Act on Special Measures Concerning Taxation

Where, as of the end of each business year of a corporation that has set aside the reserve for losses on investment in business restructuring of small and medium sized enterprises referred to in the preceding paragraph, the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to a specified corporation carried over from the preceding business year (where there are amounts that have been included, or are to be included, in gross profit by that day pursuant to the provisions of the following paragraph, or amounts that were included in gross profit by the end of the preceding business year pursuant to the provisions of this paragraph, the amount obtained by deducting those amounts; the same applies in the following paragraph and paragraph (4)) includes an amount for which five years (for the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to a specified corporation where the corporation had acquired shares, etc. of that specified corporation as a measure listed in the second column of item (ii) of the table in the preceding paragraph, 10 years) have elapsed from the day following the end of the business year in which it was set aside (hereinafter referred to in this paragraph as the "business year of accumulation") (hereinafter referred to in this paragraph as the "reserve amount past the deferral period"), then with regard to that reserve amount past the deferral period, the amount equivalent to the amount calculated by multiplying the amount set aside as that reserve for losses on investment in business restructuring of small and medium sized enterprises that was included in deductible expenses pursuant to the provisions of the preceding paragraph in calculating the amount of income for that business year of accumulation by the number of months in each relevant business year and dividing the result by 60 (where the amount so calculated exceeds that reserve amount past the deferral period, that reserve amount past the deferral period) is included in gross profit in calculating the amount of income for that business year.

Where a corporation that has set aside the reserve for losses on investment in business restructuring of small and medium sized enterprises referred to in paragraph (1) comes to fall under any of the cases listed in the following items, the amount equivalent to the amount specified in that item is included in gross profit in calculating the amount of income for the business year that includes the day on which it came to fall under that case (in the case listed in item (iii), the business year that includes the day before the date of the merger).

where the corporation has come to fall under any of the following cases (limited to where it had acquired shares, etc. of a specified corporation as the measure specified below for the category of the following cases): the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to that specified corporation as of the day on which the certification was revoked:

where the certification under Article 17, paragraph (1) of the Act on Strengthening the Management of Small and Medium-Sized Enterprises, etc. has been revoked pursuant to the provisions of Article 18, paragraph (2) of that Act: the measure listed in the second column of item (i) of the table in paragraph (1) pertaining to that certification;

where the certification under Article 24-2, paragraph (1) of the Act on Strengthening Industrial Competitiveness has been revoked pursuant to the provisions of Article 24-3, paragraph (2) or paragraph (3) of that Act: the measure listed in the second column of item (ii) of the table in paragraph (1) pertaining to that certification;

where the corporation has ceased to hold all or part of the shares, etc. of a specified corporation pertaining to that reserve for losses on investment in business restructuring of small and medium sized enterprises (excluding where it falls under the following item or item (iv), and where that specified corporation has dissolved through a qualified merger in which that corporation is the merging corporation): the amount calculated, pursuant to the provisions of Cabinet Order, as the amount pertaining to the shares, etc. it has ceased to hold, out of the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to that specified corporation as of the day on which it ceased to hold them (where it has ceased to hold all of the shares, etc. of that specified corporation, the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to that specified corporation as of the day on which it ceased to hold them);

where the corporation has transferred the shares, etc. of the specified corporation prescribed in the preceding item to the merging corporation through a merger: the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to that specified corporation immediately before the merger;

where the specified corporation prescribed in item (ii) has dissolved (excluding where it has dissolved through a qualified merger in which that corporation is the merging corporation): the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to that specified corporation as of the day of dissolution;

where the corporation has reduced the book value of the shares, etc. of the specified corporation prescribed in item (ii): the amount equivalent to the amount so reduced, out of the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to that specified corporation as of the day on which it made the reduction (where it has reduced that book value through a company split by split-off, a share distribution prescribed in Article 2, item (xii)-15-2 of the Corporation Tax Act or a refund of capital prescribed in Article 61-2, paragraph (18) of that Act, the amount specified by Cabinet Order as the amount of the portion corresponding to the amount so reduced, out of the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to that specified corporation as of that day);

where that corporation has dissolved (excluding dissolution through a merger): the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises as of the day of dissolution;

where that corporation has concluded a specified insurance policy (limited to where it had acquired shares, etc. of a specified corporation as a measure listed in the second column of an item of the table in paragraph (1) pertaining to that specified insurance policy): the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to that specified corporation as of the day on which it concluded the policy;

where the corporation has reversed the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to a specified corporation in a case other than the cases referred to in the preceding paragraph, the preceding items and the following paragraph: the amount equivalent to the amount reversed out of the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises pertaining to that specified corporation as of the day of the reversal.

Where a corporation that has set aside the reserve for losses on investment in business restructuring of small and medium sized enterprises referred to in paragraph (1) has had the approval for filing blue returns revoked, or has submitted a written notification to the effect that it will discontinue filing returns by blue return, the amount of the reserve for losses on investment in business restructuring of small and medium sized enterprises as of the day on which the fact that gave rise to the revocation of the approval occurred (where it falls under any of the cases listed in the following items, the day specified in that item) or the day on which the written notification was submitted (where the day on which the written notification was submitted is after the end of the business year in which it discontinued filing returns by blue return, the end of that business year) is included in gross profit in calculating the amount of income for the business year that includes that day. In this case, the provisions of the preceding two paragraphs do not apply.

where a group tax sharing corporation has received the notice under Article 127, paragraph (2) of the Corporation Tax Act pertaining to the disposition of that revocation: the day before the day on which it received the notice (where that day before is the end of the business year of the group tax sharing parent corporation of that group tax sharing corporation, the day on which it received the notice);

where a corporation that was a group tax sharing corporation has received the notice under Article 127, paragraph (2) of the Corporation Tax Act pertaining to the disposition of that revocation: the day on which the fact that gave rise to the revocation of the approval occurred or the day before the day on which the approval under Article 64-9, paragraph (1) of that Act ceased to be effective (where that day before is the end of the business year of the group tax sharing parent corporation of that corporation, the day on which the approval ceased to be effective), whichever is later.

The number of months referred to in paragraph (2) is calculated in accordance with the calendar, and a fraction of less than one month is counted as one month.

The provisions of paragraph (1) apply only where the final return, etc. for the business year for which the corporation seeks the application of those provisions contains a statement of the inclusion in deductible expenses of the amount set aside as a reserve for losses on investment in business restructuring of small and medium sized enterprises, and a written statement concerning the calculation of the amount so set aside is attached to that final return, etc.

Beyond what is provided for in the preceding paragraph, necessary matters concerning the application of the provisions of paragraphs (1) through (5) are specified by Cabinet Order.