent to the gross profit margin; or

a method specified by Cabinet Order as being equivalent to the method prescribed in paragraph (2), item (i), (d) or the method specified in paragraph (2), item (ii) (limited to the method equivalent to the method specified by Cabinet Order).

Where the provisions of paragraph (7) apply to the internal transaction subject to contemporaneous documentation referred to in the preceding paragraph, the provisions of the main clause of the preceding paragraph do not apply after the day on which the period elapses as prescribed in paragraph (7).

Where the relevant official of the National Tax Agency, or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over the place for tax payment of a nonresident, has requested the nonresident to present or submit the documents specified by Order of the Ministry of Finance as documents found to be important for calculating the arm's length price prescribed in paragraph (1) (including an amount deemed to be that arm's length price pursuant to the provisions of the main clause of paragraph (5)) pertaining to an internal transaction exempt from contemporaneous documentation (meaning an internal dealing to which the provisions of paragraph (4) apply; the same applies hereinafter in this paragraph and in paragraph (14)) (including, where an electronic or magnetic record has been prepared or retained in lieu of preparing or retaining those documents, that electronic or magnetic record; the same applies hereinafter in this paragraph and in paragraph (14)) or copies thereof, if they are not presented or submitted by the day designated by that official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 60 days from the day on which the presentation or submission was requested, the district director may make a reassessment or determination with regard to the amount calculated in accordance with the provisions of Article 22 of the Income Tax Act pursuant to the provisions of Article 165, paragraph (1) of that Act for the domestic source income listed in Article 164, paragraph (1), item (i), (a) of that Act of that nonresident for that year, or the amount of net loss prescribed in Article 2, paragraph (1), item (xxv) of that Act, by presuming the amount calculated by the methods listed in the items of paragraph (9) (the method listed in item (ii) of that paragraph may be used only where the method listed in item (i) of that paragraph cannot be used) to be the arm's length price prescribed in paragraph (1); provided, however, that this does not apply where the provisions of paragraph (5) or (6) apply to that internal transaction exempt from contemporaneous documentation for that year.

Where the provisions of paragraph (7) apply to the internal transaction exempt from contemporaneous documentation referred to in the preceding paragraph, the provisions of the main clause of the preceding paragraph do not apply after the day on which the period elapses as prescribed in paragraph (7).

Where the relevant official of the National Tax Agency, or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over the place for tax payment of a nonresident, has requested the nonresident to present or submit the documents specified by Order of the Ministry of Finance prescribed in paragraph (3) pertaining to an internal transaction subject to contemporaneous documentation or copies thereof, and they are not presented or submitted by the day designated by that official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 45 days from the day on which the presentation or submission was requested, or has requested the nonresident to present or submit the documents specified by Order of the Ministry of Finance as documents found to be important for calculating the arm's length price prescribed in paragraph (9) pertaining to an internal transaction subject to contemporaneous documentation or copies thereof, and they are not presented or submitted by the day designated by that official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 60 days from the day on which the presentation or submission was requested, that official may, if it is necessary for calculating the arm's length price prescribed in paragraph (1) pertaining to the internal transaction subject to contemporaneous documentation of that nonresident, to the extent found necessary, ask questions of a person engaged in a business of the same type as the business of that nonresident pertaining to that internal transaction subject to contemporaneous documentation, inspect the books and documents concerning that business (including, where an electronic or magnetic record has been prepared or retained in lieu of preparing or retaining those books and documents, that electronic or magnetic record; the same applies hereinafter in this Article), or request the presentation or submission of those books and documents (including copies thereof).

Where the relevant official of the National Tax Agency, or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over the place for tax payment of a nonresident, has requested the nonresident to present or submit the documents specified by Order of the Ministry of Finance prescribed in paragraph (11) pertaining to an internal transaction exempt from contemporaneous documentation or copies thereof, if they are not presented or submitted by the day designated by that official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 60 days from the day on which the presentation or submission was requested, that official may, if it is necessary for calculating the arm's length price prescribed in paragraph (1) pertaining to the internal transaction exempt from contemporaneous documentation of that nonresident, to the extent found necessary, ask questions of a person engaged in a business of the same type as the business of that nonresident pertaining to that internal transaction exempt from contemporaneous documentation, inspect the books and documents concerning that business, or request the presentation or submission of those books and documents (including copies thereof).

The relevant official of the National Tax Agency, or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over the place for tax payment of a nonresident, may, if it is necessary for calculating the arm's length price prescribed in paragraph (1) pertaining to the internal dealings of the nonresident, retain the books and documents (including copies thereof) submitted pursuant to the provisions of the preceding two paragraphs.

The authority of the relevant official under the provisions of the preceding three paragraphs is not construed as being granted for criminal investigation.

When the relevant official of the National Tax Agency, a Regional Taxation Bureau, or a tax office asks questions, conducts an inspection, or makes a request for presentation or submission pursuant to the provisions of paragraph (13) or (14), the official must carry an identification card and present it if requested by a person concerned.

In the case falling under any of the following items, the person who committed the violation is punished by a fine of 300,000 yen or less:

where the person has failed to answer or has given a false answer to questions asked by the relevant official pursuant to the provisions of paragraph (13) or (14), or has refused, obstructed, or evaded an inspection pursuant to those provisions;

where the person has, without justifiable grounds, failed to comply with a request for the presentation or submission of books and documents pursuant to the provisions of paragraph (13) or (14), or has presented or submitted books and documents (including copies thereof) containing false statements or records.

When the representative of a corporation (including an association or foundation without juridical personality (meaning an association or foundation without juridical personality as prescribed in Article 2, item (viii) of the Corporation Tax Act; hereinafter the same applies in this paragraph and the following paragraph); hereinafter the same applies in this paragraph) (such representative includes the administrator of an association or foundation without juridical personality), or an agent, employee, or other worker of a corporation or individual has committed a violation set forth in the preceding paragraph with regard to the business of the corporation or individual, not only the offender is punished but also the corporation or individual is punished by the penalty prescribed in that paragraph.

If the provisions of the preceding paragraph apply to an association or foundation without juridical personality, its representative or administrator represents the association or foundation without juridical personality with regard to its procedural acts, and the provisions of the laws concerning criminal proceedings in which a corporation is the defendant or the suspect apply mutatis mutandis.

Where the provisions of paragraph (1) have applied to an internal dealing of a nonresident, and an event listed in Article 23, paragraph (1), item (i) or (iii) of the Act on General Rules for National Taxes has occurred with regard to the application of the provisions of paragraph (1), with regard to the application of the provisions of Article 23, paragraph (1) of that Act (excluding item (ii)), the phrase "five years" in that paragraph is deemed to be replaced with "seven years".

A reassessment or determination (referred to as a "reassessment or determination" in this paragraph) or an assessment and determination prescribed in Article 32, paragraph (5) of the Act on General Rules for National Taxes (referred to as an "assessment and determination" in this Article) listed in the following items may, notwithstanding the provisions of Article 70, paragraph (1) of that Act, be made until the day on which seven years have elapsed from the due date or day specified in the relevant item. In this case, with regard to the application of the provisions of paragraphs (3) and (4) of that Article and Article 71, paragraph (1) of that Act, the phrase "pursuant to the provisions of the preceding two paragraphs" in Article 70, paragraph (3) of that Act is deemed to be replaced with "pursuant to the provisions of the preceding two paragraphs and Article 40-3-3, paragraph (22) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation on Internal Dealings of Nonresidents)", the phrase "notwithstanding the provisions of the preceding two paragraphs" with "notwithstanding the provisions of the preceding two paragraphs and paragraph (22) of that Article"; the phrase "pursuant to the provisions of paragraph (1)" in paragraph (4) of that Article with "pursuant to the provisions of paragraph (1) and Article 40-3-3, paragraph (22) of the Act on Special Measures Concerning Taxation", the phrase "notwithstanding the provisions of paragraph (1)" with "notwithstanding the provisions of paragraph (1) and Article 40-3-3, paragraph (22) of that Act"; the phrase "pursuant to the provisions of the preceding Article" in Article 71, paragraph (1) of that Act with "pursuant to the provisions of the preceding Article and Article 40-3-3, paragraph (22) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation on Internal Dealings of Nonresidents)", the phrase "notwithstanding the provisions of that Article" with "notwithstanding the provisions of the preceding Article and that paragraph"; and the phrase "the preceding Article" in item (iv), (b) of that paragraph with "the preceding Article and Article 40-3-3, paragraph (22) of the Act on Special Measures Concerning Taxation".

a reassessment or determination of income tax to be made based on the fact that a nonresident has set the internal dealing price at an amount different from the arm's length price prescribed in paragraph (1), or a reassessment or determination of income tax to be made, upon the reassessment or determination, to make a change to the tax base, etc. or tax amount, etc. prescribed in Article 19, paragraph (1) of the Act on General Rules for National Taxes: The statutory due date of tax return prescribed in Article 2, item (vii) of the Act with regard to income tax pertaining to the relevant reassessment or determination (for a reassessment based on a return of refund claim prescribed in Article 61, paragraph (1) of the Act: the day on which the return of refund claim has been filed); and

a reassessment or determination of income tax to be made based on the fact prescribed in the preceding item or submission of a tax return prescribed in Article 2, item (vi) of the Act on General Rules for National Taxes (excluding a return filed by the due date prescribed in Article 17, paragraph (2) of the Act; hereinafter referred to in this item as a "tax return"), or an assessment and determination to be made, upon the reassessment or determination or submission of a tax return, so as to impose additional tax prescribed in Article 69 of the Act with regard to the income tax to which the change prescribed in the preceding item should be made upon the reassessment or determination or the submission of a tax return: The date of the establishment of the relevant tax liability.

The prescription of the right to collect national tax prescribed in Article 72, paragraph (1) of the Act on General Rules for National Taxes with regard to income tax for which the amount of tax payable has been understated or the amount of refund prescribed in Article 2, item (vi) of that Act has been overstated due to a nonresident having set the internal dealing price at an amount different from the arm's length price prescribed in paragraph (1) does not run for two years from the statutory due date for payment prescribed in Article 72, paragraph (1) of that Act of that income tax (excluding a statutory due date for payment pertaining to a reassessment or an assessment and determination under the provisions of Article 70, paragraph (3) of that Act or an assessment and determination under the provisions of paragraph (4) of that Article), except where the provisions of Article 73, paragraph (3) of that Act apply.

In the case referred to in the preceding paragraph, the provisions of the proviso to Article 73, paragraph (3) of the Act on General Rules for National Taxes apply mutatis mutandis.

With regard to the application of the provisions of Article 72, paragraph (1) of the Act on General Rules for National Taxes to income tax payable as a result of a reassessment or an assessment and determination under the provisions of Article 70, paragraph (3) of that Act as applied with the terms replaced pursuant to the provisions of paragraph (22), or an assessment and determination under the provisions of paragraph (4) of that Article as so applied, the phrase "(Article 70, paragraph (3)" in Article 72, paragraph (1) of that Act is deemed to be replaced with "(Article 70, paragraph (3) as applied with the terms replaced pursuant to the provisions of Article 40-3-3, paragraph (22) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation on Internal Dealings of Nonresidents)", the phrase ", Article 70, paragraph (3)" with ", Article 70, paragraph (3) as applied with the terms replaced pursuant to the provisions of Article 40-3-3, paragraph (22) of that Act", and the phrase "Article 70, paragraph (4)" with "Article 70, paragraph (4) as applied with the terms replaced pursuant to the provisions of Article 40-3-3, paragraph (22) of that Act".

Where the provisions of paragraph (1) apply, and with respect to the arm's length price prescribed in paragraph (1) which pertains to an internal dealing conducted between the permanent establishment of a nonresident and a place of business or similar place of that nonresident (limited to a nonresident who is deemed, pursuant to the provisions of a convention prescribed in the proviso to Article 2, paragraph (1), item (viii)-4 of the Income Tax Act (hereinafter referred to in this paragraph and paragraph (1) of the following Article as a "tax treaty"), to be a resident of a contracting state or contracting party other than Japan (hereinafter referred to in this paragraph and paragraph (1) of the following Article as the "treaty partner state, etc.") of the tax treaty), the Minister of Finance has reached an agreement under the tax treaty with the competent authority of that treaty partner state, etc., or any other requirement specified by Cabinet Order is satisfied, the regional commissioner or the district director may, pursuant to the provisions of Cabinet Order, grant exemption from the part of the delinquent tax imposed with regard to the income tax payable by that nonresident pursuant to the provisions of paragraph (1), which corresponds to the base period for the calculation of the delinquent tax for which the Minister of Finance has reached an agreement with the competent authority of that treaty partner state, etc.

Matters concerning the determination of whether the special relationship prescribed in paragraph (2), item (i), (a) exists and other necessary matters concerning the application of the provisions of paragraphs (1) through (12) and paragraph (15) are specified by Cabinet Order.