Act on Special Measures Concerning Taxation

If a specified small and medium-sized business operator (meaning, among small and medium sized business operators prescribed in Article 10, paragraph (8), item (vi) who file blue returns, one that falls under a specified business operator, etc. prescribed in Article 2, paragraph (6) of the Act on Strengthening the Management of Small and Medium-Sized Enterprises, etc. (Act No. 18 of 1999) that has obtained the certification referred to in Article 17, paragraph (1) of that Act (including, where the certification referred to in Article 6, paragraph (1), Article 8, paragraph (1), Article 9, paragraph (1) or Article 10, paragraph (1) of the Act on the Promotion of Business Activities by Food, etc. Business Operators and Ensuring Proper Transactions of Food, etc. for Realizing a Sustainable Supply of Food, etc. (Act No. 59 of 1991) has been obtained for a plan listed in any of the items of Article 13 of that Act, that certification; hereinafter referred to as a "specified certification" in this paragraph); the same applies hereinafter in this Article), during the period from April 1, 2017 to March 31, 2027 (referred to as the "designated period" in paragraph (3)), acquires, out of the machinery and equipment, tools, furniture and fixtures, building fixtures, and software specified by Cabinet Order that constitute production or similar equipment and that fall under management improvement equipment, etc. prescribed in Article 17, paragraph (3) of the Act on Strengthening the Management of Small and Medium-Sized Enterprises, etc. (limited to that specified by Order of the Ministry of Finance as contributing significantly to the improvement of management), those set forth in the management improvement plan prescribed in paragraph (1) of that Article pertaining to the specified certification of the specified small and medium-sized business operator (if a certification of change under the provisions of Article 18, paragraph (1) of that Act has been granted, the plan after the change, and including a plan listed in any of the items of Article 13 of the Act on the Promotion of Business Activities by Food, etc. Business Operators and Ensuring Proper Transactions of Food, etc. for Realizing a Sustainable Supply of Food, etc. (if a certification of change under the provisions of Article 7, paragraph (1) of that Act, or under the provisions of Article 7, paragraph (1) of that Act as applied mutatis mutandis pursuant to Article 8, paragraph (7), Article 9, paragraph (8) or Article 10, paragraph (7) of that Act, has been granted, the plan after the change)) (limited to those of a scale specified by Cabinet Order; hereinafter referred to as "specified management improvement equipment, etc." in this Article) that have not been put to use for business since their manufacture or construction, or manufactures or constructs specified management improvement equipment, etc., and puts it to use for a business that the specified small and medium-sized business operator conducts in Japan (limited to use in a designated business prescribed in Article 10-3, paragraph (1); hereinafter referred to as "use in a designated business" in this Article), the amount to be included in necessary expenses as the depreciation allowance for the specified management improvement equipment, etc. in calculating the amount of business income of the specified small and medium-sized business operator for the year that includes the date on which it was put to use in a designated business (excluding the year that includes the date on which the operator discontinued the business, and any year that includes a day within the period specified by Order of the Ministry of Finance as the period of the plan for investment in specified productivity-improving equipment, etc. prescribed in Article 10-5-6, paragraph (1) of an individual who has received the confirmation prescribed in that paragraph; referred to as the "year of commencement of use" in paragraphs (3) and (9)) is, notwithstanding the provisions of Article 49, paragraph (1) of the Income Tax Act, the amount calculated by the specified small and medium-sized business operator as necessary expenses that does not exceed the sum (referred to as the "total depreciation limit" in the following paragraph) of the amount of the depreciation allowance calculated for the specified management improvement equipment, etc. pursuant to the provisions of that paragraph (hereinafter referred to as the "ordinary depreciation amount" in this paragraph) and the special depreciation limit (meaning the amount equivalent to the acquisition cost of the specified management improvement equipment, etc. less the ordinary depreciation amount); provided, however, that the amount may not be less than the amount to be included in necessary expenses as the depreciation allowance for the specified management improvement equipment, etc. pursuant to the provisions of paragraph (1) of that Article.

If the amount included in necessary expenses as the depreciation allowance for the specified management improvement equipment, etc. pursuant to the provisions of the preceding paragraph is less than its total depreciation limit, the amount to be included in necessary expenses as the depreciation allowance for the specified management improvement equipment, etc. in calculating the amount of business income for the year following the year in which the specified management improvement equipment, etc. was put to use in a designated business may be, notwithstanding the provisions of Article 49, paragraph (1) of the Income Tax Act, the amount equivalent to the sum of the amount to be included in necessary expenses as the depreciation allowance for the specified management improvement equipment, etc. pursuant to the provisions of that paragraph and the amount calculated by the specified small and medium-sized business operator as necessary expenses that does not exceed the shortfall.

If a specified small and medium-sized business operator, during the designated period, acquires specified management improvement equipment, etc. that have not been put to use for business since their manufacture or construction, or manufactures or constructs specified management improvement equipment, etc., and puts it to use in a designated business conducted by the specified small and medium-sized business operator in Japan, and the provisions of paragraph (1) are not applied to the specified management improvement equipment, etc., the sum of the amounts equivalent to 10 percent of the acquisition cost of the specified management improvement equipment, etc. put to use in a designated business (hereinafter referred to as the "maximum tax credit" in this paragraph and paragraph (5)) is deducted, pursuant to the provisions of Cabinet Order, from the amount of income tax on the amount of gross income for the year of commencement of use. In this case, if the specified small and medium-sized business operator's maximum tax credit for the year of commencement of use exceeds the amount equivalent to 20 percent of the specified small and medium-sized business operator's income tax on business income before adjustment (meaning income tax on business income before adjustment prescribed in Article 10, paragraph (8), item (iv); the same applies in the following paragraph) for that year of commencement of use (if there is an amount deducted from the amount of income tax on the amount of gross income for that year of commencement of use pursuant to the provisions of Article 10-3, paragraph (3), the remaining amount after deducting that amount), the amount to be deducted is limited to the amount equivalent to that 20 percent.

If an individual who files a blue return has a carried-over excess of the tax credit limit in a year (excluding the year that includes the date on which the individual discontinued the business), the amount equivalent to the carried-over excess of the tax credit limit is deducted, pursuant to the provisions of Cabinet Order, from the amount of income tax on the amount of gross income for that year. In this case, if the individual's carried-over excess of the tax credit limit for that year exceeds the amount equivalent to 20 percent of the individual's income tax on business income before adjustment for that year (if there is an amount deducted from the amount of income tax on the amount of gross income for that year pursuant to the provisions of the preceding paragraph with respect to specified management improvement equipment, etc. put to use in a designated business in that year, or an amount deducted from the amount of income tax on the amount of gross income for that year pursuant to the provisions of Article 10-3, paragraphs (3) and (4), the remaining amount after deducting those amounts), the amount to be deducted is limited to the amount equivalent to that 20 percent.

The carried-over excess of the tax credit limit prescribed in the preceding paragraph means the amount, out of the individual's maximum tax credit for the year preceding the year in question (limited to the case where the individual has filed a blue return with respect to income tax for that preceding year), that could not be fully deducted even after the deduction under paragraph (3).

The provisions of paragraph (1) do not apply to specified management improvement equipment, etc. acquired by a specified small and medium-sized business operator through a lease transaction without transfer of ownership.

The provisions of paragraphs (1) and (2) apply only if the tax return contains an entry concerning the inclusion of the amount to be included in necessary expenses pursuant to those provisions and has a written statement attached thereto concerning the calculation of the amount of the depreciation allowance for the specified management improvement equipment, etc.

The provisions of paragraph (3) apply only if a document stating the acquisition cost of the specified management improvement equipment, etc., the amount to be deducted, and the details of the calculation of that amount, which are subject to the deduction under that paragraph, is attached to the tax return (including an amended return form or written request for reassessment, if one is filed to increase the amount to be deducted pursuant to the provisions of that paragraph). In this case, the acquisition cost of the specified management improvement equipment, etc. serving as the basis for the calculation of the amount to be deducted pursuant to that paragraph is limited to the acquisition cost of the specified management improvement equipment, etc. stated in the document attached to the tax return.

The provisions of paragraph (4) apply only if a written statement of the carried-over excess of the tax credit limit prescribed in that paragraph is attached to the tax returns for the year of commencement of use and the following year, and a document stating the carried-over excess of the tax credit limit prescribed in that paragraph, the amount to be deducted, and the details of the calculation of that amount, which are subject to the deduction under that paragraph, is attached to the tax return for that following year (including an amended return form or written request for reassessment, if one is filed to increase the amount to be deducted pursuant to the provisions of that paragraph).

With regard to the calculation of the amount of income tax listed in Article 120, paragraph (1), item (iii) of the Income Tax Act where the provisions of paragraph (3) or (4) are applied with respect to income tax for a year, the phrase "Chapter III (Calculating the Amount of Taxes)" in that item is deemed to be replaced with "Chapter III (Calculating the Amount of Taxes) and Article 10-5-3, paragraphs (3) and (4) of the Act on Special Measures Concerning Taxation (Special Tax Credit for Income Tax Where a Specified Small and Medium-Sized Business Operator Acquires Specified Management Improvement Equipment, etc.)".

Beyond what is provided for in paragraph (6) through the preceding paragraph, necessary matters concerning the application of the provisions of paragraphs (1) through (5) are specified by Cabinet Order.