Act on Special Measures Concerning Taxation

A person who has received the application of the provisions of paragraph (1) of the preceding Article must, in the case where the person does not use the replacement asset for the business of the individual located within the area prescribed in the right-hand column of the respective items of the table in that paragraph within one year from the date of acquisition of the replacement asset, or ceases to use it for that business, file an amended return form for income tax for the year that includes the date of the transfer referred to in that paragraph within four months from the date on which the person comes to fall under any of these circumstances, and pay the amount of tax payable upon the filing of that return by that due date.

A person who has received the application of the provisions of paragraph (1) of the preceding Article as applied mutatis mutandis pursuant to paragraph (4) of that Article, in the case where the person falls under either of the following items, may, where the person falls under item (i) and the amount has become excessive, make a request for reassessment of income tax for the year that includes the date of the transfer referred to in paragraph (4) of that Article within four months from the date of acquisition of the replacement asset, and must, where the person falls under item (i) and a shortfall has arisen or where the person falls under item (ii), file an amended return form for income tax for the year that includes the date of the transfer referred to in that paragraph within four months from the date of acquisition of the replacement asset or from the date on which the circumstances falling under that item arose, and pay the amount of tax payable upon the filing of that return by that due date:

where the person has acquired an asset listed in the right-hand column of the respective items of the table in paragraph (1) of the preceding Article and there is an excess or shortfall in its acquisition price relative to the estimated amount of the acquisition price prescribed in paragraph (1) of that Article as applied mutatis mutandis pursuant to paragraph (4) of that Article, or where there is an excess or shortfall in the amount of the portion deemed to have been transferred as prescribed in paragraph (1) of that Article because the area of the replacement asset has come to differ from the area referred to in paragraph (4) of that Article, because the classification of the replacement asset (limited to one pertaining to item (iii) of that table; hereinafter the same applies in this item) among the areas listed in the items of paragraph (10) of that Article has come to differ from the classification among the areas listed in those items of the asset that the person expected to acquire and use for business as referred to in paragraph (4) of that Article, or because the determination as to whether the replacement asset falls under the principal office assets prescribed in paragraph (10) of that Article has come to differ from that determination for the asset that the person expected to acquire and use for business as referred to in paragraph (4) of that Article;

where the person does not acquire an asset listed in the right-hand column of the respective items of the table in paragraph (1) of the preceding Article within the designated acquisition period, or does not use the replacement asset for the business referred to in paragraph (4) of that Article within one year from the date of the acquisition referred to in that paragraph, or ceases to use it for that business.

Where a person falls under the provisions of paragraph (1) or item (ii) of the preceding paragraph, or where the shortfall prescribed in item (i) of that paragraph has arisen, if an amended return form is not filed, the district director with jurisdiction over the place for tax payment is to make a reassessment under Article 24 or Article 26 of the Act on General Rules for National Taxes with respect to the amount of income, the amount of income tax and other particulars 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 (1) or paragraph (2) and to the reassessment referred to in the preceding paragraph. In this case, the phrase "the due date for filing prescribed in paragraph (1)" in paragraph (3), items (i) and (ii) of that Article is deemed to be replaced with "the due date for filing prescribed in Article 37-2, paragraph (1) or paragraph (2)", and the phrase "Article 33-5, paragraph (1)" in item (ii) of that paragraph is deemed to be replaced with "Article 37-2, paragraph (1) or paragraph (2)".

Where, for a person who has received the application of the provisions of Article 37, paragraph (1) (including as applied mutatis mutandis pursuant to paragraphs (3) and (4) of that Article; hereinafter the same applies in this Article) (excluding a person who is no longer allowed the special provisions under Article 37, paragraph (1) because the person has filed an amended return form under paragraph (1) or paragraph (2) of the preceding Article or has received a reassessment under paragraph (3) of that Article), the amount of depreciation allowance under Article 49, paragraph (1) of the Income Tax Act pertaining to the replacement asset is calculated, or, where there is a transfer (including lending of real property, etc. giving rise to capital gains), inheritance, bequest or gift of the replacement asset on or after the date of its acquisition, the amount of capital gains is calculated, the acquisition price of the replacement asset is, pursuant to the provisions of Cabinet Order, the amount specified in the following items according to the category of cases listed in those items (where there are expenses incurred for the transfer referred to in Article 37, paragraph (1), the amount obtained by adding the amount of those expenses calculated pursuant to the provisions of Cabinet Order):

where the revenue from the transfer referred to in Article 37, paragraph (1) exceeds the acquisition price of the replacement asset: the sum of the amount calculated pursuant to the provisions of Cabinet Order as the amount of the portion of the acquisition price, etc. of the asset so transferred other than the portion corresponding to the excess amount and to the amount equivalent to 20 percent of the acquisition price of the replacement asset, and the amount equivalent to that 20 percent;

where the revenue from the transfer referred to in Article 37, paragraph (1) is equal to the acquisition price of the replacement asset: the amount equivalent to the sum of the amount calculated pursuant to the provisions of Cabinet Order as the amount of the portion of the acquisition price, etc. of the asset so transferred other than the portion corresponding to the amount equivalent to 20 percent of that revenue, and the amount equivalent to that 20 percent;

where the revenue from the transfer referred to in Article 37, paragraph (1) is less than the acquisition price of the replacement asset: the amount equivalent to the amount obtained by adding the shortfall to the sum of the amount calculated pursuant to the provisions of Cabinet Order as the amount of the portion of the acquisition price, etc. of the asset so transferred other than the portion corresponding to the amount equivalent to 20 percent of that revenue, and the amount equivalent to that 20 percent.

In the case referred to in the preceding paragraph, for the purpose of applying the provisions of the preceding paragraph where the asset transferred as prescribed in Article 37, paragraph (1) falls under the assets listed in the left-hand column of item (ii) of the table in that paragraph and the replacement asset or the asset expected to be acquired falls under the assets listed in the right-hand column of that item, and the person has received the application of the provisions of that paragraph, the phrase "20 percent" in the items of the preceding paragraph is deemed to be replaced with "40 percent".

For the purpose of applying the provisions of paragraph (1) in the case referred to in paragraph (1) (limited to the case where the person has received the application of the provisions of Article 37, paragraph (1) pursuant to the provisions of paragraph (10) of that Article), the following items apply according to which of the areas listed in those items the replacement asset referred to in that paragraph is located in:

the area listed in Article 37, paragraph (10), item (i): the phrase "20 percent" in the items of paragraph (1) is deemed to be replaced with "10 percent";

the area listed in Article 37, paragraph (10), item (ii): the phrase "20 percent" in the items of paragraph (1) is deemed to be replaced with "25 percent";

the area listed in Article 37, paragraph (10), item (iii): the phrase "20 percent of" in paragraph (1), item (i) is deemed to be replaced with "30 percent (or 40 percent where both the asset so transferred and the replacement asset fall under the principal office assets prescribed in paragraph (10) of that Article; hereinafter the same applies in this paragraph) of", the phrase "that 20 percent" is deemed to be replaced with "that 30 percent", and the phrase "20 percent" in items (ii) and (iii) of that paragraph is deemed to be replaced with "30 percent".

Where an individual has received the application of the provisions of Article 37, paragraph (1), the provisions listed in the items of Article 19, paragraph (1) do not apply to the replacement asset.

Where an individual, during the period from January 1, 1970 to December 31, 2029 (or March 31 of that year for the assets listed in the left-hand column of item (iii) of the table in Article 37, paragraph (1), and December 31, 2028 for those of the assets listed in the left-hand column of item (iv) of that table that are used for the construction business prescribed in that column or any other business specified by Cabinet Order), exchanges an asset held by the individual that is listed in the left-hand column of any item of that table and is used for the individual's business (hereinafter referred to as an "asset transferred by exchange" in this Article) for an asset listed in the right-hand column of that item (hereinafter referred to as an "asset acquired by exchange" in this Article) (excluding an exchange prescribed in Article 33-2, paragraph (1), item (ii) and other exchanges specified by Cabinet Order; hereinafter the same applies in this Article) (including the case where the individual receives or pays, in connection with the exchange, an exchange balancing payment (meaning money to compensate for the difference between the value of the asset acquired by the exchange and the value of the asset transferred by the exchange; hereinafter the same applies in this Article, the following Article and Article 37-8)), or exchanges an asset transferred by exchange for an asset other than an asset acquired by exchange and receives an exchange balancing payment (referred to as the "case of an exchange for other assets" in item (i)), the provisions of the preceding three Articles apply as follows:

the asset transferred by exchange (in the case of an exchange for other assets, limited to the portion specified by Cabinet Order as corresponding to the exchange balancing payment) is deemed to have been transferred as referred to in Article 37, paragraph (1) by the individual on the date of the exchange for an amount equivalent to the value of the asset as of that date;

the asset acquired by exchange is deemed to have been acquired as referred to in Article 37, paragraph (1) by the individual on the date of the exchange for an amount equivalent to the value of the asset as of that date, and the individual is deemed to have filed the notification referred to in that paragraph.