Act on Special Measures Concerning Taxation

Where a nonresident who has a permanent establishment receives, with respect to shares held by the nonresident (including capital contributions; the same applies hereinafter in this Article and the following Article), shares of a foreign parent corporation of a merging corporation (excluding shares of a foreign parent corporation of a merging corporation received through a specified non-qualified merger prescribed in paragraph (1) of the following Article that fall under the category of shares of a specified foreign corporation with less tax burden, etc. prescribed in Article 68-2-2, paragraph (5), item (i) (referred to as a "specified foreign corporation with less tax burden, etc." in the following paragraph and paragraph (4)) (hereinafter referred to as "shares of a taxable foreign parent corporation" in this paragraph), and those received by the nonresident in correspondence to shares managed by the nonresident at a permanent establishment (hereinafter referred to as "shares managed at a permanent establishment" in this Article) (excluding shares of a taxable foreign parent corporation; referred to as "permanent establishment merger parent corporation shares" in paragraph (5)); hereinafter referred to as "shares of a foreign parent corporation of a merging corporation" in this paragraph) through a Specified Merger by the domestic corporation that issued the shares (excluding a public interest corporation, etc. prescribed in Article 2, item (vi) of the Corporation Tax Act; the same applies hereinafter in this Article and the following Article), the amount equivalent to the value of the shares of a foreign parent corporation of a merging corporation received (excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act) is deemed to be revenue pertaining to capital gains, etc. on general shares, etc. (meaning capital gains, etc. on general shares, etc. prescribed in Article 37-10, paragraph (1); the same applies in the following paragraph, paragraph (3), and the following Article) if the shares held by the nonresident fall under the category of general shares, etc. (meaning general shares, etc. prescribed in Article 37-10, paragraph (1); the same applies in the following paragraph, paragraph (3), and the following Article), or revenue pertaining to capital gains, etc. on listed shares, etc. (meaning capital gains, etc. on listed shares, etc. prescribed in Article 37-11, paragraph (1); the same applies in the following paragraph, paragraph (3), and the following Article) if the shares held by the nonresident fall under the category of listed shares, etc. (meaning listed shares, etc. prescribed in Article 37-11, paragraph (2); the same applies hereinafter in this Article and the following Article), and the provisions of that Act and this Chapter apply.

Where a nonresident who has a permanent establishment receives, with respect to shares held by the nonresident, shares of a foreign parent corporation of a successor in a company split (excluding shares of a foreign parent corporation of a successor in a company split received through a specified non-qualified company split by split-off prescribed in paragraph (2) of the following Article that fall under the category of shares of a specified foreign corporation with less tax burden, etc. (hereinafter referred to as "shares of a taxable foreign parent corporation" in this paragraph), and those received by the nonresident in correspondence to shares managed at a permanent establishment (excluding shares of a taxable foreign parent corporation; referred to as "permanent establishment split successor parent corporation shares" in paragraph (5)); hereinafter referred to as "shares of a foreign parent corporation of a successor in a company split" in this paragraph) through a specified company split by split-off carried out by the domestic corporation that issued the shares, the amount equivalent to the value of the shares of a foreign parent corporation of a successor in a company split received (excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act) is deemed to be revenue pertaining to capital gains, etc. on general shares, etc. if the shares held by the nonresident fall under the category of general shares, etc., or revenue pertaining to capital gains, etc. on listed shares, etc. if the shares held by the nonresident fall under the category of listed shares, etc., and the provisions of that Act and this Chapter apply.

Where a nonresident who has a permanent establishment receives, with respect to shares held by the nonresident, shares of a foreign wholly owned subsidiary (excluding those received by the nonresident in correspondence to shares managed at a permanent establishment (referred to as "permanent establishment wholly owned subsidiary corporation shares" in paragraph (5)); hereinafter referred to as "shares of a foreign wholly owned subsidiary" in this paragraph) through a specified share distribution carried out by the domestic corporation that issued the shares, the amount equivalent to the value of the shares of a foreign wholly owned subsidiary received (excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act) is deemed to be revenue pertaining to capital gains, etc. on general shares, etc. if the shares held by the nonresident fall under the category of general shares, etc., or revenue pertaining to capital gains, etc. on listed shares, etc. if the shares held by the nonresident fall under the category of listed shares, etc., and the provisions of that Act and this Chapter apply.

Where a nonresident who has a permanent establishment has, with respect to shares held by the nonresident (hereinafter referred to as "old shares" in this paragraph), transferred the old shares to the wholly owning parent corporation in a share exchange prescribed in Article 2, item (xii)-6-3 of the Corporation Tax Act through a specified share exchange carried out by the domestic corporation that issued the old shares, and has received shares of a foreign corporation fully controlling the parent in a share exchange (excluding shares of a foreign corporation fully controlling the parent in a share exchange received through a specified non-qualified share exchange prescribed in paragraph (3) of the following Article that fall under the category of shares of a specified foreign corporation with less tax burden, etc. (hereinafter referred to as "shares of a taxable foreign parent corporation" in this paragraph), and those received by the nonresident in correspondence to shares managed at a permanent establishment (excluding shares of a taxable foreign parent corporation; referred to as "permanent establishment share exchange wholly controlling parent corporation shares" in the following paragraph); hereinafter referred to as "shares of a foreign corporation fully controlling the parent in a share exchange" in this paragraph), the provisions of Article 57-4, paragraph (1) of the Income Tax Act, in the case where a calculation is made in accordance with that paragraph pursuant to the provisions of Article 165, paragraph (1) of that Act, do not apply to the transfer of the portion of the old shares that corresponds to the shares of a foreign corporation fully controlling the parent in a share exchange received.

Where a nonresident who has a permanent establishment has performed an act specified by Cabinet Order as an act by which all or part of the permanent establishment foreign shares (meaning permanent establishment merger parent corporation shares received through a Specified Merger, permanent establishment split successor parent corporation shares received through a specified company split by split-off, permanent establishment wholly owned subsidiary corporation shares received through a specified share distribution, and permanent establishment share exchange wholly controlling parent corporation shares received through a specified share exchange; the same applies hereinafter in this paragraph) cease to be managed at the permanent establishment at the time of their delivery, the provisions of Article 161, paragraph (1), item (i) of the Income Tax Act apply by deeming that the permanent establishment foreign shares pertaining to the act were managed at the permanent establishment at the time of their delivery and were immediately thereafter transferred between the nonresident's permanent establishment and a place of business, etc. prescribed in that item.

In this Article, the meanings of the terms listed in the following items are as prescribed respectively in those items:

Specified Merger: A merger in which no assets other than shares of any one foreign corporation that is a foreign parent corporation of a merging corporation (excluding money or other assets delivered to the shareholders, members, or other investors as a dividend of surplus, distribution of profit, or distribution of surplus with respect to shares, and money or other assets delivered as consideration based on a share purchase demand by shareholders, members, or other investors who oppose the merger) were delivered to the shareholders, members, or other investors (meaning shareholders, members, or other investors prescribed in Article 2, paragraph (1), item (viii)-2 of the Income Tax Act; the same applies hereinafter in this paragraph) of the merged corporation prescribed in Article 2, item (xi) of the Corporation Tax Act;

foreign parent corporation of a merging corporation: A foreign corporation that has, with the merging corporation prescribed in Article 2, item (xii) of the Corporation Tax Act, a relationship specified by Cabinet Order as a relationship of directly or indirectly holding all of the issued shares of or capital contributions to the merging corporation (excluding the merging corporation's own shares held by itself; hereinafter referred to as "issued shares, etc." in this paragraph);

specified company split by split-off: A company split by split-off prescribed in Article 2, item (xii)-9 of the Corporation Tax Act in which no assets other than shares of any one foreign corporation that is a foreign parent corporation of a successor in a company split were delivered as split consideration assets prescribed in (a) of that item (limited to one in which the shares were delivered in proportion to the ratio that the number or amount of shares of the split corporation prescribed in item (xii)-2 of that Article held by each of its shareholders, members, or other investors bears to the total number or total amount of the issued shares, etc. of the split corporation);

foreign parent corporation of a successor in a company split: A foreign corporation that has, with the successor corporation in a company split prescribed in Article 2, item (xii)-3 of the Corporation Tax Act, a relationship specified by Cabinet Order as a relationship of directly or indirectly holding all of the issued shares, etc. of the successor corporation in a company split;

specified share distribution: A share distribution prescribed in Article 2, item (xii)-15-2 of the Corporation Tax Act in which no assets other than shares of a foreign wholly owned subsidiary were delivered to the shareholders, members, or other investors of the corporation making a distribution in kind prescribed in item (xii)-5-2 of that Article (limited to one in which the shares were delivered in proportion to the ratio that the number or amount of shares of the corporation making a distribution in kind held by each of its shareholders, members, or other investors bears to the total number or total amount of the issued shares, etc. of the corporation making a distribution in kind);

foreign wholly owned subsidiary: A wholly owned subsidiary prescribed in Article 2, item (xii)-15-2 of the Corporation Tax Act (limited to a foreign corporation);

specified share exchange: A share exchange in which no assets other than shares of any one foreign corporation that is a foreign corporation fully controlling the parent in a share exchange (excluding money or other assets delivered to the shareholders as a dividend of surplus, and money or other assets delivered as consideration based on a share purchase demand by shareholders who oppose the share exchange) were delivered to the shareholders of the wholly owned subsidiary corporation in a share exchange prescribed in Article 2, item (xii)-6 of the Corporation Tax Act;

foreign corporation fully controlling the parent in a share exchange: A foreign corporation that has, with the wholly owning parent corporation in a share exchange prescribed in Article 2, item (xii)-6-3 of the Corporation Tax Act, a relationship specified by Cabinet Order as a relationship of directly or indirectly holding all of the issued shares, etc. of the wholly owning parent corporation in a share exchange.

With regard to the application of the provisions of Article 37-12-2 in the case where the shares held prescribed in paragraphs (1) through (3) fall under the category of listed shares, etc., the phrase "or the items of Article 37-11, paragraph (4)" in paragraph (2), item (iv) of that Article is deemed to be replaced with "or the items of Article 37-11, paragraph (4), or Article 37-14-3, paragraphs (1) through (3)", and the phrase "the items of paragraph (2)" in paragraph (6) of that Article is deemed to be replaced with "the items of paragraph (2) (including the case where item (iv) of that paragraph is applied with the terms replaced pursuant to the provisions of Article 37-14-3, paragraph (7))".

The provisions of paragraphs (1) through (4) apply mutatis mutandis where a nonresident who does not have a permanent establishment receives shares of a foreign parent corporation of a merging corporation (excluding shares of a taxable foreign parent corporation prescribed in paragraph (1)), shares of a foreign parent corporation of a successor in a company split (excluding shares of a taxable foreign parent corporation prescribed in paragraph (2)), shares of a foreign wholly owned subsidiary, or shares of a foreign corporation fully controlling the parent in a share exchange (excluding shares of a taxable foreign parent corporation prescribed in paragraph (4)) through a Specified Merger, specified company split by split-off, specified share distribution, or specified share exchange. In this case, in paragraph (1), the phrase "excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act)" is deemed to be replaced with "excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act, and limited to that which falls under the domestic source income of the nonresident listed in Article 164, paragraph (1), item (ii) of that Act)", the phrase "capital gains, etc. on general shares, etc. (meaning capital gains, etc. on general shares, etc. prescribed in Article 37-10, paragraph (1)" is deemed to be replaced with "domestic source income from the transfer of general shares, etc. (meaning domestic source income from the transfer of general shares, etc. prescribed in Article 37-12, paragraph (1)", and the phrase "capital gains, etc. on listed shares, etc. (meaning capital gains, etc. on listed shares, etc. prescribed in Article 37-11, paragraph (1)" is deemed to be replaced with "domestic source income from the transfer of listed shares, etc. (meaning domestic source income from the transfer of listed shares, etc. prescribed in Article 37-12, paragraph (3)", and in paragraphs (2) and (3), the phrase "excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act)" is deemed to be replaced with "excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act, and limited to that which falls under the domestic source income of the nonresident listed in Article 164, paragraph (1), item (ii) of that Act)", the phrase "capital gains, etc. on general shares, etc." is deemed to be replaced with "domestic source income from the transfer of general shares, etc.", and the phrase "capital gains, etc. on listed shares, etc." is deemed to be replaced with "domestic source income from the transfer of listed shares, etc.".

Special provisions for the calculation of the acquisition cost of shares received in the case where the provisions of paragraphs (1) through (4) apply, special provisions for the scope of domestic source income in the case where the provisions of paragraph (5) apply, and other necessary matters concerning the application of the provisions of paragraphs (1) through (5) and the preceding paragraph are specified by Cabinet Order.