Act on Special Measures Concerning Taxation

Where a domestic corporation has the amount listed in Article 23, paragraph (1), item (i) of the Corporation Tax Act (hereinafter referred to in this Article as the "amount of dividend of surplus, etc.") received from a foreign corporation (excluding one that falls under the category of foreign subsidiary prescribed in Article 23-2, paragraph (1) of that Act; hereinafter the same applies in this paragraph), the portion of the amount of dividend of surplus, etc. up to the specified taxable amount pertaining to the foreign corporation is not included in gross profit in calculating the amount of income of the domestic corporation for each business year.

Where a domestic corporation has an amount of dividend of surplus, etc. received from a foreign corporation (limited to the portion of the amount to which the provisions of Article 23-2, paragraph (1) of the Corporation Tax Act apply; hereinafter the same applies in this paragraph), with regard to the application of the provisions of paragraph (1) of that Article to the portion of the amount of dividend of surplus, etc. up to the specified taxable amount pertaining to the foreign corporation, the phrase "the amount obtained by deducting, from the amount of dividend of surplus, etc., the amount calculated pursuant to the provisions of Cabinet Order as the amount equivalent to the amount of expenses pertaining to that amount of dividend of surplus, etc." in that paragraph is deemed to be replaced with "the amount of dividend of surplus, etc.".

Where a domestic corporation has an amount of dividend of surplus, etc. received from a foreign corporation (limited to the portion of the amount to which the provisions of Article 23-2, paragraph (2) of the Corporation Tax Act apply; hereinafter the same applies in this paragraph), the portion of the amount of dividend of surplus, etc. up to the specified taxable amount pertaining to the foreign corporation is not included in gross profit in calculating the amount of income of the domestic corporation for each business year.

The specified taxable amount prescribed in the preceding three paragraphs means the sum of the following amounts:

the amount calculated pursuant to the provisions of Cabinet Order, by taking into consideration the number of shares, etc. held directly by the domestic corporation in the foreign corporation (meaning the number of shares of or amount of capital contributions to a foreign corporation held by a domestic corporation; the same applies in the following item, the following paragraph and paragraph (10)) and the status of the relationship of substantive control between the domestic corporation and the foreign corporation (meaning the relationship of substantive control prescribed in paragraph (2), item (v) of that Article; the same applies in the following item and paragraph (10), item (ii)), out of the taxable amount, partially taxable amount or partially taxable amount for a financial subsidiary, etc. pertaining to the foreign corporation that is included in gross profit in calculating the amount of income for the business year that includes the day on which the domestic corporation receives the amount of dividend of surplus, etc. from the foreign corporation, pursuant to the provisions of Article 66-6, paragraph (1), paragraph (8) or paragraph (10) in that business year;

the amount calculated pursuant to the provisions of Cabinet Order, by taking into consideration the number of shares, etc. held directly by the domestic corporation in the foreign corporation and the status of the relationship of substantive control between the domestic corporation and the foreign corporation, out of the taxable amount, partially taxable amount or partially taxable amount for a financial subsidiary, etc. pertaining to the foreign corporation that was included in gross profit in calculating the amount of income for each business year that began within ten years before the first day of the business year that includes the day on which the domestic corporation receives the amount of dividend of surplus, etc. from the foreign corporation (hereinafter referred to in this Article as "each business year within the preceding ten years"), pursuant to the provisions of Article 66-6, paragraph (1), paragraph (8) or paragraph (10) in each business year within the preceding ten years (if there is an amount of dividend of surplus, etc. received from the foreign corporation in each business year within the preceding ten years (limited to the portion of the amount to which the provisions of the preceding three paragraphs were applied; hereinafter the same applies in this item), the balance remaining after deducting the amount equivalent to that amount of dividend of surplus, etc.; hereinafter referred to in this Article as the "already-taxed amount").

Where a domestic corporation has acquired, as a result of a qualified merger, qualified company split, qualified capital contribution in kind or qualified in-kind distribution (hereinafter referred to in this paragraph as a "qualified reorganization"), the transfer of the whole or part of the number of shares, etc. of a foreign corporation held directly by the merged corporation, the splitting corporation, the corporation making a capital contribution in kind or the corporation making a distribution in kind, with regard to the application of the provisions of the preceding paragraph in the business year that includes the date of the qualified reorganization (if the qualified reorganization is a distribution of all of the residual assets, the day following the date of determination of the residual assets) and each subsequent business year of the domestic corporation, the amount specified in each of the following items for the category of qualified reorganization listed in the relevant item, pursuant to the provisions of Cabinet Order, is deemed to be the already-taxed amount of the domestic corporation for each business year within the preceding ten years:

qualified merger or qualified in-kind distribution (for a qualified in-kind distribution, limited to a distribution of all of the residual assets; hereinafter referred to in this item as a "qualified merger, etc."): the already-taxed amount of the merged corporation or the corporation making a distribution in kind involved in the qualified merger, etc. for each business year within ten years before the merger, etc. (meaning each business year that began within ten years before the date of the qualified merger, etc. (if the qualified merger, etc. is a distribution of all of the residual assets, the day following the date of determination of the residual assets));

qualified company split, qualified capital contribution in kind or qualified in-kind distribution (for a qualified in-kind distribution, excluding a distribution of all of the residual assets; hereinafter referred to in this item and the following paragraph as a "qualified company split, etc."): Any part of the already-taxed amount of the splitting corporation, corporation making a capital contribution in kind or corporation making a distribution in kind involved in the qualified company split, etc. (referred to in that paragraph as the "split corporation, etc.") for each business year within ten years before the company split, etc. (meaning each business year that commenced within ten years before the first day of the business year that includes the date of the qualified company split, etc.; the same applies in that paragraph), which is calculated pursuant to the method specified by Cabinet Order as the amount corresponding to the number of shares, etc. of the foreign corporation held directly that was transferred to the domestic corporation as a result of the qualified company split, etc., while taking into consideration the contents of the claim prescribed in Article 66-6, paragraph (1).

Where the succeeding corporation in a company split, the corporation receiving a capital contribution in kind or the corporation receiving a distribution in kind (hereinafter referred to in this paragraph as the "successor corporation in a split, etc.") involved in a qualified company split, etc. is subject to the provisions of the preceding paragraph, with regard to the application of the provisions of paragraph (4) in the business year that includes the date of the qualified company split, etc. and each subsequent business year of the split corporation, etc. involved in the qualified company split, etc., the amount, out of the already-taxed amount of the split corporation, etc. for each business year within ten years before the company split, etc., that is deemed to be the already-taxed amount of the successor corporation in a split, etc. for each business year within the preceding ten years pursuant to the provisions of the preceding paragraph is deemed not to exist.

Where a domestic corporation has an amount of dividend of surplus, etc. received from a foreign corporation (excluding one that falls under the category of foreign subsidiary prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act; hereinafter the same applies in this paragraph), the portion of the amount of dividend of surplus, etc. (excluding the portion of the amount to which the provisions of paragraph (1) apply) up to the indirect specified taxable amount pertaining to the foreign corporation is not included in gross profit in calculating the amount of income of the domestic corporation for each business year.

Where a domestic corporation has an amount of dividend of surplus, etc. received from a foreign corporation (limited to the portion of the amount to which the provisions of Article 23-2, paragraph (1) of the Corporation Tax Act apply; hereinafter the same applies in this paragraph), with regard to the application of the provisions of paragraph (1) of that Article to the portion of the amount of dividend of surplus, etc. (excluding the portion of the amount to which the provisions of paragraph (2) apply) up to the indirect specified taxable amount pertaining to the foreign corporation, the phrase "the amount obtained by deducting, from the amount of dividend of surplus, etc., the amount calculated pursuant to the provisions of Cabinet Order as the amount equivalent to the amount of expenses pertaining to that amount of dividend of surplus, etc." in that paragraph is deemed to be replaced with "the amount of dividend of surplus, etc.".

Where a domestic corporation has an amount of dividend of surplus, etc. received from a foreign corporation (limited to the portion of the amount to which the provisions of Article 23-2, paragraph (2) of the Corporation Tax Act apply; hereinafter the same applies in this paragraph), the portion of the amount of dividend of surplus, etc. (excluding the portion of the amount to which the provisions of paragraph (3) apply) up to the indirect specified taxable amount pertaining to the foreign corporation is not included in gross profit in calculating the amount of income of the domestic corporation for each business year.

The indirect specified taxable amount prescribed in the preceding three paragraphs means whichever is the smaller of the following amounts:

the amount specified by Cabinet Order as the portion corresponding to the number of shares, etc. held directly by the domestic corporation in the foreign corporation, out of the amount of dividend of surplus, etc. received by the foreign corporation from another foreign corporation during the period from the first day of the earliest of the business years that began within two years before the first day of the business year of the domestic corporation that includes the day on which the domestic corporation receives the amount of dividend of surplus, etc. from the foreign corporation (hereinafter referred to in this paragraph as the "dividend business year") (those business years hereinafter referred to in this paragraph as "each business year within the preceding two years") to the end of the dividend business year (excluding the amount specified by Cabinet Order as the amount of dividend of surplus, etc. received before the first day of the business year of the other foreign corporation to which the provisions of Article 66-6, paragraph (1), paragraph (8) or paragraph (10) apply) (if there is an amount of dividend of surplus, etc. received from the foreign corporation in each business year within the preceding two years (limited to the portion, out of the amount to which the provisions of the preceding three paragraphs were applied, corresponding to the amount of dividend of surplus, etc. received by the foreign corporation from the other foreign corporation; hereinafter the same applies in this item), the balance remaining after deducting the amount equivalent to that amount of dividend of surplus, etc.; referred to in paragraph (12) as "indirect dividends, etc.");

the sum of the following amounts:

the amount calculated pursuant to the provisions of Cabinet Order, by taking into consideration the number of shares, etc. held indirectly by the domestic corporation referred to in that item in the other foreign corporation (meaning the number of shares of or amount of capital contributions to another foreign corporation specified by Cabinet Order as being held indirectly by a domestic corporation through a foreign corporation; the same applies in (b)) and the status of the relationship of substantive control between the domestic corporation and the other foreign corporation, out of the taxable amount, partially taxable amount or partially taxable amount for a financial subsidiary, etc. pertaining to the other foreign corporation referred to in the preceding item that is included in gross profit in calculating the amount of income for the dividend business year pursuant to the provisions of Article 66-6, paragraph (1), paragraph (8) or paragraph (10) in the dividend business year;

the amount calculated pursuant to the provisions of Cabinet Order, by taking into consideration the number of shares, etc. held indirectly by the domestic corporation referred to in that item in the other foreign corporation and the status of the relationship of substantive control between the domestic corporation and the other foreign corporation, out of the taxable amount, partially taxable amount or partially taxable amount for a financial subsidiary, etc. pertaining to the other foreign corporation referred to in the preceding item that was included in gross profit in calculating the amount of income for each business year within the preceding two years pursuant to the provisions of Article 66-6, paragraph (1), paragraph (8) or paragraph (10) in each business year within the preceding two years (if there is an amount of dividend of surplus, etc. received from the foreign corporation referred to in that item in each business year within the preceding two years (limited to the portion, out of the amount to which the provisions of the preceding three paragraphs were applied, corresponding to the amount of dividend of surplus, etc. received by the foreign corporation from the other foreign corporation; hereinafter the same applies in this item), the balance remaining after deducting the amount equivalent to that amount of dividend of surplus, etc.; referred to in paragraph (12) as the "indirectly taxed amount").

The provisions of paragraphs (1) through (3) and paragraphs (7) through (9) apply only if a final return prescribed in Article 2, item (xxxi) of the Corporation Tax Act has been filed for each business year from the earliest of the business years pertaining to the already-taxed amount or the indirect dividends, etc. or indirectly taxed amount onward, and a document stating the amount of dividend of surplus, etc. that is not included in gross profit pursuant to those provisions and the details of its calculation is attached to the final return, etc., amended return form or written request for reassessment for the business year for which the domestic corporation seeks to apply the provisions of paragraphs (1) through (3) and paragraphs (7) through (9). In this case, the amount that is not included in gross profit pursuant to those provisions is limited to the amount stated as such amount.

With regard to the application of the provisions of the Corporation Tax Act in the case where the provisions of paragraph (1) or paragraph (3) or paragraph (7) or paragraph (9) apply, the phrase "Article 23-2 (Exclusion from Gross Profit of Dividends Received from Foreign Subsidiaries)" in Article 67, paragraph (3), item (iii) of that Act is deemed to be replaced with "Article 23-2 (Exclusion from Gross Profit of Dividends Received from Foreign Subsidiaries) or Article 66-8 (Special Provisions on Taxation on Income from the Foreign Affiliated Company of a Domestic Corporation) of the Act on Special Measures Concerning Taxation", and other necessary matters concerning the calculation of the amount of revenue reserves are specified by Cabinet Order.

With regard to the application of the provisions of the Corporation Tax Act in the case where the provisions of paragraph (2) or paragraph (8) apply, the phrase "excluding the portion of the amount to which the provisions of Article 23-2, paragraph (2) apply" in Article 39-2 of that Act is deemed to be replaced with "excluding the portion of the amount to which the provisions of Article 23-2, paragraph (2) apply and the portion of the amount to which the provisions of Article 66-8, paragraph (2) and paragraph (8) (Special Provisions on Taxation on Income from the Foreign Affiliated Company of a Domestic Corporation) of the Act on Special Measures Concerning Taxation apply", and the phrase "Article 23-2 (Exclusion from Gross Profit of Dividends Received from Foreign Subsidiaries)" in Article 67, paragraph (3), item (iii) of that Act is deemed to be replaced with "Article 23-2 (Exclusion from Gross Profit of Dividends Received from Foreign Subsidiaries) (including as applied by replacing the terms pursuant to the provisions of Article 66-8, paragraph (2) or paragraph (8) (Special Provisions on Taxation on Income from the Foreign Affiliated Company of a Domestic Corporation) of the Act on Special Measures Concerning Taxation)", and other necessary matters concerning the calculation of the amount of revenue reserves are specified by Cabinet Order.