Act on Special Measures Concerning Taxation

If an asset held by an individual comes to fall under the case where residential property has been transferred, the following provisions apply with regard to the application of the provisions of Article 31 or Article 32 to the transfer of all of the assets that have come to fall under that case during that year:

in Article 31, paragraph (1), the phrase "the amount of long-term capital gains (" is deemed to be replaced with "the amount remaining after deducting 30 million yen (or, where the portion of the amount of long-term capital gains pertaining to the transfer of assets falling under the provisions of Article 35, paragraph (1) is less than 30 million yen, the amount of the portion pertaining to the transfer of those assets, and where the provisions of Article 32, paragraph (1) as read with the terms replaced pursuant to the provisions of item (ii) of that paragraph apply, the amount remaining after deducting the amount deducted pursuant to the provisions of that paragraph from 30 million yen or the amount of the portion pertaining to the transfer of those assets, whichever is lower) from the amount of long-term capital gains (";

in Article 32, paragraph (1), the phrase "the amount of short-term capital gains (" is deemed to be replaced with "the amount remaining after deducting 30 million yen (or, where the portion of the amount of short-term capital gains pertaining to the transfer of assets falling under the provisions of Article 35, paragraph (1) is less than 30 million yen, the amount of the portion pertaining to the transfer of those assets) from the amount of short-term capital gains (".

The case where residential property has been transferred prescribed in the preceding paragraph means any of the following cases (excluding the case where the individual has already been subject to the provisions of that paragraph (excluding where it is applied pursuant to the provisions of the following paragraph) or the provisions of Article 36-2, Article 36-5, Article 41-5, or Article 41-5-2 in the year preceding that year or in the year before that):

where the individual has transferred a house that the individual uses as the individual's residence, which is specified by Cabinet Order (hereinafter referred to in this paragraph as a "residential house") (excluding a transfer 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 Articles 33 through 33-4, Article 37, Article 37-4, or Article 37-8; hereinafter the same applies in this paragraph and the following paragraph), or has transferred land used as the site of a residential house or a right existing on that land together with the residential house (including the lending of real property, etc. giving rise to capital gains; hereinafter the same applies in this paragraph and the following paragraph);

where the individual has transferred land that was used as the site of a residential house destroyed by a disaster or a right existing on that land, has transferred a residential house that has ceased to be used as the individual's residence, or has transferred land used as the site of a residential house that has ceased to be used as the individual's residence or a right existing on that land together with that residential house, during the period from the day on which the residential house 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 day.

If an heir (including a universal legatee; hereinafter the same applies in this paragraph and the following paragraph) who has acquired a house used as the decedent's residence and the site, etc. of the house used as the decedent's residence through inheritance or bequest (including a gift that takes effect upon the death of the donor; hereinafter the same applies through paragraph (6)) has made any of the following transfers (limited to a transfer made during the period from the day of the commencement of the succession until December 31 of the year that includes the day on which three years have elapsed from that day, and excluding a transfer that is subject to the provisions of Article 39 and a transfer for which the amount of consideration exceeds 100 million yen; hereinafter referred to in this Article as a "covered transfer") between April 1, 2016 and December 31, 2027 (excluding the case where the heir has already been subject to the provisions of this paragraph with regard to a covered transfer of the house used as the decedent's residence or the site, etc. of the house used as the decedent's residence pertaining to that inheritance or bequest, and, where the heir has made a transfer listed in item (iii), limited to the case where, during the period from the time of the transfer until February 15 of the year following the year that includes the day of the transfer, the house used as the decedent's residence has come to conform to the earthquake resistance standards (meaning the provisions or standards concerning safety against earthquakes that are specified by Cabinet Order; the same applies in item (i), (b)), or the whole of the house used as the decedent's residence has been demolished or removed or has been entirely destroyed), the provisions of paragraph (1) apply by deeming the case to fall under the case where residential property has been transferred as prescribed in that paragraph.

a transfer of the portion specified by Cabinet Order of the house used as the decedent's residence acquired through the inheritance or bequest (including the portion pertaining to any extension, rebuilding (excluding rebuilding carried out after the whole of the house used as the decedent's residence has been demolished or removed and rebuilding carried out after it has been entirely destroyed), repair, or remodeling (referred to in item (iii) as "extension, rebuilding, etc.") carried out on the house used as the decedent's residence after the time of the inheritance, and limited to a house that satisfies the following requirements; hereinafter the same applies in this item), or a transfer of the portion specified by Cabinet Order of the site, etc. of the house used as the decedent's residence acquired through the inheritance or bequest (limited to one that satisfies the requirement listed in (a)) made together with the house used as the decedent's residence:

it has not been used for business, for lending, or as a residence during the period from the time of the inheritance until the time of the transfer;

it conforms to the earthquake resistance standards at the time of the transfer.

a transfer of the portion specified by Cabinet Order of the site, etc. of the house used as the decedent's residence acquired through the inheritance or bequest (limited to one that satisfies the requirements listed in (b) and (c)), made after the whole of the house used as the decedent's residence acquired through the inheritance or bequest (limited to one that satisfies the requirement listed in (a)) has been demolished or removed or after it has been entirely destroyed:

it has not been used for business, for lending, or as a residence during the period from the time of the inheritance until the time of the demolition, removal, or destruction;

it has not been used for business, for lending, or as a residence during the period from the time of the inheritance until the time of the transfer;

it has not been used as the site of a building or structure during the period from the time of the demolition, removal, or destruction until the time of the transfer.

a transfer of the portion specified by Cabinet Order of the house used as the decedent's residence acquired through the inheritance or bequest (including the portion pertaining to any extension, rebuilding, etc. carried out on the house used as the decedent's residence after the time of the inheritance, and limited to a house that has not been used for business, for lending, or as a residence during the period from the time of the inheritance until the time of the transfer; hereinafter the same applies in this item), or a transfer of the portion specified by Cabinet Order of the site, etc. of the house used as the decedent's residence acquired through the inheritance or bequest (limited to one that has not been used for business, for lending, or as a residence during the period from the time of the inheritance until the time of the transfer) made together with the house used as the decedent's residence (excluding any of those transfers that falls under the transfer listed in item (i)).

In the case referred to in the preceding paragraph, with regard to the application of the provisions of paragraph (1) where the number of heirs who have acquired the house used as the decedent's residence and the site, etc. of the house used as the decedent's residence through the inheritance or bequest is three or more, in item (i) of that paragraph, the phrase "30 million yen (" is deemed to be replaced with "20 million yen (or, where the provisions of Article 35, paragraph (1) apply in the case falling under any of the cases listed in the items of paragraph (2) of that Article, the amount calculated pursuant to the provisions of Cabinet Order within the limit of 30 million yen; the same applies hereinafter in this paragraph) (", the phrase "less than 30 million yen" is deemed to be replaced with "less than 20 million yen", and the phrase "from 30 million yen" is deemed to be replaced with "from 20 million yen"; and in item (ii) of that paragraph, the phrase "30 million yen (" is deemed to be replaced with "20 million yen (or, where the provisions of Article 35, paragraph (1) apply in the case falling under any of the cases listed in the items of paragraph (2) of that Article, the amount calculated pursuant to the provisions of Cabinet Order within the limit of 30 million yen; the same applies hereinafter in this paragraph) (", and the phrase "less than 30 million yen" is deemed to be replaced with "less than 20 million yen".

The house used as the decedent's residence prescribed in the preceding two paragraphs and the following paragraph means a house specified by Cabinet Order that was used, immediately before the commencement of the succession, as the residence of the decedent (including a testator of a universal legacy; hereinafter the same applies in this paragraph and the following paragraph) pertaining to the inheritance or bequest (including, where the house was not used as the residence of the decedent immediately before the commencement of the succession due to a reason specified by Cabinet Order as a reason for which it could not be used as a residence (hereinafter referred to in this paragraph and the following paragraph as a "specified reason") (limited to the case where the requirements specified by Cabinet Order are satisfied), its use as the residence of the decedent immediately before it ceased to be used as a residence due to the specified reason (referred to in item (iii) as "covered prior residential use")) (limited to a house that satisfies the following requirements), and the site, etc. of the house used as the decedent's residence prescribed in the preceding two paragraphs and the following paragraph means land specified by Cabinet Order as land that was used as the site of the house used as the decedent's residence immediately before the commencement of the succession, or a right existing on that land:

it was built on or before May 31, 1981;

it is not a building that falls under the provisions of Article 1 of the Act on Building Unit Ownership;

there was no person other than the decedent living in it immediately before the commencement of the succession (or, where the house that was used as the residence of the decedent was a house used for covered prior residential use, there was no person other than the decedent living in the house immediately before it ceased to be used as a residence due to the specified reason).

The provisions of paragraph (3) do not apply if an heir who has acquired a house used as the decedent's residence or the site, etc. of the house used as the decedent's residence through the inheritance or bequest (including a universal legatee; referred to in the following paragraph through paragraph (9) as an "heir acquiring the decedent's residence") has, during the period from the time of the inheritance until December 31 of the year that includes the day on which the person who is subject to the provisions of paragraph (3) made the covered transfer, made a transfer (including the lending of real property, etc. giving rise to capital gains, and excluding a transfer by expropriation or exchange, etc. prescribed in Article 33-4, paragraph (1) or any other transfer specified by Cabinet Order (referred to in the following paragraph as a "transfer by expropriation or exchange, etc."); hereinafter referred to in this Article as a "pre-application transfer") of a house specified by Cabinet Order that was used, as one unit together with the asset of the covered transfer, as the residence of the decedent immediately before the commencement of the succession (or, where the house used as the decedent's residence was not used as the residence of the decedent immediately before the commencement of the succession due to a specified reason (limited to the case where the requirements specified by Cabinet Order prescribed in the preceding paragraph are satisfied), for the use specified by Cabinet Order) (including the portion pertaining to any extension, rebuilding (excluding rebuilding carried out after the whole of the house has been demolished or removed and rebuilding carried out after it has been entirely destroyed), repair, or remodeling carried out on the house after the time of the inheritance), or of land specified by Cabinet Order as land that was used as the site of that house or a right existing on that land (referred to in the following paragraph as a "house, etc. used together with the asset of the covered transfer"), and the total of the amount of consideration for the pre-application transfer and the amount of consideration for the covered transfer comes to exceed 100 million yen.

The provisions of paragraph (3) do not apply if an heir acquiring the decedent's residence has made a transfer of a house, etc. used together with the asset of the covered transfer (including the lending of real property, etc. giving rise to capital gains, and excluding a transfer by expropriation or exchange, etc.; hereinafter referred to in this Article as a "post-application transfer") during the period from January 1 of the year following the year that includes the day on which the person who is subject to the provisions of that paragraph made the covered transfer until December 31 of the year that includes the day on which three years have elapsed from the day of the covered transfer, and the total of the amount of consideration for the post-application transfer and the amount of consideration for the covered transfer (or, where there has been a pre-application transfer, the total amount referred to in the preceding paragraph) has come to exceed 100 million yen.

A person who seeks the application of the provisions of paragraph (3) must notify the other heirs acquiring the decedent's residence of the fact that the person has made a covered transfer, the day on which the covered transfer was made, and any other matters that should serve as a reference. In this case, an heir acquiring the decedent's residence who has received the notice and has made a pre-application transfer must, without delay after receiving the notice, and an heir acquiring the decedent's residence who has received the notice and has made a post-application transfer must, without delay after making the post-application transfer, notify the person who gave the notice of the fact that the heir has made the transfer, the day on which the transfer was made, the amount of consideration for the transfer, and any other matters that should serve as a reference.

If a person who has been subject to the provisions of paragraph (3) with regard to a covered transfer comes to fall under the provisions of paragraph (7), the person must file an amended return form for the income tax for the year that includes the day on which the covered transfer was made by the day on which four months have elapsed from the day on which the heir acquiring the decedent's residence made the post-application transfer by which the person has come to fall under that paragraph, and must pay the amount of tax payable as a result of filing that return by that deadline.

In the case falling under the provisions of the preceding paragraph, if no amended return form has been filed, the district director with jurisdiction over the place for tax payment is to make a reassessment under the provisions of Article 24 or Article 26 of the Act on General Rules for National Taxes with regard to the amount of income, the amount of income tax, and other matters that should have been stated in that return.

The provisions of Article 33-5, paragraph (3) apply mutatis mutandis to an amended return form under the provisions of paragraph (9) and the reassessment referred to in the preceding paragraph. In this case, the phrase "the filing deadline prescribed in paragraph (1)" in items (i) and (ii) of paragraph (3) of that Article is deemed to be replaced with "the filing deadline prescribed in Article 35, paragraph (9)", and the phrase "Article 33-5, paragraph (1)" in item (ii) of that paragraph is deemed to be replaced with "Article 35, paragraph (9)".

The provisions of paragraph (1) apply only if the tax return for the year that includes the day on which the person seeking their application made the transfer of the assets prescribed in that paragraph contains a statement to the effect that the person seeks the application of the provisions of that paragraph and any other matters specified by Order of the Ministry of Finance, and a written statement concerning the calculation of the amount of capital gains from the transfer and any other documents specified by Order of the Ministry of Finance are attached to that return.

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

Beyond what is provided for in paragraph (5) through the preceding paragraph, the method of calculating the amount of consideration for a pre-application transfer and a post-application transfer and other necessary matters concerning the application of the provisions of paragraphs (1) through (4) are specified by Cabinet Order.