Act on Special Measures Concerning Taxation

Where an individual who files a blue return and who has obtained the certification under Article 12, paragraph (1) of the Act on Promotion of Improvement of Agricultural Management Foundation (Act No. 65 of 1980) for a farm management improvement plan prescribed in that paragraph or the certification under Article 14-4, paragraph (1) of that Act for a farming plan for young persons, etc. prescribed in that paragraph (referred to in paragraph (3), item (i) and paragraph (7) as a "certified farmer, etc.") (limited to one specified by Order of the Ministry of Finance as a person who takes charge of agriculture in the area of the regional plan prescribed in Article 19, paragraph (1) of that Act), in each year that includes a day within the period from April 1, 2007 to March 31, 2027 (excluding the year that includes the day on which the business was discontinued), has received a grant prescribed in Article 3, paragraph (1) or Article 4, paragraph (1) of the Act on Payment of Grants to Farmers for Purpose of Stabilization of Farming Management (Act No. 88 of 2006) or any other grant or subsidy specified by Order of the Ministry of Finance as being similar thereto (referred to in item (i) as "grants, etc."), if, in preparation for the expenditure of expenses required for strengthening the farm management base (meaning expanding the scale of farm management referred to in Article 12, paragraph (2), item (ii) of the Act on Promotion of Improvement of Agricultural Management Foundation or rationalizing the production methods referred to in that item; the same applies in item (i)) carried out in accordance with the certified plan prescribed in Article 13, paragraph (2) of that Act or the certified farming plan prescribed in Article 14-5, paragraph (2) of that Act (referred to in paragraph (3), item (ii), (a) and (b) and paragraph (7) as a "certified plan, etc."), the individual sets aside as a reserve for strengthening the farm management base an amount not exceeding the lesser of the following amounts, the amount so set aside is included in necessary expenses in calculating the amount of business income for the year in which it was set aside.

the amount specified by Cabinet Order, out of the amount of those grants, etc., as being for the expenditure of expenses required for strengthening the farm management base;

the amount calculated, as specified by Cabinet Order, as the amount of business income for the year in which it was set aside.

Where, as of December 31 of the relevant year, the amount of the reserve for strengthening the farm management base of the individual prescribed in the preceding paragraph carried over from the preceding year (where there are amounts that have been included, or are to be included, in gross revenue by that day pursuant to the provisions of the following paragraph, or amounts that were included in gross revenue by December 31 of the year preceding the relevant year pursuant to the provisions of this paragraph, the amount obtained by deducting those amounts; hereinafter the same applies in this Article) includes an amount for which five years have elapsed from January 1 of the year following the year in which it was set aside, the amount of the reserve for strengthening the farm management base for which those five years have elapsed is included in gross revenue in calculating the amount of business income for the year that includes the day on which those five years elapsed.

Where an individual who has set aside the reserve for strengthening the farm management base 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 revenue in calculating the amount of business income for the year that includes the day on which the individual came to fall under that case. In this case, where the individual falls under the case listed in item (ii) or item (iv), the amounts of the reserve for strengthening the farm management base prescribed in those items are to be included in gross revenue in order beginning with the amount with the earliest year of setting aside.

where the individual ceases to be a certified farmer, etc.: the amount of the reserve for strengthening the farm management base on the day on which the individual ceased to be a certified farmer, etc.;

where the individual has made an acquisition (meaning an acquisition as prescribed in paragraph (1) of the following Article, limited, for specified agricultural machinery, etc., to the acquisition of those that have not been used for business since their manufacture or construction) or a manufacture or construction (referred to in this item as an "acquisition, etc.") of the following agricultural land (meaning agricultural land as prescribed in Article 4, paragraph (1), item (i) of the Act on Promotion of Improvement of Agricultural Management Foundation, including a right of lease pertaining to that agricultural land; the same applies hereinafter in this item) or specified agricultural machinery, etc. (meaning specified agricultural machinery, etc. as prescribed in paragraph (1) of the following Article; the same applies hereinafter in this item): the amount, out of the amount of the reserve for strengthening the farm management base on the day of the acquisition, etc., equivalent to the acquisition cost of the agricultural land or specified agricultural machinery, etc. that was the subject of the acquisition, etc.;

agricultural land, etc. prescribed in paragraph (1) of the following Article for which an acquisition, etc. is made in accordance with the certified plan, etc.;

agricultural land (excluding agricultural land for which an acquisition, etc. is made in accordance with the certified plan, etc.) or specified agricultural machinery, etc. (excluding those listed in (a), and agricultural tools, furniture and fixtures, and software).

where the individual has transferred or discontinued the whole of the business: the amount of the reserve for strengthening the farm management base on the day of the transfer or discontinuance;

where the individual has reversed the amount of the reserve for strengthening the farm management base in a case other than the cases referred to in the preceding paragraph, the preceding three items, and the following paragraph: the amount, out of the amount of the reserve for strengthening the farm management base on the day of the reversal, equivalent to the amount reversed.

Where an individual who has accumulated the reserve for strengthening the farm management base referred to in paragraph (1) has the approval for filing blue returns revoked, or has submitted a written notification to the effect that the individual will discontinue filing blue returns, the amount of the reserve for strengthening the farm management base on the day on which the fact giving rise to the revocation of the approval occurred or on the day on which the written notification was submitted (or, if the day on which the written notification was submitted falls in the year following the year in which the individual discontinued filing blue returns, on December 31 of the year of discontinuance) is included in gross revenue in calculating the amount of business income for the year that includes that day. In this case, the provisions of the preceding two paragraphs and paragraphs (6) through (8) do not apply.

The provisions of Article 21, paragraph (7) apply mutatis mutandis where the provisions of paragraph (1) are applied.

The provisions of Article 21, paragraphs (8) through (10) apply mutatis mutandis where, upon the death of an individual who has accumulated the reserve for strengthening the farm management base referred to in paragraph (1), an heir of that individual has succeeded to the business pertaining to the reserve for strengthening the farm management base referred to in that paragraph.

Where a presumptive heir (limited to one who is a certified farmer, etc. under the certified plan, etc. pertaining to the reserve for strengthening the farm management base) of an individual who has accumulated the reserve for strengthening the farm management base referred to in paragraph (1) (limited to a person who falls under the category of a person with a special disability as prescribed in Article 2, paragraph (1), item (xxix) of the Income Tax Act) has acquired by transfer the whole of the business pertaining to that reserve for strengthening the farm management base (excluding the case where, in the year that includes the day on which the whole of the business was acquired by transfer, the individual falls under any of the cases listed in paragraph (3), item (i), item (ii), or item (iv)), if the presumptive heir is a person who may file a blue return, or a person who has submitted a written application for approval of blue returns, with regard to income tax for the year that includes the day on which the whole of the business was acquired by transfer, the amount of the reserve for strengthening the farm management base on the day on which the whole of the business was acquired by transfer is deemed to be the amount of the reserve for strengthening the farm management base pertaining to the presumptive heir. In this case, the provisions of paragraph (3) do not apply to the individual.

Where the presumptive heir prescribed in the preceding paragraph is a person who has submitted a written application for approval of blue returns with regard to income tax for the year that includes the day on which the presumptive heir acquired by transfer the whole of the business prescribed in that paragraph, if the application has been rejected, notwithstanding the provisions of paragraph (3) and the preceding paragraph, the amount of the reserve for strengthening the farm management base referred to in that paragraph on the day of the rejection is included in gross revenue in calculating the amount of business income of the individual prescribed in that paragraph pertaining to the presumptive heir for the year that includes the day on which that individual transferred the whole of the business.

The provisions of paragraph (7) apply only if the tax return of the presumptive heir prescribed in that paragraph contains a statement to the effect that the presumptive heir seeks the application of the provisions of that paragraph, and has attached to it a written statement concerning the calculation of the amount accumulated pursuant to the provisions of paragraph (1) as the reserve for strengthening the farm management base referred to in that paragraph by the individual referred to in paragraph (7) pertaining to the presumptive heir and any other documents specified by Order of the Ministry of Finance.

Beyond what is provided for in paragraph (5), paragraph (6), and the preceding paragraph, necessary matters concerning the application of the provisions of paragraphs (1) through (4), paragraph (7), and paragraph (8) are specified by Cabinet Order.

Where an individual who has the amount of the reserve for strengthening the farm management base referred to in paragraph (1) of the preceding Article (excluding an amount to which the provisions of paragraph (4) of that Article apply) (including an individual who may receive the application of the provisions of paragraph (1) of that Article), in any year, in accordance with the certified plan, etc. prescribed in that paragraph, makes an acquisition (excluding an acquisition by gift, by exchange, or by a distribution in kind as prescribed in Article 2, item (xii)-5-2 of the Corporation Tax Act, an acquisition through a lease transaction without transfer of ownership, and any other acquisition specified by Cabinet Order; the same applies hereinafter in this paragraph) of agricultural land as prescribed in Article 4, paragraph (1), item (i) of the Act on Promotion of Improvement of Agricultural Management Foundation that has been designated, in a regional plan as prescribed in Article 19, paragraph (1) of that Act (limited to a plan for which public notice to the effect that it has been established has been given pursuant to the provisions of paragraph (8) of that Article, and, where public notice to the effect that it has been changed has been given pursuant to the provisions of that paragraph, meaning the plan after the change), as land to be used by the individual (including a right of lease pertaining to that agricultural land; the same applies hereinafter in this paragraph), or makes an acquisition of agricultural machinery and equipment, tools, furniture and fixtures, buildings and their associated facilities, structures, and software (limited to those of a scale specified by Cabinet Order, and, for buildings and their associated facilities, limited to buildings specified by Order of the Ministry of Finance as buildings directly used for the individual's agriculture, out of the agricultural facilities prescribed in Article 3, item (iv) of the Act on Establishment of Agricultural Promotion Regions (Act No. 58 of 1969) that are constructed on land whose use has been designated as land listed in that item in an agricultural land use plan prescribed in Article 8, paragraph (4) of that Act, and their associated facilities; referred to in this paragraph and paragraph (4) as "specified agricultural machinery, etc.") that have not been used for business since their manufacture or construction, or manufactures or constructs specified agricultural machinery, etc., and uses that agricultural land or specified agricultural machinery, etc. (referred to in this paragraph and paragraph (5) as "agricultural land, etc.") for the individual's business, the amount calculated pursuant to the provisions of Cabinet Order as an amount equivalent to an amount not exceeding the lesser of the following amounts for that agricultural land, etc. is included in necessary expenses in calculating the amount of business income for that year.

the total of the following amounts;

the amount, out of the amount of the reserve for strengthening the farm management base referred to in paragraph (1) of the preceding Article carried forward from the year preceding that year (or, where there is an amount that was included in gross revenue pursuant to the provisions of paragraph (2) or paragraph (3) of that Article by December 31 of the year preceding that year, the amount after deducting that amount), equivalent to the amount that has been included, or is to be included, in gross revenue in that year pursuant to the provisions of paragraph (2) or paragraph (3) (excluding the part pertaining to item (ii), (b)) of that Article;

the amount specified by Cabinet Order as the amount, out of the amount of grants, etc. prescribed in paragraph (1) of the preceding Article received in that year, that was not accumulated as the reserve for strengthening the farm management base referred to in that paragraph.

the amount calculated pursuant to the provisions of Cabinet Order as the amount of business income for that year.

The provisions of the preceding paragraph apply only if the tax return for the year for which the individual seeks the application of the provisions of that paragraph contains a statement concerning the inclusion of the amount to be included in necessary expenses pursuant to the provisions of that paragraph, and has attached to it a written statement concerning the calculation of that amount and any other documents specified by Order of the Ministry of Finance.

Even where a tax return without the statement or attachment referred to in the preceding paragraph has been filed, the district director may, when the district director finds that there was an unavoidable reason for the absence of the statement or attachment, apply the provisions of paragraph (1), only if a document containing that statement, and the written statement and the documents specified by Order of the Ministry of Finance referred to in that paragraph, are submitted.

The provisions listed in the items of Article 19, paragraph (1) do not apply to specified agricultural machinery, etc. to which the provisions of paragraph (1) have been applied.

The calculation of the acquisition cost of agricultural land, etc. to which the provisions of paragraph (1) have been applied, in the case where the provisions of laws and regulations concerning income tax are applied to that agricultural land, etc., and other necessary matters concerning the application of the provisions of that paragraph are specified by Cabinet Order.