Act on Special Measures Concerning Taxation

If an individual has, between April 1, 1993 and December 31, 2027, transferred a house, land, or a right existing on land held by the individual, for which the holding period prescribed in Article 31, paragraph (2) exceeds ten years as of January 1 of that year, that falls under any of the following (hereinafter referred to in this Article and the following Article as a "transferred asset") (the transfer includes the lending of real property, etc. giving rise to capital gains, and excludes a transfer for which the amount of consideration for the transfer of the transferred asset exceeds 100 million yen, a transfer to the individual's spouse or any other person who has a special relationship with the individual specified by Cabinet Order, a transfer that is subject to the provisions of Articles 33 through 33-4, Article 37, Article 37-4, or Article 37-8, and a transfer by way of gift, exchange, or capital contribution and any other transfer specified by Cabinet Order; hereinafter the same applies in this Article and the following Article), and has acquired (including by construction, and excluding an acquisition by way of gift or exchange and any other acquisition specified by Cabinet Order; hereinafter the same applies in this Article), from April 1, 1993 (or, where the day of the transfer is on or after January 1, 1995, January 1 of the year preceding the year that includes the day of the transfer) until December 31 of the year that includes the day of the transfer, a house to be used as the individual's residence or land to be used as the site of that house or a right existing on that land, which is specified by Cabinet Order and is located in Japan (hereinafter referred to in this Article and the following Article as a "replacement asset"), and has used it as the individual's residence, or is expected to use it as such, from the day of the acquisition until December 31 of the year following the year that includes the day of the transfer, then, except where the individual has been subject to the provisions of Article 31-3, paragraph (1), Article 35, paragraph (1) (excluding where it is applied pursuant to the provisions of paragraph (3) of that Article), Article 41-5, or Article 41-5-2 in that year or in the year preceding that year or the year before that, the provisions of Article 31 apply by deeming that, where the revenue from the transfer of the transferred asset is equal to or less than the acquisition price of the replacement asset, the transferred asset was not transferred, and that, where the revenue exceeds the acquisition price, the portion of the transferred asset specified by Cabinet Order as corresponding to the excess amount was transferred.

a house that the individual uses as the individual's residence (limited to one for which the period specified by Cabinet Order as the period during which the individual has used it as the individual's residence is ten years or more), which is specified by Cabinet Order and is located in Japan;

a house listed in the preceding item that has ceased to be used as the individual's residence (limited to one transferred during the period from the day on which it ceased to be used as the individual's residence until December 31 of the year that includes the day on which three years have elapsed from that day);

a house listed in the preceding two items and land used as the site of that house or a right existing on that land;

where the house of the individual listed in item (i) has been destroyed by a disaster, land that was used as the site of the house, for which the holding period prescribed in Article 31, paragraph (2) would exceed ten years as of January 1 of that year if the individual had continued to own the house, or a right existing on that land (limited to one transferred during the period from the day on which the disaster occurred until December 31 of the year that includes the day on which three years have elapsed from that day).

The provisions of the preceding paragraph apply mutatis mutandis where an individual who has transferred a transferred asset between April 1, 1993 and December 31, 2027 is expected to acquire a replacement asset during the period from January 1 of the year following the year that includes the day of the transfer until December 31 of that year (or, where it has become difficult to acquire a replacement asset by that day due to unavoidable circumstances arising from an extraordinary disaster designated as a specified extraordinary disaster pursuant to the provisions of Article 2, paragraph (1) of the Act on Special Measures concerning Preservation of Rights and Interests of Victims of Specified Disaster, if the individual is expected to acquire a replacement asset within two years after that day and has obtained the approval of the district director with jurisdiction over the place for tax payment pursuant to the provisions of Order of the Ministry of Finance, December 31 of the second year following the year that includes that day; referred to in paragraph (2), item (ii) of the following Article as the "acquisition deadline"), and is expected to use the acquired replacement asset as the individual's residence by December 31 of the year following the year that includes the day of the acquisition. In this case, in the preceding paragraph, the phrase "until December 31 of the year that includes the day of the transfer" is deemed to be replaced with "by the acquisition deadline prescribed in the following paragraph", the phrase "from the day of the acquisition until December 31 of the year following the year that includes the day of the transfer" is deemed to be replaced with "by December 31 of the year following the year that includes the day of the acquisition", the phrase "equal to or less than the acquisition price" is deemed to be replaced with "equal to or less than the total of the acquisition price and the estimated amount of the acquisition price", and the phrase "the acquisition price" is deemed to be replaced with "the total amount".

The provisions of paragraph (1) (including as applied mutatis mutandis pursuant to the preceding paragraph; hereinafter the same applies in this Article) do not apply if an individual who has transferred a transferred asset has, in the year that includes the day of the transfer or in the year preceding that year or the year before that, transferred a house, land, or a right existing on land that had been used as the individual's residence as one unit together with the transferred asset (excluding a transfer by expropriation or exchange, etc. prescribed in Article 33-4, paragraph (1) or any other transfer specified by Cabinet Order (referred to in the following paragraph as a "transfer by expropriation or exchange, etc."); hereinafter referred to in this paragraph and the following paragraph as a "transfer within the preceding three years"), and the total of the amount of consideration for the transfer within the preceding three years and the amount of consideration for the transfer of the transferred asset comes to exceed 100 million yen.

The provisions of paragraph (1) do not apply if an individual who has transferred a transferred asset has, in the year following the year that includes the day of the transfer or in the year after that, transferred a house, land, or a right existing on land that had been used as the individual's residence as one unit together with the transferred asset (excluding a transfer by expropriation or exchange, etc.), and the total of the amount of consideration for the transfer of the house, land, or right existing on land and the amount of consideration for the transfer of the transferred asset (or, where there has been a transfer within the preceding three years, the total amount referred to in the preceding paragraph) has come to exceed 100 million yen.

The provisions of paragraph (1) apply only if the tax return for the year that includes the day on which the person seeking the application of the provisions of that paragraph transferred the transferred asset contains a statement to the effect that the person seeks the application of the provisions of that paragraph, and a written statement concerning the transfer value of the transferred asset and the acquisition price of the replacement asset or its estimated amount and any other documents specified by Order of the Ministry of Finance are attached to that return.

Even in the case where no tax return has been filed, or a tax return without the statement or attachment referred to in the preceding paragraph has been filed, if the district director finds that there were unavoidable circumstances for the failure to file the return or to include the statement or attachment, the district director may apply the provisions of paragraph (1), but only if there has been a submission of 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.

The provisions of Article 33, paragraph (7) apply mutatis mutandis to a person who files the tax return prescribed in paragraph (5). In this case, the phrase "substitute assets" in paragraph (7) of that Article is deemed to be replaced with "replacement assets".

Beyond what is provided for in the preceding three paragraphs, the scope of transferred assets and replacement assets and other necessary matters concerning the application of the provisions of paragraphs (1), (3), and (4) are specified by Cabinet Order.

If a person who has been subject to the provisions of paragraph (1) of the preceding Article does not use the replacement asset as the individual's residence, or ceases to use it as such, by December 31 of the year following the year that includes the day on which the person transferred the transferred asset, the person must file an amended return form for the income tax for the year that includes the day of the transfer by the day on which four months have elapsed from that December 31, and must pay the amount of tax payable as a result of filing that return by that deadline.

If a person who has been subject to the provisions of paragraph (1) of the preceding Article as applied mutatis mutandis pursuant to paragraph (2) of that Article falls under either of the following items, the person may, where the person falls under item (i) and the acquisition price has turned out to be excessive, make a request for reassessment of the income tax for the year that includes the day of the transfer prescribed in paragraph (2) of that Article by the day on which four months have elapsed from the day on which the person made the acquisition of the replacement asset prescribed in paragraph (2) of that Article (or, where there are two or more days on which the person made the acquisition, the latest of those days; hereinafter the same applies in this paragraph), and must, where the person falls under item (i) and a shortfall arises, or where the person falls under item (ii), file an amended return form for the income tax for the year that includes the day of the transfer by the day on which four months have elapsed from the day on which the person acquired the replacement asset or the day on which the person came to fall under item (ii), and pay the amount of tax payable as a result of filing that return by that deadline:

where the person has acquired a replacement asset and there is an excess or shortfall in its acquisition price in relation to the estimated amount of the acquisition price prescribed in paragraph (1) of the preceding Article as read with the terms replaced pursuant to the provisions of paragraph (2) of that Article;

where the person has not acquired a replacement asset by the acquisition deadline, or where the person has acquired a replacement asset but does not use it as the individual's residence, or ceases to use it as such, by December 31 of the year following the year that includes the day of the acquisition.

If a person who has been subject to the provisions of paragraph (1) of the preceding Article (including as applied mutatis mutandis pursuant to paragraph (2) of that Article) with regard to the transfer of a transferred asset comes to fall under the provisions of paragraph (4) of that Article, the person must file an amended return form for the income tax for the year that includes the day on which the transferred asset was transferred by the day on which four months have elapsed from the day of the transfer by which the person has come to fall under that paragraph, and must pay the amount of tax payable as a result of filing that return by that deadline.

In the case falling under the provisions of paragraph (1), paragraph (2), item (ii), or the preceding paragraph, or where a shortfall prescribed in paragraph (2), item (i) has arisen, if no amended return form has been filed, the district director with jurisdiction over the place for tax payment is to make a reassessment under 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.

The provisions of Article 33-5, paragraph (3) apply mutatis mutandis to an amended return form under the provisions of paragraphs (1) through (3) and the reassessment referred to in the preceding paragraph. In this case, the phrase "the filing deadline prescribed in paragraph (1)" in items (i) and (ii) of paragraph (3) of that Article is deemed to be replaced with "the filing deadline prescribed in Article 36-3, paragraphs (1) through (3)", and the phrase "Article 33-5, paragraph (1)" in item (ii) of that paragraph is deemed to be replaced with "Article 36-3, paragraphs (1) through (3)".

With regard to a replacement asset prescribed in Article 36-2, paragraph (1) of a person who has been subject to the provisions of that paragraph (including as applied mutatis mutandis pursuant to paragraph (2) of that Article; hereinafter the same applies in this Article) (excluding a person who has filed an amended return form under the provisions of paragraphs (1) through (3) of the preceding Article or received a reassessment under the provisions of paragraph (4) of that Article, and as a result is no longer granted the special provisions under Article 36-2, paragraph (1)), when calculating the amount of capital gains in the case where there has been a transfer (including the lending of real property, etc. giving rise to capital gains), inheritance, bequest, or gift of the replacement asset on or after the day of its acquisition, the acquisition price of the replacement asset is, pursuant to the provisions of Cabinet Order, to be the amount specified in the following items according to the categories of cases listed in those items (or, where there are expenses required for the transfer of the transferred asset prescribed in that paragraph, the amount obtained by adding the amount of those expenses calculated pursuant to the provisions of Cabinet Order):

where the revenue from the transfer referred to in Article 36-2, paragraph (1) exceeds the acquisition price of the replacement asset: the amount calculated pursuant to the provisions of Cabinet Order as the amount of the portion of the acquisition price, etc. of the transferred asset that was transferred, other than the portion corresponding to the excess;

where the revenue from the transfer referred to in Article 36-2, paragraph (1) is equal to the acquisition price of the replacement asset: an amount equivalent to the acquisition price, etc. of the transferred asset that was transferred;

where the revenue from the transfer referred to in Article 36-2, paragraph (1) is less than the acquisition price of the replacement asset: an amount equivalent to the amount obtained by adding the shortfall to the acquisition price, etc. of the transferred asset that was transferred.