Act on Special Measures Concerning Taxation

A domestic corporation (limited to a general incorporated association or general incorporated foundation (excluding an incorporated public interest association and an incorporated public interest foundation), a workers' cooperative, an association or foundation without juridical personality prescribed in Article 2, paragraph (1), item (viii) of the Income Tax Act, and a corporation deemed to be a public interest corporation, etc. prescribed in Article 2, item (vi) of the Corporation Tax Act under laws other than the Corporation Tax Act, which is specified by Cabinet Order; the same applies hereinafter in this Article) or foreign corporation is liable to pay income tax with respect to the amount of gain pertaining to the following redemption money (for a foreign corporation, limited to the redemption money listed in item (i)) to be received on or after January 1, 2016 through the redemption of discount bonds (including retirement by purchase and the payment of interest on separated interest bonds prescribed in paragraph (6), item (i), (c) (referred to as "separated interest bonds" in item (i)); the same applies in that paragraph), and income tax is imposed by applying a tax rate of 15 percent to that amount of gain:

redemption money of discount bonds paid in Japan (including interest on separated interest bonds, and, where retirement by purchase is made, meaning the consideration for that purchase; the same applies hereinafter in this Article);

redemption money of discount bonds issued outside Japan (limited to that paid outside Japan; hereinafter referred to in this Article as "redemption money of foreign discount bonds") that is delivered through a person handling payment in Japan who is specified by Cabinet Order (hereinafter referred to in this Article as a "handler of foreign discount bonds").

A person who pays, on or after January 1, 2016, redemption money of discount bonds (excluding redemption money of specified discount bonds prescribed in the following paragraph to which the provisions of that paragraph apply) in Japan to an individual, or to a domestic corporation or foreign corporation, must, at the time of the payment, collect income tax in the amount calculated by multiplying the amount of gain pertaining to the redemption money of the discount bonds by a tax rate of 15 percent, and pay it to the State no later than the tenth day of the month following the month that includes the day of the collection.

A person handling payment in Japan of redemption money of discount bonds (limited to those that fall under listed shares, etc. prescribed in Article 37-11, paragraph (2) (referred to as "listed shares, etc." in paragraph (13)); hereinafter referred to in this Article as "specified discount bonds") paid in Japan on or after January 1, 2016 to an individual, or to a domestic corporation or foreign corporation, who is specified by Cabinet Order (referred to as a "handler of specified discount bonds" in paragraph (6) and paragraph (12)), must, at the time of delivering the redemption money to the individual, or to the domestic corporation or foreign corporation, collect income tax in the amount calculated by multiplying the amount of gain pertaining to the redemption money of the specified discount bonds delivered by a tax rate of 15 percent, and pay it to the State no later than the tenth day of the month following the month that includes the day of the collection.

A handler of foreign discount bonds in Japan for redemption money of foreign discount bonds paid on or after January 1, 2016 to a resident or domestic corporation must, at the time of delivering the redemption money of foreign discount bonds to the resident or domestic corporation, collect income tax in the amount calculated by multiplying the amount of gain pertaining to the redemption money of foreign discount bonds delivered by a tax rate of 15 percent, and pay it to the State no later than the tenth day of the month following the month that includes the day of the collection.

In the cases referred to in paragraph (1) and the preceding paragraph, if there is an amount of foreign income tax prescribed in Article 95, paragraph (1) of the Income Tax Act (including that specified by Cabinet Order as being equivalent to withholding at the source prescribed in Article 2, paragraph (1), item (xlv) of that Act) collected at the time of payment of redemption money of foreign discount bonds, the amount of gain referred to in paragraph (1) and the preceding paragraph is the amount remaining after deducting an amount equivalent to the amount of that foreign income tax from that amount of gain.

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

discount bond: Of the public and corporate bonds listed in Article 37-10, paragraph (2), item (vii) (hereinafter referred to in this item as "public and corporate bonds"), those listed below (excluding those that, at the time of their redemption, are entered or recorded in a transfer account book (meaning a transfer account book prescribed in the Act on Book-Entry Transfer of Corporate Bonds and Shares; the same applies in item (iii), (c)) pertaining to a specified account prescribed in Article 37-11-3, paragraph (3), item (i) or are placed in custody in that specified account, and foreign currency denominated bonds listed in paragraph (7), item (i) of the preceding Article):

those issued by means of a discount;

separated principal bonds (meaning public and corporate bonds that, of public and corporate bonds separated into the part pertaining to the principal and the part pertaining to interest, each of which is traded independently, were the part pertaining to the principal);

separated interest bonds (meaning public and corporate bonds that, of public and corporate bonds separated into the part pertaining to the principal and the part pertaining to interest, each of which is traded independently, were the part pertaining to the interest; the same applies in item (iii), (b));

public and corporate bonds on which interest is paid, for which the ratio of the amount specified by Order of the Ministry of Finance as their issue price to their face value is the ratio specified by Order of the Ministry of Finance or less.

retirement by purchase: The purchase in the case of redeeming discount bonds by means of purchase;

amount of gain: The amount specified in each of the following according to the category of discount bonds listed therein:

discount bonds listed in item (i), (a), (b) and (d) whose period from the date of issue to the date of redemption is one year or less (excluding those listed in (c)): the amount calculated by multiplying the amount of redemption money of the discount bonds (where the person receiving payment of redemption money of discount bonds issued by a foreign corporation is a nonresident or a foreign corporation, the amount specified by Cabinet Order as the portion of that redemption money pertaining to the business conducted through the permanent establishment of the foreign corporation that issued the discount bonds; the same applies in (b)) by 0.2 percent;

discount bonds listed in item (i), (a), (b) and (d) whose period from the date of issue to the date of redemption exceeds one year, and separated interest bonds (excluding those listed in (c)): the amount calculated by multiplying the amount of redemption money of the discount bonds by 25 percent;

discount bonds for which the amount required for the acquisition of the discount bonds is managed, pursuant to the provisions of Cabinet Order, under a contract concerning the management of the amount required for the acquisition of discount bonds that the domestic corporation receiving payment of the redemption money of the discount bonds has concluded with the financial instruments business operator, etc. prescribed in Article 37-11-3, paragraph (3), item (i) in whose transfer account book the domestic corporation has the discount bonds entered or recorded, or with which it has placed them in custody, and which is the handler of specified discount bonds or handler of foreign discount bonds in Japan for that redemption money: where the amount of redemption money of the discount bonds exceeds the amount required for the acquisition of the discount bonds managed under the contract, the amount of that gain.

Income tax to be collected and paid pursuant to the provisions of paragraphs (2) through (4) is deemed to be income tax pertaining to withholding at the source as prescribed in Article 2, paragraph (1), item (xlv) of the Income Tax Act, and the provisions of that Act, the Act on General Rules for National Taxes and the National Tax Collection Act apply. In this case, where the person who is to receive payment of redemption money of discount bonds is a domestic corporation or foreign corporation, with regard to the application of the provisions of the Corporation Tax Act to that domestic corporation or foreign corporation, the phrase "or prize money" in Article 68, paragraph (1) of that Act is deemed to be replaced with "or prize money, or redemption money of discount bonds listed in the items of Article 41-12-2, paragraph (1) of the Act on Special Measures Concerning Taxation (Special Provisions on Withholding at the Source, etc. for the Amount of Gain from Discount Bonds)", the phrase "that Act" is deemed to be replaced with "the Income Tax Act or the Act on Special Measures Concerning Taxation", and the phrase "of the Income Tax Act" in Article 144 of that Act is deemed to be replaced with "of the Income Tax Act or the Act on Special Measures Concerning Taxation".

A person who pays redemption money of specified discount bonds in Japan to a resident or to a nonresident who has a permanent establishment (including a person specified by Cabinet Order as being equivalent thereto (hereinafter referred to in this paragraph and the following paragraph as a "quasi-payer"); hereinafter referred to in this Article as a "payer of redemption money") must, pursuant to the provisions of Order of the Ministry of Finance, deliver a written notice concerning the payment of the redemption money of specified discount bonds to the person receiving the payment no later than the last day of the month following the month that includes the day on which the payment was finalized (or, where a quasi-payer delivers it, the 15th day of the second month following the month that includes the day on which the payment was finalized).

Where a payer of redemption money prepares, pursuant to the provisions of Order of the Ministry of Finance, the written notice referred to in the preceding paragraph based on the total amount of redemption money of specified discount bonds paid to the same person during the year, the payer of redemption money must, notwithstanding the provisions of that paragraph, deliver the written notice to the person receiving the payment no later than January 31 of the year following the year that includes the day on which the payment referred to in that paragraph was finalized (or, where a quasi-payer delivers it, February 15 of that following year).

A payer of redemption money may, in lieu of delivering a written notice under the provisions of the preceding two paragraphs, provide the matters to be stated in the written notice by the electronic or magnetic means prescribed in Article 8-4, paragraph (6), pursuant to the provisions of Cabinet Order and with the consent of the person receiving the payment; provided, however, that the payer must deliver the written notice to the person receiving the payment if requested by that person.

In the case referred to in the main clause of the preceding paragraph, the payer of redemption money referred to in that paragraph is deemed to have delivered the written notice referred to in paragraph (8) or paragraph (9).

Where redemption money of specified discount bonds is delivered through a handler of specified discount bonds in Japan, the provisions of paragraph (8) through the preceding paragraph apply by deeming the handler of specified discount bonds to be the person who pays the redemption money of specified discount bonds prescribed in paragraph (8). In this case, with regard to the person who pays the redemption money of specified discount bonds, the provisions of paragraph (8) through the preceding paragraph do not apply to the part pertaining to that redemption money of specified discount bonds.

Where redemption money of foreign discount bonds pertaining to discount bonds that fall under listed shares, etc. is delivered through a handler of foreign discount bonds in Japan, the provisions of paragraphs (8) through (11) apply by deeming the redemption money of foreign discount bonds to be paid in Japan, and deeming the handler of foreign discount bonds to be the person who pays the redemption money of foreign discount bonds.

Beyond what is specified in paragraph (7) and paragraph (10) through the preceding paragraph, necessary matters concerning the application of the provisions of paragraphs (1) through (6), paragraph (8) and paragraph (9) are specified by Cabinet Order.