Act on Special Measures Concerning Taxation

Where an individual transfers land, etc. or buildings, etc. that the individual owns, whose holding period prescribed in Article 31, paragraph (2) exceeds 10 years as of January 1 of the year of the transfer, and that fall under residential property (excluding a transfer made to the individual's spouse or any other person who has a special relationship with the individual specified by Cabinet Order, and a transfer that is subject to the provisions of Article 58 of the Income Tax Act or the provisions of the preceding Article, Articles 33 through 33-3, Article 35-3, Article 36-2, Article 36-5, Article 37, Article 37-4, Article 37-5 (excluding paragraph (6) of that Article), Article 37-6, or Article 37-8; hereinafter the same applies in this Article) (excluding where the individual has already received the application of the provisions of this paragraph in the year preceding that year or in the year before the preceding year), with regard to the capital gains from the transfer, notwithstanding the provisions of the first sentence of Article 31, paragraph (1), the amount of income tax imposed on the taxable long-term capital gains pertaining to the transfer pursuant to the provisions of the first sentence of that paragraph is the amount equivalent to the amount specified in the following items according to the categories of cases listed in those items:

where the taxable long-term capital gains are 60 million yen or less: the amount equivalent to 10 percent of the taxable long-term capital gains;

where the taxable long-term capital gains exceed 60 million yen: the total of the following amounts:

6 million yen;

the amount equivalent to 15 percent of the amount remaining after deducting 60 million yen from the taxable long-term capital gains.

The residential property prescribed in the preceding paragraph means the following houses or land, etc.:

a house that the individual uses as the individual's residence, which is specified by Cabinet Order and is located in Japan;

a house listed in the preceding item that has ceased to be used as the individual's residence (limited to one transferred during the period from the date on which it ceased to be used as the individual's residence until December 31 of the year that includes the day on which three years have elapsed from that date);

the houses listed in the preceding two items and the land, etc. used as the sites of those houses;

where a house of the individual listed in item (i) has been lost due to a disaster, land, etc. that was used as the site of the house, whose holding period prescribed in Article 31, paragraph (2) would exceed 10 years as of January 1 of the year of the transfer if the individual had continued to own the house (limited to land, etc. transferred during the period from the date of the disaster until December 31 of the year that includes the day on which three years have elapsed from that date).

The provisions of paragraph (1) apply only if the tax return for the year for which the individual seeks the application of the provisions of that paragraph contains a statement to the effect that the individual seeks the application of the provisions of that paragraph, and has attached to it the documents specified by Order of the Ministry of Finance as documents certifying that the case falls under the provisions of that paragraph.

Even where no tax return has been filed, or where a tax return without the statement or attachment referred to in the preceding paragraph has been filed, the district director may, when the district director finds that there were unavoidable circumstances for the failure to file the return or to include the statement or attachment, apply the provisions of paragraph (1), only if a document containing the statement and the documents specified by Order of the Ministry of Finance referred to in that paragraph are submitted.

Where an individual transfers land, etc. or buildings, etc. that the individual has continuously owned since on or before December 31, 1952, notwithstanding the provisions of Article 38 and Article 61 of the Income Tax Act, the acquisition cost to be deducted from the revenue in calculating the amount of long-term capital gains is the amount equivalent to 5 percent of the revenue; provided, however, that if it is proved that the amount is less than the amount listed in each of the following items, it is the amount listed in that item:

the total of the amount required for the acquisition of the land, etc. and the amount of improvement expenses;

the amount that would be deemed to be the acquisition cost pursuant to the provisions of Article 38, paragraph (2) of the Income Tax Act if the provisions of that paragraph were applied to the total of the amount required for the acquisition of the buildings, etc. and the amount of equipment expenses and improvement expenses.

The provisions of Article 30, paragraph (2) apply mutatis mutandis where the provisions of the preceding paragraph are applied. In this case, the term "forested land" in the main clause of paragraph (2) of that Article is deemed to be replaced with "land, etc. or buildings, etc. prescribed in Article 31-4, paragraph (1) (hereinafter referred to in this paragraph as "land or buildings, etc.")", and the term "forested land" in the proviso to that paragraph is deemed to be replaced with "land or buildings, etc.".

Where an individual transfers land, etc. or buildings, etc. that the individual owns and whose holding period prescribed in Article 31, paragraph (2) is five years or less as of January 1 of the year of the transfer (including land, etc. or buildings, etc. acquired during that year that are specified by Cabinet Order), with regard to the capital gains from that transfer, notwithstanding the provisions of Article 22, Article 89, and Article 165 of the Income Tax Act, income tax is imposed, separately from other income, on the amount of capital gains pertaining to the transfer during that year (meaning the amount calculated without deducting the special capital gain deduction prescribed in Article 33, paragraph (3) of that Act, and, where there is an amount of losses arising in the calculation of the amount of long-term capital gains prescribed in Article 31, paragraph (1), notwithstanding the provisions of the second sentence of that paragraph, the amount after deducting the amount of losses up to the calculated amount; hereinafter referred to as the "amount of short-term capital gains" in this paragraph), in an amount equivalent to 30 percent of the taxable short-term capital gains (meaning the amount of short-term capital gains (where the provisions of Articles 72 through 87 of that Act as applied with the deemed replacement of terms pursuant to the provisions of Article 31, paragraph (3), item (iii) as applied mutatis mutandis pursuant to paragraph (4) apply, the amount after that application)). In this case, where there is an amount of losses arising in the calculation of the amount of short-term capital gains, with regard to the application of the provisions of that Act and other laws and regulations concerning income tax, the amount of losses is deemed not to have arisen.

The provisions of the preceding paragraph apply mutatis mutandis where an individual makes a transfer of shares or capital contributions issued by a corporation whose assets consist mainly of land, etc. (excluding those shares or capital contributions that fall under the following capital contributions, investment units or beneficial rights; hereinafter referred to as "shares, etc." in this paragraph), which is specified by Cabinet Order as being similar to a transfer of land, etc. whose holding period prescribed in the preceding paragraph is five years or less as of January 1 of the year of the transfer, if the income from the transfer falls under income from a transfer of shares, etc. specified by Cabinet Order as being similar to a transfer of a business or of assets used for the business:

preferred equity investments prescribed in Article 2, paragraph (5) of the Act on the Securitization of Assets and specified equity prescribed in paragraph (6) of that Article, of a special purpose company prescribed in paragraph (3) of that Article that falls under one listed in Article 67-14, paragraph (1), item (i), (b), 1. or 2. or one listed in (b), 3. or 4. of that item (excluding one that falls under a family company prescribed in item (ii), (d) of that paragraph);

investment units prescribed in Article 2, paragraph (14) of the Act on Investment Trusts and Investment Corporations, of an investment corporation prescribed in paragraph (12) of that Article that falls under one listed in Article 67-15, paragraph (1), item (i), (b), 1. or 2. (excluding one that falls under a family company prescribed in item (ii), (d) of that paragraph);

beneficial rights of a special purpose trust that is a trust subject to corporate taxation and that meets the requirements listed in Article 68-3-2, paragraph (1), item (i), (b) (excluding one that falls under a family company prescribed in item (ii), (a) of that paragraph);

beneficial rights of an investment trust listed in Article 2, item (xxix)-2, (d) of the Corporation Tax Act that is a trust subject to corporate taxation and that meets the requirements listed in Article 68-3-3, paragraph (1), item (i), (b) (excluding one that falls under a family company prescribed in item (ii), (a) of that paragraph).

With regard to the application of the provisions of paragraph (1) to a transfer that has been certified, pursuant to the provisions of Order of the Ministry of Finance, as falling under a transfer of land, etc. listed in Article 28-4, paragraph (3), items (i) through (iii), the phrase "30 percent" in that paragraph is deemed to be replaced with "15 percent".

The provisions of Article 31, paragraph (3) apply mutatis mutandis where the provisions of paragraph (1) or paragraph (2) apply. In this case, in paragraph (3), item (i) of that Article, the phrase "Article 31, paragraph (1) (Special Provisions on Taxation on Long-Term Capital Gains) (including where it is applied pursuant to the provisions of Article 31-2 (Special Provisions on Taxation on Long-Term Capital Gains in the Case of Transfer of Land, etc. for Development, etc. of Superior Residential Areas) or Article 31-3 (Special Provisions on Taxation on Long-Term Capital Gains in the Case of Transfer of Residential Property) of that Act; the same applies hereinafter)" is deemed to be replaced with "Article 32, paragraph (1) or paragraph (2) (Special Provisions on Taxation on Short-Term Capital Gains)", and the phrase "amount of long-term capital gains" is deemed to be replaced with "amount of short-term capital gains"; in item (ii) of that paragraph, the phrase "capital gains from the transfer prescribed in Article 31, paragraph (1) (Special Provisions on Taxation on Long-Term Capital Gains)" is deemed to be replaced with "capital gains from the transfer prescribed in Article 32, paragraph (1) (Special Provisions on Taxation on Short-Term Capital Gains) or income from the transfer prescribed in paragraph (2) of that Article", and the phrase "amount of long-term capital gains" is deemed to be replaced with "amount of short-term capital gains"; in item (iii) of that paragraph, the phrase "amount of long-term capital gains" is deemed to be replaced with "amount of short-term capital gains"; and in item (iv) of that paragraph, the phrase "Article 31, paragraph (1)" is deemed to be replaced with "Article 32, paragraph (1) or paragraph (2)", the phrase "Special Provisions on Taxation on Long-Term Capital Gains" is deemed to be replaced with "Special Provisions on Taxation on Short-Term Capital Gains", and the phrase "taxable long-term capital gains" is deemed to be replaced with "taxable short-term capital gains".