Act on Special Measures Concerning Taxation

Where an individual has cut down or transferred forest that the individual has continuously held since on or before December 31 of the year 15 years before that year, the necessary expenses to be deducted from gross revenue in calculating the amount of timber income from that cutting or transfer may, notwithstanding the provisions of Article 37, paragraph (2) and Part II, Chapter II, Section 2, Subsections 4 and 5 of the Income Tax Act, be the amount calculated by multiplying the revenue from that cutting or transfer (where cutting expenses, transportation expenses, or other expenses specified by Order of the Ministry of Finance were required in connection with that cutting or transfer, the amount after deducting those expenses) by the ratio set pursuant to the provisions of paragraph (4) (where there is the amount so deducted, or an amount of losses on business assets damaged by disaster prescribed in Article 70, paragraph (3) of that Act that arose in that year with regard to the operations that generate timber income, the amount after adding those amounts).

With regard to the application of the provisions of the preceding paragraph, forest acquired by inheritance, bequest, or gift is deemed to have been held continuously by the heir, legatee, or donee; provided, however, that this does not apply to the following forests:

forested land acquired by universal legacy during 1953;

forested land acquired during the period from January 1, 1953 to December 31, 1961 by legacy (excluding universal legacy and specific legacy to an heir; the same applies in the following item) or gift (excluding a gift to an heir that is to take effect upon the death of the donor who is the decedent; the same applies in the following item and item (iv));

forested land acquired during the period from January 1, 1962 to March 31, 1965 by legacy or gift, to which the provisions of Article 5-2, paragraph (3) of the former Income Tax Act (Act No. 27 of 1947) were not applied;

forested land acquired during the period from April 1, 1965 to December 31, 1972 by inheritance (limited to inheritance involving qualified acceptance; the same applies in the following item), legacy (excluding universal legacy other than that involving qualified acceptance, and specific legacy to an heir) or gift, to which the provisions of Article 59, paragraph (2) of the Income Tax Act prior to the amendment by the Act Partially Amending the Income Tax Act (Act No. 8 of 1973) were not applied;

forested land acquired on or after January 1, 1973 by inheritance, legacy (limited to legacy to the trustee of a public interest trust prescribed in Article 2, paragraph (1), item (i) of the Act on Public Interest Trusts (hereinafter referred to in this item as a "public interest trust") (limited to legacy for the purpose of making it trust property) and universal legacy involving qualified acceptance) or gift (limited to gift to the trustee of a public interest trust (limited to gift for the purpose of making it trust property)).

The provisions of paragraph (1) do not apply if the tax return does not contain a statement to the effect that the provisions of that paragraph are to be applied.

The ratio by which the revenue from the felling or transfer prescribed in paragraph (1) is to be multiplied pursuant to the provisions of that paragraph is specified by Order of the Ministry of Finance on the basis of the amount calculated pursuant to the provisions of Cabinet Order as the value of the forested land as of January 1 of the year following the year 15 years before the year that includes the date of the felling or transfer, and of the management expenses and other necessary expenses normally required on or after that date (excluding felling expenses, transportation expenses and other expenses specified by Order of the Ministry of Finance as prescribed in that paragraph).

Where an individual, in any year from 2012 to 2028, fells all or part of the forested land that the individual owns or transfers it (excluding a transfer by exchange or by way of contribution in kind and any other transfer specified by Cabinet Order) based on a forest management plan prescribed in Article 11, paragraph (1) of the Forest Act (Act No. 249 of 1951) (excluding a plan specified by Order of the Ministry of Finance as a plan for implementing forest management by public benefit function prescribed in paragraph (5), item (ii), (b) of that Article, and a plan whose approval has been revoked pursuant to the provisions of Article 16 of the Forest Act or Article 9, paragraph (4) of the Act on Special Measures concerning Assurance of Stable Supply of Timber (Act No. 47 of 1996); referred to as a "forest management plan" in paragraph (5) and paragraph (8)) that has been approved, with regard to that forested land, by the head of a municipality (where the provisions of Article 19 of the Forest Act apply, the person specified in the respective items of paragraph (1) of that Article according to the categories of cases listed in those items; the same applies in paragraph (5)) pursuant to the provisions of Article 11, paragraph (5) of the Forest Act (including where it is applied mutatis mutandis pursuant to Article 12, paragraph (3) of that Act, where it is applied with the deemed replacement of terms pursuant to the provisions of Article 8 of the Act on Special Measures concerning Assurance of Stable Supply of Timber, and where it is applied mutatis mutandis pursuant to Article 12, paragraph (3) of the Forest Act as applied with the deemed replacement of terms pursuant to the provisions of Article 9, paragraph (2) or paragraph (3) of the Act on Special Measures concerning Assurance of Stable Supply of Timber) (excluding where the provisions of Article 59, paragraph (1), item (i) of the Income Tax Act apply and where the felling or transfer is made in order to develop a forest health facility prescribed in Article 2, paragraph (2), item (ii) of the Act on Special Measures concerning Improvement of Public Health Function of Forests (Act No. 71 of 1989)), with regard to the application of the provisions of Article 32, paragraph (3) of the Income Tax Act to the amount of timber income pertaining to the felling or transfer for the year that includes the date of the felling or transfer, the balance remaining after deducting the necessary expenses prescribed in that paragraph is the amount equivalent to the balance remaining after deducting the special deduction amount for forest plans pertaining to that forested land from the amount equivalent to that balance.

The special deduction amount for forest plans prescribed in the preceding paragraph is the lower of the following amounts (or, where the amount of necessary expenses prescribed in item (ii) is calculated pursuant to the provisions of paragraph (1) of the preceding Article, the amount listed in item (i)):

the amount equivalent to 20 percent (or, where the revenue exceeds 20 million yen, 10 percent for the portion of the amount in excess) of the revenue from the felling or transfer of forested land prescribed in the preceding paragraph (where felling expenses, transportation expenses and other expenses specified by Order of the Ministry of Finance were required in connection with the felling or transfer, the amount after deducting those expenses);

the balance remaining after deducting, from the amount equivalent to 50 percent of the revenue prescribed in the preceding item, the amount of necessary expenses prescribed in Article 32, paragraph (3) of the Income Tax Act (where the expenses prescribed in the preceding item were required, or where there is an amount of losses on damaged business assets prescribed in paragraph (1) of the preceding Article that arose in that year, the amount after deducting those expenses and the amount calculated pursuant to the provisions of Cabinet Order as the portion of the amount of losses on the damaged business assets that corresponds to the revenue).

The provisions of paragraph (1) apply only if the tax return contains a statement to the effect that the individual seeks the application of the provisions of that paragraph, and has attached to it a written statement concerning the calculation of the amount of timber income under the provisions of that paragraph and other documents specified by Order of the Ministry of Finance.

Even where no tax return has been filed, or 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 were unavoidable circumstances for the failure to file the return or to include the statement or attachment, apply the provisions of paragraph (1), only if a document containing the statement, and the written statement and the documents specified by Order of the Ministry of Finance referred to in that paragraph, are submitted.

With regard to the application of the provisions of paragraph (1) in the case where the approval of a forest management plan has been revoked pursuant to the provisions of Article 16 of the Forest Act or Article 9, paragraph (4) of the Act on Special Measures concerning Assurance of Stable Supply of Timber, the approval of the head of a municipality prescribed in that paragraph pertaining to that forest management plan is deemed not to have been obtained. In this case, an individual who has received the application of the provisions of that paragraph with regard to the timber income for each year up to and including the year preceding the year that includes the date of revocation of the approval must, within four months from the date of revocation of the approval, file an amended return form of income tax for each of those years (limited to the years for which the provisions of paragraph (1) cease to apply pursuant to the provisions of the first sentence of this paragraph), and must pay, within that time limit, the amount of tax to be paid upon filing that return.

Where the provisions of the preceding paragraph have come to apply, if the amended return form under the provisions of that paragraph is not filed, the district director having jurisdiction over the place for tax payment is to make a reassessment pursuant to the provisions of Article 24 or Article 26 of the Act on General Rules for National Taxes with regard to the amount of income, the amount of income tax, and other matters that should have been stated in that return.

With regard to the application of the provisions of the Act on General Rules for National Taxes to an amended return form under the provisions of paragraph (5) and to the reassessment set forth in the preceding paragraph, the following provisions apply:

an amended return form that is filed within the time limit for filing prescribed in paragraph (5) is deemed to be a return filed by the due date prescribed in Article 17, paragraph (2) of the Act on General Rules for National Taxes, except where the provisions of Article 20 of that Act are applied;

with regard to an amended return form that is filed after the time limit for filing prescribed in paragraph (5) and to the reassessment, in the provisions of Chapter II through Chapter VII of the Act on General Rules for National Taxes, the phrases "statutory due date for filing a return" and "statutory due date for payment" are deemed to be replaced with "the time limit for filing an amended return form prescribed in Article 30-2, paragraph (5) of the Act on Special Measures Concerning Taxation"; in Article 61, paragraph (1), item (i) of that Act, the phrase "return filed by the due date" is deemed to be replaced with "tax return prescribed in Article 2, paragraph (1), item (x) of the Act on Special Measures Concerning Taxation"; in paragraph (2) of that Article, the phrase "return filed by the due date or return filed after the due date" is deemed to be replaced with "amended return form under the provisions of Article 30-2, paragraph (5) of the Act on Special Measures Concerning Taxation"; and in Article 65, paragraph (1), paragraph (3), item (ii), and paragraph (5), item (ii) of that Act, the phrase "return filed by the due date" is deemed to be replaced with "tax return prescribed in Article 2, paragraph (1), item (x) of the Act on Special Measures Concerning Taxation";

the provisions of Article 61, paragraph (1), item (ii) and Article 66 of the Act on General Rules for National Taxes do not apply to the amended return form and the reassessment prescribed in the preceding item.

Necessary matters concerning notification to the district director in the case where the approval prescribed in paragraph (5) of a forest management plan has been revoked are specified by Cabinet Order.