Act on Special Measures Concerning Taxation

Where a resident or a nonresident who has a permanent establishment conducts a transaction or makes an acquisition listed in any of the following items and, according to the category of the transaction or acquisition listed in that item (hereinafter referred to in this paragraph and the following Article as a "futures transaction"), makes the settlement, or the exercise, waiver or transfer, specified in that item (hereinafter referred to in this paragraph and the following Article as "cash settlement, etc."), with respect to the business income, capital gains and miscellaneous income from the futures transaction pertaining to the cash settlement, etc., notwithstanding the provisions of Articles 22 and 89 and Article 165 of the Income Tax Act, income tax is imposed, separately from other income, on the amount calculated pursuant to the provisions of Cabinet Order as the amount of business income, the amount of capital gains and the amount of miscellaneous income from the futures transaction during that year (hereinafter referred to in this paragraph as the "amount of miscellaneous income, etc. from futures transactions"), in an amount equivalent to 15 percent of the amount of taxable miscellaneous income, etc. from futures transactions (meaning the amount of miscellaneous income, etc. from futures transactions (where the provisions of Articles 72 through 87 of that Act as replaced pursuant to the provisions of item (iv) of the following paragraph apply, the amount after that application)). In this case, if there is an amount of losses arising in the calculation of the amount of miscellaneous income, etc. from futures transactions, the amount of losses is deemed not to have arisen for the purpose of applying the provisions of that Act and other laws and regulations concerning income tax.

commodity futures transactions, etc. (meaning transactions listed in Article 2, paragraph (3), items (i) through (iv) of the Commodity Derivatives Transaction Act (for transactions listed in item (iv), limited to those pertaining to rights to effect the transactions listed in (a) through (c) of that item) that fall under futures transactions prescribed in that paragraph (including transactions listed in paragraph (10), item (i), (e) of that Article conducted on a commodity market prescribed in paragraph (9) of that Article), or transactions listed in paragraph (14), items (i) through (v) of that Article (for transactions listed in item (iv) of that paragraph, limited to those pertaining to rights to effect the transactions listed in (a) through (c) of that item) that fall under over-the-counter commodity derivatives transactions prescribed in that paragraph (limited to those conducted with a commodity derivatives business operator prescribed in paragraph (23) of that Article as the counterparty); hereinafter the same applies in this item): settlement of the commodity futures transactions, etc. (excluding settlement that results in delivery of the commodities pertaining to the commodity futures transactions, etc.);

financial instruments futures transactions, etc. (meaning, among transactions listed in Article 2, paragraph (21), items (i) through (iii) of the Financial Instruments and Exchange Act (for transactions listed in item (iii) of that paragraph, excluding those pertaining to rights to effect the transactions listed in items (iv) through (vi) of that paragraph) that fall under market transactions of derivatives prescribed in that paragraph (excluding those pertaining to crypto assets, etc. listed in paragraph (24), item (iii)-2 of that Article or financial indicators prescribed in Article 29-2, paragraph (1), item (ix) of that Act), those specified by Cabinet Order, or transactions listed in Article 2, paragraph (22), items (i) through (iv) of that Act (for transactions listed in item (iii) of that paragraph, excluding those pertaining to rights to effect the transactions listed in items (v) through (vii) of that paragraph) that fall under over-the-counter transactions of derivatives prescribed in that paragraph (excluding those pertaining to crypto assets, etc. listed in paragraph (24), item (iii)-2 of that Article or financial indicators prescribed in Article 29-2, paragraph (1), item (ix) of that Act) (limited to those conducted with a financial instruments business operator or registered financial institution prescribed in Article 37-12-2, paragraph (2), item (i) as the counterparty); hereinafter the same applies in this item): settlement of the financial instruments futures transactions, etc. (excluding settlement that results in delivery of the financial instruments prescribed in Article 2, paragraph (24) of that Act pertaining to the financial instruments futures transactions, etc.);

acquisition of securities listed in Article 2, paragraph (1), item (xix) of the Financial Instruments and Exchange Act (excluding those representing rights pertaining to transactions that are conducted on a foreign financial instruments market prescribed in paragraph (8), item (iii), (b) of that Article and are similar to the transactions listed in paragraph (21), item (iii) of that Article): the exercise, conducted on or after January 1, 2010, of the rights represented by those securities (excluding an exercise that results in delivery of the financial instruments prescribed in paragraph (24) of that Article) or waiver of those rights, or the transfer of those securities (limited to a transfer to a financial instruments business operator prescribed in paragraph (9) of that Article or any other transfer specified by Cabinet Order).

Where the provisions of the preceding paragraph apply, the following applies:

for the purpose of applying the provisions of Article 2, paragraph (1), items (xxx) through (xxxiv)-5 of the Income Tax Act, the phrase "amount of timber income" in item (xxx) of that paragraph is deemed to be replaced with "amount of timber income and the amount of miscellaneous income, etc. from futures transactions prescribed in Article 41-14, paragraph (1) (Special Provisions on Taxation on Miscellaneous Income, etc. from Futures Transactions) of the Act on Special Measures Concerning Taxation (hereinafter referred to as the "amount of miscellaneous income, etc. from futures transactions")";

for the purpose of applying the provisions of Article 33, paragraph (3) of the Income Tax Act, the phrase "Capital gains is" in that paragraph is deemed to be replaced with "Capital gains from futures transactions prescribed in Article 41-14, paragraph (1) (Special Provisions on Taxation on Miscellaneous Income, etc. from Futures Transactions) of the Act on Special Measures Concerning Taxation pertaining to cash settlement, etc. prescribed in that paragraph (hereinafter referred to as 'futures transactions pertaining to cash settlement, etc.') is", the phrase ", adding together the net balances" is deemed to be replaced with ", and adding together the net balances", and the phrase "; hereinafter such an amount is referred to as 'net gain' in this Article), then applying the special capital gains deduction against the net gain" is deemed to be replaced with ")";

for the purpose of applying the provisions of Article 69 of the Income Tax Act, the phrase "amount of capital gains" in paragraph (1) of that Article is deemed to be replaced with "amount of capital gains (for the amount of business income and the amount of capital gains, the amount calculated as if there were no business income or capital gains from futures transactions pertaining to cash settlement, etc.)", and the phrase "amount of each type of income" is deemed to be replaced with "amount of each type of income (excluding the amount of miscellaneous income, etc. from futures transactions)";

for the purpose of applying the provisions of Article 71 and Articles 72 through 87 of the Income Tax Act, the phrase "amount of gross income" in those provisions is deemed to be replaced with "amount of gross income, amount of miscellaneous income, etc. from futures transactions";

for the purpose of applying the provisions of Articles 92, 95 and 165-6 of the Income Tax Act, the phrase "the preceding Section (Tax Rates)" in Article 92, paragraph (1) of that Act is deemed to be replaced with "the preceding Section (Tax Rates) and Article 41-14, paragraph (1) (Special Provisions on Taxation on Miscellaneous Income, etc. from Futures Transactions) of the Act on Special Measures Concerning Taxation", the phrase "taxable gross income" is deemed to be replaced with "the sum of the taxable gross income and the amount of taxable miscellaneous income, etc. from futures transactions prescribed in Article 41-14, paragraph (1) of the Act on Special Measures Concerning Taxation", the phrase "amount of income tax on taxable gross income" in paragraph (2) of that Article is deemed to be replaced with "amount of income tax on taxable gross income, the amount of income tax on the amount of taxable miscellaneous income, etc. from futures transactions prescribed in that paragraph", and the phrase "amount of income tax for that year" in Article 95 and Article 165-6 of that Act is deemed to be replaced with "amount of income tax for that year and the amount of income tax under the provisions of Article 41-14, paragraph (1) (Special Provisions on Taxation on Miscellaneous Income, etc. from Futures Transactions) of the Act on Special Measures Concerning Taxation";

beyond what is specified in the preceding items, special provisions concerning applications or returns under the provisions of Part II, Chapter V of the Income Tax Act and other necessary matters concerning the application of the provisions of laws and regulations on income tax in the case where the provisions of the preceding paragraph apply are specified by Cabinet Order.

Beyond what is prescribed in the preceding paragraph, Cabinet Order provides for the necessary particulars concerning the application of the provisions of paragraph (1).

Where a resident or nonresident who has a permanent establishment who files a tax return (including a return under the provisions of Article 123, paragraph (1) of the Income Tax Act (including as applied mutatis mutandis pursuant to Article 166 of that Act) as applied mutatis mutandis pursuant to paragraph (5); hereinafter the same applies in this paragraph and paragraph (3)) has an amount of losses from cash settlement, etc. of futures transactions that arose in any year within the three years before that year (excluding any amount deducted in or before the previous year by applying the provisions of this paragraph), notwithstanding the provisions of the second sentence of paragraph (1) of the preceding Article, an amount equivalent to that amount of losses from cash settlement, etc. of futures transactions is, pursuant to the provisions of Cabinet Order, deducted in calculating the amount of miscellaneous income, etc. from futures transactions for the year covered by the tax return, up to the amount of miscellaneous income, etc. from futures transactions prescribed in that paragraph for that year.

The amount of losses from cash settlement, etc. of futures transactions prescribed in the preceding paragraph means, out of the amount calculated pursuant to the provisions of Cabinet Order as the amount of losses arising from the resident or nonresident who has a permanent establishment having made cash settlement, etc. of futures transactions on or after January 1, 2003, the amount calculated pursuant to the provisions of Cabinet Order as the portion that cannot be fully deducted even after deduction in calculating the amount of miscellaneous income, etc. from futures transactions prescribed in paragraph (1) of the preceding Article for the year that includes the day on which the person made that cash settlement, etc.

The provisions of paragraph (1) apply only where the resident or nonresident who has a permanent establishment prescribed in that paragraph has filed, for income tax for the year in which the amount of losses from cash settlement, etc. of futures transactions prescribed in the preceding paragraph arose, a tax return to which a written statement concerning the calculation of that amount of losses from cash settlement, etc. of futures transactions and other documents specified by Order of the Ministry of Finance are attached, and has continuously filed tax returns thereafter, and where the tax return referred to in paragraph (1) has attached to it a written statement concerning the calculation of the amount to be deducted under the provisions of that paragraph and other documents specified by Order of the Ministry of Finance.

With regard to the application of the provisions of the preceding Article (excluding paragraph (2)) in the case where the provisions of paragraph (1) apply, the phrase "calculated amount (" in paragraph (1) of that Article is deemed to be replaced with "calculated amount (where the provisions of paragraph (1) of the following Article apply, the amount after that application;".

The provisions of Article 123, paragraph (1) (excluding item (ii)) of the Income Tax Act (including as applied mutatis mutandis pursuant to Article 166 of that Act) apply mutatis mutandis to the case where a resident or nonresident who has a permanent establishment seeks the application of the provisions of paragraph (1) in or after the year following the relevant year, and the case falls under neither the case where the person must file a return under the provisions of Article 120, paragraph (1) of that Act (including as applied mutatis mutandis pursuant to Article 166 of that Act) for income tax for the relevant year nor the case where the person may file a return under the provisions of Article 122, paragraph (1) or Article 123, paragraph (1) of that Act (including as applied mutatis mutandis pursuant to Article 166 of that Act). In this case, in paragraph (1) of that Article, the phrase "seeks the application of the provisions of Article 70, paragraph (1) or paragraph (2) (Deduction for Carryover of Net Loss) or Article 71, paragraph (1) (Deduction for Carryover of Casualty Loss), or seeks a refund under the provisions of Article 142, paragraph (2) (Procedures for Issuing Refunds Based on Carryback of Net Loss), during the third period" is deemed to be replaced with "seeks the application of the provisions of Article 41-15, paragraph (1) (Deduction for Carryover of Losses from Cash Settlement, etc. of Futures Transactions) of the Act on Special Measures Concerning Taxation", and the phrase "listed in the items of the following paragraph" is deemed to be replaced with "the amount of losses from cash settlement, etc. of futures transactions prescribed in paragraph (2) of that Article that arose in that year (hereinafter referred to in this paragraph as the 'amount of losses from cash settlement, etc. of futures transactions'), the amount of losses from cash settlement, etc. of futures transactions that arose in each year within the three years before that year, and other matters specified by Cabinet Order"; in item (i) of that paragraph, the phrase "amount of net loss" is deemed to be replaced with "amount of losses from cash settlement, etc. of futures transactions"; and in item (iii) of that paragraph, the phrase "amount of net loss and casualty loss (Article 70, paragraph (1) or paragraph (2) or Article 71, paragraph (1)" is deemed to be replaced with "amount of losses from cash settlement, etc. of futures transactions (Article 41-15, paragraph (1) of the Act on Special Measures Concerning Taxation", the phrase "and excluding those that formed the basis for calculating the amount to be refunded pursuant to the provisions of Article 142, paragraph (2); the same applies in that item" is deemed to be replaced with "excluding", the phrase "those amounts" is deemed to be replaced with "that amount of losses from cash settlement, etc. of futures transactions", and the phrase "the sum of the amount of gross income, the amount of retirement income and the amount of timber income" is deemed to be replaced with "the amount of miscellaneous income, etc. from futures transactions prescribed in Article 41-14, paragraph (1) (Special Provisions on Taxation on Miscellaneous Income, etc. from Futures Transactions) of that Act".

With regard to the application of the provisions of the Act on General Rules for National Taxes in the case where the provisions of paragraph (1) apply, in Article 2, item (vi), (c), 1. of that Act, the phrase "or casualty loss" is deemed to be replaced with "or casualty loss, or the amount of losses from cash settlement, etc. of futures transactions prescribed in Article 41-15, paragraph (2) (Deduction for Carryover of Losses from Cash Settlement, etc. of Futures Transactions) of the Act on Special Measures Concerning Taxation", and the phrase "that Act" is deemed to be replaced with "those Acts".

Special provisions on the matters to be stated in the tax return to be filed in the case where the application of the provisions of paragraph (1) is sought in or after the year following the relevant year or in that year, and other necessary matters concerning the application of the provisions of the preceding paragraphs are specified by Cabinet Order.