Act on Special Measures Concerning Taxation

With regard to the domestic source income listed in Article 138, paragraph (1), item (i) of the Corporation Tax Act (excluding that which falls under the domestic source income listed in items (ii) through (vi) of that paragraph and the domestic source income listed in Article 161, paragraph (1), items (viii) through (xi) and items (xiii) through (xvi) of the Income Tax Act) held by a foreign corporation that is a partner who has concluded an investment partnership contract (meaning an investment partnership contract prescribed in Article 41-21, paragraph (4), item (i); hereinafter the same applies in this Article), that conducts business through a permanent establishment under that investment partnership contract and that satisfies the requirements listed in the items of Article 41-21, paragraph (1), which is attributable to that permanent establishment (referred to as "covered domestic source income" in the following paragraph), no corporation tax is imposed.

If a foreign corporation has received the application of the provisions of the preceding paragraph with respect to covered domestic source income, the amount specified by Cabinet Order as the amount of loss pertaining to covered domestic source income arising from the business conducted through a permanent establishment under the investment partnership contract concluded by that foreign corporation to which that application pertains (referred to as a "special application partnership business" in the following paragraph) is deemed not to exist for the purpose of applying the provisions of the Corporation Tax Act and other laws and regulations concerning corporation tax.

If the provisions of paragraph (1) apply, the domestic source income listed in Article 138, paragraph (1), item (i) of the Corporation Tax Act (limited to that which falls under the domestic source income listed in items (ii) through (vi) of that paragraph and the domestic source income listed in Article 161, paragraph (1), items (viii) through (xi) and items (xiii) through (xvi) of the Income Tax Act) held by a foreign corporation that is attributable to a permanent establishment pertaining to a special application partnership business is deemed not to fall under the domestic source income listed in Article 138, paragraph (1), item (i) of the Corporation Tax Act, and the provisions of that Act, this Act and other laws and regulations concerning corporation tax apply accordingly.

The provisions of Article 41-21, paragraphs (5) through (13) apply mutatis mutandis to the case where the provisions of paragraph (1) apply. In this case, the phrase "the day before the date on which the domestic source income listed in Article 161, paragraph (1), item (iv) of the Income Tax Act received under the investment partnership contract pertaining to that special application return is deemed to have been paid under the provisions of Article 212, paragraph (5) of that Act (or, if the person is a nonresident, that day before or March 15 of the year following the year that includes the date on which the person first comes to have domestic source income prescribed in Article 161, paragraph (1) of that Act on or after the date on which the person came to fall under that case, whichever is earlier)" in paragraph (9) of that Article is deemed to be replaced with "the due date for filing the return under the provisions of Article 144-6, paragraph (1) of the Corporation Tax Act for the business year prescribed in Article 2, paragraph (2), item (xix) that includes the date on which the person comes to have domestic source income prescribed in Article 138, paragraph (1) of that Act".

With regard to the application of the provisions of Article 146, paragraph (2), Article 146-2, paragraph (2) and Article 150-2 of the Corporation Tax Act in the case where the provisions of paragraph (1) apply, the term "internal dealings" in the row of Article 123, item (ii) (Dismissal of Application for Approval of Blue Return) in the table in Article 146, paragraph (2) of that Act, in Article 146-2, paragraph (2) and in Article 150-2, paragraph (1) is deemed to be replaced with "internal dealings (excluding those pertaining to covered domestic source income prescribed in Article 67-16, paragraph (1) (Special Provisions on Taxation on Foreign Partners) of the Act on Special Measures Concerning Taxation)".

Beyond what is provided for in the preceding two paragraphs, necessary matters concerning the application of the provisions of paragraph (1) and the application of other provisions of laws and regulations concerning corporation tax with respect to foreign corporations that have concluded investment partnership contracts are specified by Cabinet Order.

No corporation tax is imposed on the domestic source income listed in Article 138, paragraph (1), item (i) of the Corporation Tax Act, or the domestic source income listed in item (vi) of that paragraph that is specified by Cabinet Order, for each business year of the following foreign corporations (limited to such domestic source income pertaining to the Expo-related work prescribed in Article 29 performed during the period from April 1, 2025 to March 31, 2028; referred to as "covered domestic source income" in the following paragraph):

an official participant prescribed in Article 29, item (i);

a foreign corporation specified by Order of the Ministry of Finance prescribed in Article 29, item (ii);

the Bureau International des Expositions.

The amount specified by Cabinet Order as the amount of loss pertaining to covered domestic source income for each business year of a foreign corporation listed in any of the items of the preceding paragraph is deemed not to exist for the purpose of applying the provisions of the Corporation Tax Act and other laws and regulations concerning corporation tax.

With regard to the application of the provisions of Article 146-2, paragraph (2) and Article 150-2 of the Corporation Tax Act in the case where the provisions of paragraph (1) apply, the term "internal dealings" in that paragraph and in paragraph (1) of that Article is deemed to be replaced with "internal dealings (excluding those pertaining to covered domestic source income prescribed in Article 67-16-2, paragraph (1) (Special Provisions on Taxation on Foreign Corporations, etc. That Are Official Participants in the International Horticultural Expo 2027 to Be Held in 2027) of the Act on Special Measures Concerning Taxation)".

Beyond what is provided for in the preceding paragraph, necessary matters concerning the application of the provisions of laws and regulations concerning corporation tax with respect to the foreign corporations listed in the items of paragraph (1) are specified by Cabinet Order.

No corporation tax is imposed on profit from redemption (meaning the margin profit generated when the amount received from the redemption (including retirement by purchase; the same applies in the following paragraph, paragraph (3) and paragraph (11)) of the book-entry government bonds or book-entry municipal bonds exceeds the acquisition cost of the book-entry government bonds or book-entry municipal bonds) that a foreign corporation receives with respect to book-entry government bonds prescribed in Article 5-2, paragraph (1) (excluding those that fall under discount bonds (meaning discount bonds prescribed in Article 41-13, paragraph (1); hereinafter the same applies in this paragraph and the following paragraph); referred to as "book-entry government bonds" in this paragraph and paragraph (11)) or book-entry municipal bonds prescribed in Article 5-2, paragraph (1) (excluding those that fall under discount bonds; referred to as "book-entry municipal bonds" in this paragraph and paragraph (11)).

No corporation tax is imposed on profit from redemption (meaning the margin profit generated when the amount received from the redemption of the specified book-entry corporate bonds, etc. exceeds the acquisition cost of the specified book-entry corporate bonds, etc.) that a foreign corporation receives with respect to specified book-entry corporate bonds, etc. prescribed in Article 5-3, paragraph (4), item (vii) (excluding those that fall under discount bonds; referred to as "specified book-entry corporate bonds, etc." in this paragraph, paragraph (11) and paragraph (13)), which is received by a person that is not a specially-related person, prescribed in paragraph (2) of that Article, of the person issuing those specified book-entry corporate bonds, etc.

No corporation tax is imposed on profit from redemption (meaning the margin profit generated when the amount received from the redemption of the private foreign bonds exceeds the acquisition cost of the private foreign bonds) that a foreign corporation receives with respect to private foreign bonds prescribed in Article 6, paragraph (4) issued on or after April 1, 1998 (referred to as "private foreign bonds" in this paragraph and paragraph (11)), which is received by a person that is not a specially-related person, prescribed in paragraph (4) of that Article, of the person issuing those private foreign bonds.

Out of the profit from redemption of discount bonds prescribed in Article 41-12-2, paragraph (6), item (i) issued by a foreign corporation (meaning the margin profit generated when the amount received from the redemption, prescribed in paragraph (1) of that Article, of those discount bonds exceeds the acquisition cost of those discount bonds), that which is specified by Cabinet Order as pertaining to the business conducted through the permanent establishment of that foreign corporation is deemed to be the domestic source income listed in Article 138, paragraph (1), item (ii) of the Corporation Tax Act, and the provisions of that Act and other laws and regulations concerning corporation tax apply accordingly.

Profit from redemption prescribed in Article 41-12, paragraph (7) (excluding that which falls under the domestic source income listed in Article 141, item (i), (a) of the Corporation Tax Act) of discount bonds prescribed in paragraph (7) of that Article (limited to those to which the provisions of paragraph (3) of that Article have been applied) received by a foreign corporation is to be treated as not falling under the domestic source income listed in (b) of that item or in Article 141, item (ii) of that Act.

Where a foreign corporation has income arising from the holding of specified book-entry discount bonds (meaning specified book-entry discount bonds prescribed in Article 41-13-3, paragraph (7), item (vii); hereinafter the same applies in this paragraph and paragraph (11)) for which it has received entries or records under the book-entry transfer system prescribed in item (vi) of that paragraph in its account established with a specified book-entry transfer institution, etc. (meaning a specified book-entry transfer institution, etc. prescribed in paragraph (1) of that Article; hereinafter the same applies in this paragraph) or a qualified foreign intermediary (meaning a qualified foreign intermediary prescribed in paragraph (7), item (iv) of that Article; hereinafter the same applies in this paragraph), via a business office or any other office of the specified book-entry transfer institution, etc. located in Japan or a specified overseas business office, etc. prescribed in paragraph (7), item (v) of that Article of the qualified foreign intermediary, corporation tax is not imposed with respect to the income arising from the holding of those specified book-entry discount bonds that arises for a person that is not a specially-related person, prescribed in paragraph (4) of that Article, of the issuer of those specified book-entry discount bonds.

No corporation tax is imposed on lending fees, etc. (meaning the margin specified by Cabinet Order as arising from a bond transaction with a repurchase/resale agreement prescribed in Article 42-2, paragraph (1) (referred to as a "bond transaction with a repurchase/resale agreement" in paragraph (9)), or the money paid as consideration for the lending of the securities listed in the items of paragraph (1) of that Article to a specified financial institution, etc. through a securities lending transaction prescribed in that paragraph; the same applies in the following paragraph) that a foreign financial institution, etc. prescribed in Article 42-2, paragraph (7), item (i) (referred to as a "foreign financial institution, etc." in the following paragraph) receives, with respect to a specified bond transaction with a repurchase/resale agreement, etc. involving book-entry bonds, etc. prescribed in paragraph (1) of that Article, from a specified financial institution, etc. prescribed in paragraph (7), item (ii) of that Article (referred to as a "specified financial institution, etc." in this paragraph and paragraph (9)).

The provisions of Article 42-2, paragraph (2) apply mutatis mutandis to a foreign financial institution, etc. that receives lending fees, etc. In this case, in that paragraph, the phrase "the provisions of the preceding paragraph" is deemed to be replaced with "the provisions of Article 67-17, paragraph (7)", the phrase "and the preceding paragraph" with "and paragraph (7) of that Article", the phrase "that preceding paragraph" with "that paragraph (7) of that Article", the phrase "pertaining to the interest received" with "pertaining to lending fees, etc. (referred to as 'lending fees, etc.' in this paragraph)", the phrase "received by the foreign financial institution, etc. referred to in that paragraph" with "received by the foreign financial institution, etc. referred to in paragraph (7) of that Article", and the phrase "the interest received prescribed in that paragraph" with "lending fees, etc.", and the term "interest" in items (i) and (iii) of that paragraph is deemed to be replaced with "lending fees, etc.".

No corporation tax is imposed on the margin specified by Cabinet Order as arising from a bond transaction with a repurchase/resale agreement that a specified foreign corporation prescribed in Article 42-2, paragraph (3) (referred to as a "specified foreign corporation" in the following paragraph) receives from a specified financial institution, etc. with respect to a specified bond transaction with a repurchase/resale agreement involving book-entry government bonds, etc. prescribed in paragraph (3) of that Article that commenced during the period from April 1, 2017 to March 31, 2029.

The provisions of Article 42-2, paragraph (4) apply mutatis mutandis to a specified foreign corporation that receives the margin prescribed in the preceding paragraph. In this case, the phrase "the preceding paragraph" in paragraph (4) of that Article is deemed to be replaced with "Article 67-17, paragraph (9)", the phrase "the interest received" with "the margin", and the phrase "that interest" with "that margin".

The amount of loss arising from the redemption of book-entry government bonds, book-entry municipal bonds, specified book-entry corporate bonds, etc. (excluding those held by a specially-related person, prescribed in Article 5-3, paragraph (2), of the person issuing those specified book-entry corporate bonds, etc.), private foreign bonds (excluding those held by a specially-related person, prescribed in Article 6, paragraph (4), of the person issuing those private foreign bonds) or specified book-entry discount bonds (excluding those held by a specially-related person, prescribed in Article 41-13-3, paragraph (4), of the issuer of those specified book-entry discount bonds) held by a foreign corporation (or, for specified book-entry discount bonds, the amount of loss arising from the holding of those specified book-entry discount bonds and any other amount specified by Cabinet Order) is deemed not to exist for the purpose of applying the provisions of laws and regulations concerning corporation tax.

The provisions of paragraphs (1) through (3), paragraph (6), paragraph (7), paragraph (9) and the preceding paragraph do not apply to that which, out of the profit from redemption prescribed in paragraph (1), the profit from redemption prescribed in paragraph (2), the profit from redemption prescribed in paragraph (3), the income arising from holding prescribed in paragraph (6), the lending fees, etc. prescribed in paragraph (7), the margin prescribed in paragraph (9) or the amount of loss prescribed in the preceding paragraph, is received by a foreign corporation that has a permanent establishment, or arises for a foreign corporation that has a permanent establishment, and falls under the domestic source income listed in Article 141, item (i), (a) of the Corporation Tax Act.

The determination of whether a person receiving payment of profit from redemption, prescribed in paragraph (2), of specified book-entry corporate bonds, etc. is a specially related person prescribed in that paragraph, and other necessary matters concerning the application of the provisions of the preceding paragraphs are specified by Cabinet Order.