Act on Special Measures Concerning Taxation

Where, in the relevant business year, there is a special depreciation shortfall for a depreciable asset held by a corporation to which the provisions of Article 42-6, paragraph (1), Article 42-10, paragraph (1), Article 42-11, paragraph (1), Article 42-11-2, paragraph (1), Article 42-12, paragraph (1), Article 42-12-4, paragraph (1), Article 42-12-6, paragraph (1), Article 42-12-7, paragraph (1) or Articles 43 through 47, or the provisions specified by Cabinet Order as provisions that prescribe special provisions on depreciable assets (referred to in the following paragraph as the "special depreciation provisions"), have been applied, the depreciation limit for that asset for that business year is, notwithstanding the provisions of Article 31, paragraph (1) or paragraph (2) of the Corporation Tax Act, the amount obtained by adding the special depreciation shortfall pertaining to that asset to the amount specified by Cabinet Order as the ordinary depreciation limit for that asset.

The special depreciation shortfall prescribed in the preceding paragraph means the shortfall pertaining to the special depreciation limit (meaning, where the amount included in deductible expenses as the depreciation allowance for the asset subject to special depreciation of the corporation in each of those business years is less than the depreciation limit calculated under the special depreciation provisions for that asset subject to special depreciation (where the provisions on extra depreciation specified by Cabinet Order, including Article 45, paragraph (3), are applied, the sum of the ordinary depreciation limit and the special depreciation limit prescribed in those provisions on extra depreciation), the portion of the difference up to the amount reaching that special depreciation limit; the same applies in the following paragraph) of the depreciable asset prescribed in the special depreciation provisions (hereinafter referred to in this Article and the following Article as an "asset subject to special depreciation") that arose in each business year that began within one year before the first day of the relevant business year (limited to each business year where the corporation has continuously filed blue returns up to the relevant business year), excluding the amount included in deductible expenses in calculating the amount of income for each of those business years before the relevant business year. In this case, where the asset subject to special depreciation is a depreciable asset to which the provisions of Article 43-2 have been applied, a final return prescribed in Article 2, item (xxxi) of the Corporation Tax Act other than a blue return is deemed to be a blue return.

The provisions of paragraph (1) do not apply where the final returns prescribed in Article 2, item (xxxi) of the Corporation Tax Act for each business year from the business year in which the shortfall pertaining to the special depreciation limit of the asset subject to special depreciation arose to the business year immediately preceding the relevant business year, and the tax return, etc. for the business year for which the corporation seeks the application of the provisions of that paragraph, do not have attached to them a written statement concerning the calculation of the depreciation limit for the depreciable asset prescribed in that paragraph.

Where a corporation receives a transfer of an asset subject to special depreciation through a qualified merger, qualified company split, qualified capital contribution in kind or qualified in-kind distribution (referred to in the following paragraph as a "qualified merger, etc."), if there is a special depreciation shortfall in a merger, etc. for that asset subject to special depreciation in the business year that includes the day on which it received that transfer, the depreciation limit for that asset subject to special depreciation for that business year is, notwithstanding the provisions of Article 31, paragraph (1) or paragraph (2) of the Corporation Tax Act, the amount obtained by adding the special depreciation shortfall in a merger, etc. pertaining to that asset subject to special depreciation to the amount specified by Cabinet Order as the ordinary depreciation limit for that asset subject to special depreciation.

The special depreciation shortfall in a merger, etc. prescribed in the preceding paragraph means, where the amount included in deductible expenses as the depreciation allowance for the asset subject to special depreciation in the business year of the merged corporation, splitting corporation, corporation making a capital contribution in kind or corporation making a distribution in kind pertaining to a qualified merger, etc. that includes the day of that qualified merger, etc. (for a qualified merger, the day preceding the day of that qualified merger, and for a qualified in-kind distribution that constitutes a distribution of all residual assets, the day on which the residual assets pertaining to that qualified in-kind distribution are determined) (where that asset subject to special depreciation was transferred through a qualified company split, qualified capital contribution in kind or qualified in-kind distribution (for a qualified in-kind distribution, excluding a distribution of all residual assets), the amount included in deductible expenses out of the amount entered through accounting as an expense or loss during the period prescribed in Article 31, paragraph (2) of the Corporation Tax Act) is less than the depreciation limit calculated under the special depreciation provisions prescribed in paragraph (1) for that asset subject to special depreciation (where the provisions on extra depreciation specified by Cabinet Order, including Article 45, paragraph (3), are applied, the sum of the ordinary depreciation limit and the special depreciation limit prescribed in those provisions on extra depreciation), the portion of the difference up to the amount reaching the special depreciation limit prescribed in the special depreciation provisions for that asset subject to special depreciation.

The provisions of paragraph (4) do not apply where the final return, etc. for the business year for which the corporation seeks the application of the provisions of that paragraph does not have attached to it a written statement concerning the calculation of the depreciation limit for the asset subject to special depreciation and the special depreciation shortfall in a merger, etc. prescribed in that paragraph.

Beyond what is provided for in paragraph (3) and the preceding paragraph, necessary matters concerning the application of the provisions of paragraph (1) and paragraph (4) are specified by Cabinet Order.