Act on Special Measures Concerning Taxation

Where, with respect to a resident or a nonresident who has a permanent establishment, any of the following facts occurs as a case where a loss has arisen because specified managed shares, etc. held by that person (meaning shares or public and corporate bonds issued by a domestic corporation whose shares or public and corporate bonds, as listed shares, etc. held in a specified account prescribed in paragraph (1) of the following Article pertaining to a specified account (meaning a specified account prescribed in paragraph (3), item (i) of the following Article; hereinafter the same applies in this paragraph) opened by the resident or nonresident who has a permanent establishment (excluding those moved to the specified account pursuant to the provisions of Cabinet Order), have ceased to fall under listed shares, etc. (meaning listed shares, etc. prescribed in paragraph (2) of the preceding Article; hereinafter the same applies up to Article 37-11-4 and in Article 37-11-6 and Article 37-12-2), which, since the date on which they ceased to fall under listed shares, etc., have continuously been entered or recorded in the transfer account book (meaning the transfer account book prescribed in the Act on Book-Entry Transfer of Corporate Bonds and Shares; hereinafter the same applies in this paragraph and the following paragraph and in paragraphs (1) and (3) of the following Article) pertaining to a specified management account (meaning an account that meets the requirements specified by Order of the Ministry of Finance, such as that custody of the shares or public and corporate bonds issued by a domestic corporation whose listed shares, etc. held in the specified account have ceased to fall under listed shares, etc. is entrusted by moving them from the specified account; hereinafter the same applies in this paragraph and the following paragraph) opened with the financial instruments business operator, etc. (meaning a financial instruments business operator, etc. prescribed in that item) with which the specified account is opened, or custody of which has been entrusted to the specified management account; hereinafter the same applies in this paragraph and the following paragraph) or public and corporate bonds held in a specified account (meaning public and corporate bonds issued by a domestic corporation that are entered or recorded in the transfer account book pertaining to the specified account or custody of which has been entrusted to the specified account) have lost their value as shares or public and corporate bonds, the occurrence of that fact is deemed to be a transfer of the specified managed shares, etc. or of the public and corporate bonds held in a specified account, and the amount specified by Cabinet Order as the amount of that loss is deemed to be the amount of losses arising from a transfer of listed shares, etc. prescribed in Article 37-12-2, paragraph (2), and the provisions of this Article, the preceding Article and Article 37-12-2 and other provisions of laws and regulations concerning income tax apply:

the domestic corporation that issued the specified managed shares, etc. or the public and corporate bonds held in a specified account has dissolved (excluding dissolution due to a merger) and its liquidation has been completed;

a fact specified by Cabinet Order as being similar to the fact listed in the preceding item.

Where a resident or a nonresident who has a permanent establishment transfers (including a transaction specified by Cabinet Order as being similar to a transfer, and excluding a transfer made by the method of a securities futures transaction; hereinafter the same applies up to Article 37-11-6 and in Article 37-12-2 and Article 37-13-3) specified managed shares, etc. that are entered or recorded in the transfer account book of a specified management account (where the person has two or more specified management accounts, each of them; hereinafter the same applies in this paragraph) or custody of which has been entrusted to a specified management account, the amount of business income, the amount of capital gains or the amount of miscellaneous income from the transfer of the specified managed shares, etc. and the amount of business income, the amount of capital gains or the amount of miscellaneous income from the transfer of shares, etc. (meaning shares, etc. prescribed in Article 37-10, paragraph (2)) other than the specified managed shares, etc. are to be calculated separately pursuant to the provisions of Cabinet Order.

The provisions of paragraph (1) apply, pursuant to the provisions of Cabinet Order, only where the tax return for the year that includes the date on which the fact prescribed in that paragraph occurred contains a statement to the effect that the person seeks the application of the provisions of that paragraph, and has attached to it a written statement concerning the calculation of the amount specified by Cabinet Order as the amount of losses prescribed in that paragraph and other documents specified by Order of the Ministry of Finance.

Even if the tax return referred to in the preceding paragraph is not filed, or a tax return is filed without the statement or document referred to in that paragraph, the district director may apply paragraph (1) if the district director finds that there were unavoidable circumstances for the failure to file the tax return or to include the statement or document, but only if a document giving that statement and the document prescribed by Order of the Ministry of Finance referred to in that paragraph are submitted.

Cabinet Order provides for the necessary particulars concerning the application of the provisions of paragraphs (1) and (2).