Act on Special Measures Concerning Taxation

Where assets held by a corporation that are prescribed in the following items have come to fall under the cases listed in those items (including where compensation, consideration or settlement money (hereinafter referred to as "compensation, etc." in this Article) or consideration for reserved land (meaning the consideration for reserved land in the case where the reserved land has been designated pursuant to the provisions of Article 16, paragraph (1) of the Act on Vitalization in City Center, Article 39, paragraph (1) of the Act on Promotion of Smooth Transportation, etc. of Elderly Persons, Disabled Persons, etc., Article 19, paragraph (1) of the Act on Promotion of Low-Carbon Cities, Article 21, paragraph (1) of the Urban Housing Supply Promotion Act, or Article 28, paragraph (1) of the Act on Comprehensive Development of Regional Core Cities with Relocation of Office-Work Function; the same applies in item (i) of the following paragraph and paragraph (10), item (i)) has been acquired together with the assets prescribed in those items; the same applies in paragraph (5)), if the corporation has reduced, through accounting as an expense or loss, the book value of the assets it has acquired through the expropriation, purchase, replotting disposition, rights conversion or exchange prescribed in those items (hereinafter referred to as "replotting disposition, etc." in this Article and the following Article) (hereinafter referred to as "assets acquired by exchange" in this Article), within the limit of the balance remaining after deducting, from the value of the assets acquired by exchange, the book value immediately before the transfer of the assets transferred through the replotting disposition, etc. (referred to as the "reduction entry limit" in paragraph (5)), an amount equivalent to the amount of that reduction is included in deductible expenses in calculating the amount of income for that business year.

where assets have been expropriated under the provisions of the Expropriation of Land Act, etc. (including where there has been a purchase that falls under the provisions of Article 64, paragraph (1), item (ii) or item (iv)), if assets specified by Cabinet Order as assets of the same type as those assets or as other assets that are to replace them are acquired;

where a land improvement project under the Land Improvement Act or a project under Article 13-2, paragraph (1) of the Act on Establishment of Agricultural Promotion Regions has been implemented with regard to land, etc., if land, etc. is acquired through an exchange pertaining to that land, etc.;

where a land readjustment project under the Land Readjustment Act, land consolidation under the Act on Development of Infrastructures for New Cities, a land improvement project under the Land Improvement Act, or a residential block improvement project under the Urban Housing Supply Promotion Act has been implemented with regard to land, etc., if land, etc., or a part of a building prescribed in Article 93, paragraph (1), (2), (4) or (5) of the Land Readjustment Act and a share of co-ownership of the land on which the building stands, a part, etc. of the facility housing prescribed in Article 74, paragraph (1) of the Urban Housing Supply Promotion Act, or rights concerning the facility housing or the site of the facility housing prescribed in Article 90, paragraph (2) of the Urban Housing Supply Promotion Act, is acquired through a replotting disposition pertaining to that land, etc.;

where a type 1 urban redevelopment project under the Urban Renewal Act has been implemented with regard to assets, if a right to acquire a part of a facility building or a right to acquire a building lease right for a part of a facility building, and a facility building site or a share of co-ownership thereof or a share of co-ownership of a superficies right (where the rights conversion pertaining to the assets is one set forth in a rights conversion plan established pursuant to the provisions of Article 110, paragraph (1) or Article 110-2, paragraph (1) of that Act, a right to acquire rights concerning a facility building site or rights concerning a facility building), or residential land within an individual use zone or a right to use and profit therefrom, is acquired through a rights conversion pertaining to the assets, or where assets have been purchased or expropriated in connection with the implementation of a type 2 urban redevelopment project under that Act, if a right to receive the grant of a portion of a building facility prescribed in Article 118-11, paragraph (1) of that Act (where the grant is one set forth in a management and disposal plan established pursuant to the provisions of Article 118-25-3, paragraph (1) of that Act, the grant of rights concerning a facility building site or a facility building) is acquired as consideration therefor pursuant to the provisions of that paragraph;

where a disaster prevention block improvement project under the Act on Promotion of Improvement of Disaster Control Districts in Populated Urban Districts has been implemented with regard to assets, if a right to acquire a part of a disaster prevention facility building or a right to acquire a building lease right for a part of a disaster prevention facility building, and a disaster prevention facility building site or a share of co-ownership thereof or a share of co-ownership of a superficies right (where the rights conversion pertaining to the assets is one set forth in a rights conversion plan established pursuant to the provisions of Article 255, paragraph (1) or Article 257, paragraph (1) of that Act, a right to acquire rights concerning a disaster prevention facility building site or rights concerning a disaster prevention facility building), or residential land within an individual use zone or a right to use and profit therefrom, is acquired through a rights conversion pertaining to the assets;

where a condominium regeneration project prescribed in Article 2, paragraph (1), item (x) of the Act on Facilitation of the Regeneration, etc. of Condominiums has been implemented with regard to assets (limited to those specified by Cabinet Order), if a right to acquire rights concerning the post-regeneration condominium prescribed in item (xiv) of that paragraph or a right to use the site pertaining to that post-regeneration condominium (meaning the right to use the site prescribed in item (xxxv) of that paragraph) is acquired through a rights conversion under that Act pertaining to the assets;

where a site division project prescribed in Article 2, paragraph (1), item (xxviii) of the Act on Facilitation of the Regeneration, etc. of Condominiums has been carried out with regard to assets, if a removal site share prescribed in Article 191, paragraph (1), item (ii) of that Act, a non-removal site share, etc. prescribed in item (v) of that paragraph, or a share of co-ownership of the housing complex common areas after the site division referred to in item (viii) of that paragraph is acquired through a site rights conversion under that Act pertaining to the assets.

The book value immediately before the transfer prescribed in the preceding paragraph is, in the cases listed in the following items, the amount specified in each of those items.

where compensation, etc. or consideration for reserved land has been acquired together with assets acquired by exchange: the amount after deducting, from the book value, the amount calculated pursuant to the provisions of Cabinet Order as the part of the book value corresponding to the amount of the compensation, etc. or the consideration for reserved land;

where the value of the assets acquired by exchange exceeds the value of the transferred assets, if an amount equivalent to the difference has been paid upon the replotting disposition, etc.: the amount obtained by adding the amount so paid to the book value;

where there is an amount calculated pursuant to the provisions of Cabinet Order as the expenses required for the transfer of the assets transferred through the replotting disposition, etc. that pertain to the assets acquired by exchange: the amount obtained by adding the amount so calculated to the book value.

The provisions of the preceding two Articles (excluding Article 64, paragraphs (7) and (8) (including as applied mutatis mutandis pursuant to paragraph (10) of that Article or paragraph (14) of the preceding Article) and paragraph (12) (including as applied mutatis mutandis pursuant to paragraph (16) of the preceding Article)) apply mutatis mutandis where assets held by a corporation that are prescribed in the items of paragraph (1) (excluding item (vii)) have come to fall under the cases listed in those items, and the corporation has acquired compensation, etc. together with the assets prescribed in those items and has acquired or is expected to acquire substitute assets with an amount equivalent to all or part of that amount, or has acquired assets that are to become substitute assets. In this case, the phrase "the balance remaining after deducting the book value immediately before the transfer of the transferred assets from the amount of the compensation, consideration or settlement money, to that compensation, consideration or settlement money" in Article 64, paragraph (1) is deemed to be replaced with "the balance remaining after deducting, from the amount of the compensation, etc. prescribed in Article 65, paragraph (1) (where there are expenses required for the transfer of the assets transferred through the replotting disposition, etc. prescribed in that paragraph, the amount after deducting the amount specified by Cabinet Order as having been paid out of the amount of the compensation, etc.; hereinafter the same applies in this paragraph), the amount calculated pursuant to the provisions of Cabinet Order as the part of the book value immediately before the transfer of the transferred assets corresponding to the amount of the compensation, etc., to that compensation, etc.".

The provisions of Article 64, paragraphs (5) and (6) apply mutatis mutandis where the provisions of paragraph (1) are applied.

Where a corporation (limited to a corporation whose assets prescribed in the items of paragraph (1) have come to fall under the cases listed in those items) carries out a qualified company split, a qualified capital contribution in kind or a qualified in-kind distribution (limited to one carried out on or after that date; hereinafter referred to as a "qualified company split, etc." in this paragraph and the following paragraph) in the business year that includes the date of the replotting disposition, etc., if the corporation transfers the assets acquired by exchange that it has acquired through the replotting disposition, etc. during the period from the start of that business year until immediately before the qualified company split, etc. to the succeeding corporation in a company split, the corporation receiving a capital contribution in kind or the corporation receiving a distribution in kind through the qualified company split, etc., then, only where the corporation has reduced the book value of those assets acquired by exchange within the limit of an amount equivalent to the reduction entry limit pertaining to those assets acquired by exchange, an amount equivalent to the amount of that reduction is included in deductible expenses in calculating the amount of income for that business year.

The provisions of the preceding paragraph apply only where the corporation seeking the application of the provisions of that paragraph submits, within two months after the date of the qualified company split, etc., a document stating the amount of the reduction prescribed in that paragraph and other matters specified by Order of the Ministry of Finance to the district director having jurisdiction over its place for tax payment.

Where the provisions of paragraph (1), item (iv) have been applied, if an amount equivalent to the difference prescribed in Article 104, paragraph (1) of the Urban Renewal Act (including as applied with the deemed replacement of terms pursuant to the provisions of Article 110-2, paragraph (6) or Article 111 of that Act) or Article 118-24 of that Act (including as applied with the deemed replacement of terms pursuant to the provisions of Article 118-25-3, paragraph (3) of that Act) (referred to as "conversion settlement money" in paragraph (10), item (i) and paragraphs (1) and (2) of the following Article) has come to be granted pursuant to those provisions with regard to the right to acquire a part of a facility building and a facility building site or a share of co-ownership thereof or a share of co-ownership of a superficies right referred to in that item (including a right to acquire rights concerning a facility building site or rights concerning a facility building pertaining to a rights conversion plan established pursuant to the provisions of Article 110-2, paragraph (1) of that Act), or residential land within an individual use zone or a right to use and profit therefrom, or the right to receive the grant prescribed in that item, if an offer of a wish to acquire under the provisions of Article 118-5, paragraph (1) of that Act has been withdrawn with regard to the portion of a building facility prescribed in paragraph (1), item (iv) (including rights concerning a facility building site or a facility building pertaining to a management and disposal plan established pursuant to the provisions of Article 118-25-3, paragraph (1) of that Act) (including where the offer of a wish to acquire is deemed to have been withdrawn pursuant to the provisions of Article 118-12, paragraph (1) or Article 118-19, paragraph (1) of that Act), or if a part of the facility building or a building lease right for a part of the facility building referred to in that item (including rights concerning the facility building referred to in that item) or the portion of a building facility (including rights concerning the facility building site or the facility building referred to in that item) has been acquired based on the right to acquire a part of the facility building or the right to acquire a building lease right for a part of a facility building referred to in that item (including a right to acquire rights concerning a facility building pertaining to a rights conversion plan established pursuant to the provisions of Article 110, paragraph (1) or Article 110-2, paragraph (1) of that Act; hereinafter the same applies in this paragraph and paragraph (10)) or the right to receive the grant prescribed in that item, then the provisions of the preceding two Articles or the preceding paragraphs apply by deeming that a transfer through expropriation, etc. or replotting disposition, etc. has been made, on the day on which it has come to be so granted, the day on which the offer of a wish to acquire was withdrawn or the day on which the withdrawal is deemed to have been made pursuant to the provisions of Article 118-12, paragraph (1) or Article 118-19, paragraph (1) of that Act, or the day of the acquisition, with regard to the part of the assets referred to in that item specified by Cabinet Order as corresponding to that amount, the right to receive the grant prescribed in that item to which the withdrawal pertains, or the right to acquire a part of the facility building, the right to acquire a building lease right for a part of a facility building or the right to receive the grant prescribed in that item that gave rise to the acquisition.

Where the provisions of paragraph (1), item (v) have been applied, if an amount equivalent to the difference prescribed in Article 248, paragraph (1) of the Act on Promotion of Improvement of Disaster Control Districts in Populated Urban Districts (including as applied with the deemed replacement of terms pursuant to provisions specified by Cabinet Order) (referred to as "disaster prevention conversion settlement money" in paragraph (10), item (i) and paragraphs (1) and (2) of the following Article) has come to be granted pursuant to the provisions of that paragraph with regard to the right to acquire a part of a disaster prevention facility building and a disaster prevention facility building site or a share of co-ownership thereof or a share of co-ownership of a superficies right referred to in that item (including a right to acquire rights concerning a disaster prevention facility building site or rights concerning a disaster prevention facility building pertaining to a rights conversion plan established pursuant to the provisions of Article 255, paragraph (1) of that Act), or residential land within an individual use zone or a right to use and profit therefrom, or if a part of the disaster prevention facility building or a building lease right for a part of the disaster prevention facility building referred to in paragraph (1), item (v) (including rights concerning the disaster prevention facility building referred to in that item) has been acquired based on the right to acquire a part of the disaster prevention facility building or the right to acquire a building lease right for a part of a disaster prevention facility building referred to in that item (including a right to acquire rights concerning a disaster prevention facility building pertaining to a rights conversion plan established pursuant to the provisions of Article 255, paragraph (1) or Article 257, paragraph (1) of that Act; hereinafter the same applies in this paragraph and paragraph (10)), then the provisions of the preceding two Articles or paragraphs (1) through (6) apply by deeming that a transfer through expropriation, etc. or replotting disposition, etc. has been made, on the day on which it has come to be so granted or the day of the acquisition, with regard to the part of the assets referred to in that item specified by Cabinet Order as corresponding to that amount, or the right to acquire a part of the disaster prevention facility building or the right to acquire a building lease right for a part of a disaster prevention facility building referred to in that item that gave rise to the acquisition.

Where the provisions of paragraph (1), item (vi) have been applied, if rights concerning the post-regeneration condominium referred to in that item have been acquired based on the right to acquire rights concerning the post-regeneration condominium referred to in that item, then the provisions of that paragraph, paragraph (2) and paragraphs (4) through (6) apply by deeming that a transfer through replotting disposition, etc. has been made, on the day of the acquisition, with regard to the right to acquire those rights.

Where a domestic corporation has received the application of the provisions of Article 61-11, paragraph (1) of the Corporation Tax Act with regard to the amount of gain on transfer prescribed in paragraph (1) of that Article (referred to as the "amount of gain on transfer" in item (i)) pertaining to a transfer gain or loss adjustment asset prescribed in that paragraph (hereinafter referred to as a "transfer gain or loss adjustment asset" in this paragraph), if the transferee corporation prescribed in paragraph (2) of that Article has received the application of the provisions of paragraph (1) or paragraph (5) with regard to the transfer of an asset held by it that is a transfer gain or loss adjustment asset to which that application pertains (referred to as an "applicable asset subject to adjustment of gain or loss on transfer" in the following paragraph) and that falls under the provisions of paragraph (1), items (iii) through (vii) (excluding, for item (iii) of that paragraph, the part pertaining to land consolidation under the Act on Development of Infrastructures for New Cities, and, for item (iv) of that paragraph, the part pertaining to a type 2 urban redevelopment project under the Urban Renewal Act) (including the right to acquire a part of a facility building or the right to acquire a building lease right for a part of a facility building referred to in paragraph (7), the right to acquire a part of a disaster prevention facility building or the right to acquire a building lease right for a part of a disaster prevention facility building referred to in paragraph (8), and the right to acquire rights concerning the post-regeneration condominium referred to in the preceding paragraph), then with regard to the application of the provisions of that Article, what is specified in each of the following items applies according to the category of cases listed in those items:

where compensation, etc. or consideration for reserved land has been acquired together with assets acquired by exchange (including where conversion settlement money or disaster prevention conversion settlement money has come to be granted and other cases specified by Cabinet Order): the amount to be included in gross profits pursuant to the provisions of Article 61-11, paragraph (2) of the Corporation Tax Act as a result of the transfer is the amount calculated pursuant to the provisions of Cabinet Order as the part of the amount of gain on transfer corresponding to the amount of the compensation, etc. or the consideration for reserved land, or of the conversion settlement money or disaster prevention conversion settlement money;

cases other than the case listed in the preceding item: with regard to the application of the provisions of Article 61-11, paragraph (2) of the Corporation Tax Act, the transfer is deemed not to fall under the grounds specified by Cabinet Order prescribed in that paragraph.

Where the provisions of the preceding paragraph apply, the provisions of that paragraph and Article 61-11 of the Corporation Tax Act apply by deeming the assets acquired by the transferee corporation referred to in that paragraph through the replotting disposition, etc. pertaining to the transfer referred to in that paragraph to be applicable assets subject to adjustment of gain or loss on transfer.

The provisions of Article 64, paragraphs (7) and (8) apply mutatis mutandis to assets to which the provisions of paragraph (1), paragraph (3) or paragraph (5) have been applied.

The provisions of Article 64, paragraph (12) apply mutatis mutandis to assets to which the provisions of paragraph (1), paragraph (3) or paragraph (5) have been applied.

Beyond what is provided for in paragraph (4), paragraph (6) and the preceding two paragraphs, the calculation of the book value immediately before the transfer prescribed in paragraph (1) of the assets transferred through the rights conversion prescribed in paragraph (1), item (vi) (limited to the part pertaining to the right to use the site prescribed in that item) in the case where, at the time of that rights conversion, there is a difference between the value of those transferred assets and the approximate value of the right to use the site pertaining to the post-regeneration condominium prescribed in that item, and other matters necessary for the application of the provisions of that paragraph, paragraph (3), paragraph (5) and paragraphs (7) through (11), are specified by Cabinet Order.