Act on Special Measures Concerning Taxation

Where a resident or a nonresident who has a permanent establishment transfers general shares, etc. (meaning shares, etc. other than listed shares, etc. prescribed in paragraph (2) of the following Article; hereinafter the same applies in this Article) on or after January 1, 2016 (excluding a transfer made by the method of the transaction listed in Article 28, paragraph (10), item (iii), (a) of the Financial Instruments and Exchange Act (referred to as a "securities futures transaction" in Article 37-11-2, paragraph (2)), and a transfer pertaining to the acquisition, prescribed in paragraph (3), item (v), of a corporation's own shares or capital contributions or to the redemption of public and corporate bonds by the method of purchase; hereinafter the same applies in this paragraph and in paragraph (1) of the following Article), with respect to the business income, capital gains and miscellaneous income from the transfer of the general shares, etc. (excluding business income and miscellaneous income falling under the provisions of Article 41-2 of the Income Tax Act and capital gains falling under the provisions of Article 32, paragraph (2); referred to as "capital gains, etc. on general shares, etc." in paragraphs (3) and (4)), notwithstanding the provisions of Articles 22 and 89 and Article 165 of that Act, income tax is imposed, separately from other income, on the amount calculated pursuant to the provisions of Cabinet Order as the amount of business income, the amount of capital gains and the amount of miscellaneous income pertaining to the transfer of the general shares, etc. during that year (hereinafter referred to as the "amount of capital gains, etc. on general shares, etc." in this paragraph), in an amount equivalent to 15 percent of the amount of taxable capital gains, etc. on general shares, etc. (meaning the amount of capital gains, etc. on general shares, etc. (where the provisions of Articles 72 through 87 of that Act as replaced pursuant to the provisions of paragraph (6), item (v) apply, the amount after that application)). In this case, if there is an amount of losses arising in the calculation of the amount of capital gains, etc. on general shares, etc., the amount of losses is deemed not to have arisen for the purpose of applying the provisions of that Act and other laws and regulations concerning income tax.

In this Article, "shares, etc." means the following (including those pertaining to a foreign corporation, and excluding shares or equity interests of investors specified by Cabinet Order as being similar to rights concerning the use of golf courses or other facilities):

shares (including the right to become a shareholder or unitholder (meaning a unitholder prescribed in Article 2, paragraph (16) of the Act on Investment Trusts and Investment Corporations), the right to receive an allotment of shares, share options (including subscription rights for new investment equity prescribed in paragraph (17) of that Article; hereinafter the same applies in this item), and the right to receive an allotment of share options);

the equity interest of an investor in a corporation established under a special Act, the equity interest of a partner in a general partnership company, limited partnership company or limited liability company, the equity interest of a cooperative member or member of a cooperative, etc. prescribed in Article 2, item (vii) of the Corporation Tax Act, or any other equity interest of an investor in a corporation (including the right to become an investor, partner, cooperative member or member and the right to receive an allotment of capital contributions, and excluding those listed in the following item);

preferred equity investment prescribed in the Act on Preferred Equity Investment by Cooperative Structured Financial Institution (Act No. 44 of 1993) (including the right to become a preferred equity investor (meaning a preferred equity investor referred to in Article 13, paragraph (1) of that Act) and the right to receive an allotment of preferred equity investment), and preferred equity investment prescribed in Article 2, paragraph (5) of the Act on the Securitization of Assets (including the right to become a preferred equity member (meaning a preferred equity member prescribed in Article 26 of that Act) and the subscription right prescribed in Article 5, paragraph (1), item (ii), (d), 2. of that Act);

a beneficial interest in an investment trust;

a beneficial interest in a specified trust that issues beneficiary certificates;

a bond-type beneficial interest;

public and corporate bonds (excluding long-term credit bank debentures, etc. prescribed in Article 2, paragraph (2), item (v) of the Deposit Insurance Act (Act No. 34 of 1971) and others specified by Cabinet Order; hereinafter the same applies in this Subsection).

The following amounts that a resident or a nonresident who has a permanent establishment holding general shares, etc. receives with respect to the general shares, etc. (excluding the portion of the amount falling under the provisions of Article 25, paragraph (1) of the Income Tax Act; the same applies in paragraph (3) of the following Article), and the amount specified by Cabinet Order that such a person receives with respect to the general shares, etc. due to a cause specified by Cabinet Order, are deemed to be revenue pertaining to capital gains, etc. on general shares, etc., and the provisions of that Act and this Chapter apply:

the sum of the amount of money and the value of assets other than money received by a shareholder, member, or other investor prescribed in Article 2, paragraph (1), item (viii)-2 of the Income Tax Act (hereinafter referred to as a "shareholder, member, or other investor" in this paragraph) of a corporation (excluding a public interest corporation, etc. prescribed in Article 2, item (vi) of the Corporation Tax Act; hereinafter the same applies in this paragraph) due to a merger of the corporation (including a merger of trusts pertaining to a trust subject to corporate taxation; hereinafter the same applies in this item) (excluding a merger in which no assets other than shares or capital contributions of either the merging corporation prescribed in Article 2, item (xii) of the Corporation Tax Act (including a trustee corporation prescribed in Article 6-3 of the Income Tax Act pertaining to a trust subject to corporate taxation that is the new trust pertaining to a merger of trusts) or any one corporation having with the merging corporation a relationship specified by Cabinet Order as one of directly or indirectly holding all of the issued shares or capital contributions of the merging corporation (excluding its own shares or capital contributions held by it; referred to as "issued shares, etc." in the following item and item (iii)) were delivered to the shareholders, members, or other investors of the corporation (excluding money or other assets delivered to the shareholders, members, or other investors as dividends of surplus, distributions of profit or distributions of surplus with respect to shares or capital contributions, and money or other assets delivered to shareholders, members, or other investors who oppose the merger as consideration based on their demand for purchase));

the sum of the amount of money and the value of assets other than money received by a shareholder, member, or other investor of a corporation due to a company split of the corporation (excluding a company split in which no assets other than shares or capital contributions of either the successor corporation in a company split prescribed in Article 2, item (xii)-3 of the Corporation Tax Act (including a trustee corporation prescribed in Article 6-3 of the Income Tax Act pertaining to a trust subject to corporate taxation that receives a transfer of part of the trust property from another trust having the same trustee through a trust split) or any one corporation having with the successor corporation a relationship specified by Cabinet Order as one of directly or indirectly holding all of the issued shares, etc. of the successor corporation were delivered as split consideration assets prescribed in Article 2, item (xii)-9, (a) of the Corporation Tax Act, and in which those shares or capital contributions were delivered in proportion to the ratio of the number or amount of shares of the splitting corporation held by each shareholder, member, or other investor of the splitting corporation prescribed in Article 2, item (xii)-2 of the Corporation Tax Act (including a trustee corporation prescribed in Article 6-3 of the Income Tax Act pertaining to a trust subject to corporate taxation that transfers part of its trust property through a trust split as trust property of another trust having the same trustee or of a new trust; hereinafter the same applies in this item) to the total number or total amount of the issued shares, etc. of the splitting corporation);

the sum of the amount of money and the value of assets other than money received by a shareholder, member, or other investor of a corporation due to a share distribution prescribed in Article 2, item (xii)-15-2 of the Corporation Tax Act made by the corporation (excluding a share distribution in which no assets other than shares or capital contributions of the wholly owned subsidiary corporation prescribed in that item were delivered to the shareholders, members, or other investors of the corporation, and in which those shares or capital contributions were delivered in proportion to the ratio of the number or amount of shares of the corporation making a distribution in kind prescribed in item (xii)-5-2 of that Article held by each shareholder, member, or other investor of that corporation to the total number or total amount of the issued shares, etc. of the corporation making a distribution in kind);

the sum of the amount of money and the value of assets other than money received by a shareholder, member, or other investor of a corporation through a refund of capital of the corporation (meaning a dividend of surplus with respect to shares (limited to one accompanying a decrease in the amount of capital surplus) other than one made through a company split by split-off prescribed in Article 2, item (xii)-9 of the Corporation Tax Act (including a trust split pertaining to a trust subject to corporate taxation) and a share distribution prescribed in item (xii)-15-2 of that Article, and a distribution associated with a reduction in capital, etc. prescribed in Article 24, paragraph (1) of the Income Tax Act), or as a distribution of residual assets upon the dissolution of the corporation;

the sum of the amount of money and the value of assets other than money received by a shareholder, member, or other investor of a corporation through the acquisition by the corporation of its own shares or capital contributions (excluding acquisition through purchase in a market operated by a financial instruments exchange (meaning a financial instruments exchange prescribed in Article 2, paragraph (16) of the Financial Instruments and Exchange Act; the same applies in paragraph (2) of the following Article) and other acquisition specified by Cabinet Order, and acquisition in the case where the shares or capital contributions listed in Article 57-4, paragraph (3), items (i) through (iii) of the Income Tax Act fall under the case prescribed in that paragraph);

the sum of the amount of money and the value of assets other than money received by a shareholder, member, or other investor of a corporation through the cancellation of capital contributions of the corporation (excluding cancellation of capital contributions it has acquired), the refund of capital contributions of the corporation, the refund of equity interest upon withdrawal or secession from the corporation, or the extinguishment of shares or capital contributions of the corporation without their acquisition by the corporation;

the sum of the amount of money and the value of assets other than money received by a shareholder, member, or other investor of a corporation through an entity conversion of the corporation (limited to one in which assets other than shares or capital contributions of the corporation that has undergone the entity conversion were delivered upon the entity conversion);

the sum of the amount of money and the value of assets other than money received through the redemption of the principal of public and corporate bonds (including redemption by the method of purchase; hereinafter the same applies in this item) (including the value of money or assets other than money that are received together with that money or those assets and that arise from fluctuation in the value of the principal, and excluding the value of the following money or assets other than money received through the redemption of public and corporate bonds other than specified public and corporate bonds prescribed in Article 3, paragraph (1), item (i)):

money or assets other than money received by the person (referred to as a "covered person" in (a)) or any other person specified by Cabinet Order in the case where the corporation that delivered the money or assets other than money would, on the date of the redemption, fall under a family corporation prescribed in Article 2, item (x) of the Corporation Tax Act if the covered person or a corporation having a special relationship with the covered person specified by Cabinet Order were selected as a shareholder serving as the basis for the determination;

of money or assets other than money received from a corporation (referred to as a "specified corporation" in (b)) other than a corporation that would, on the date of the redemption, fall under a family corporation prescribed in Article 2, item (x) of the Corporation Tax Act if the person (referred to as a "covered person" in (b)) or a corporation having a special relationship with the covered person specified by Cabinet Order were selected as a shareholder serving as the basis for the determination (referred to as a "family corporation" in (b)), those received from the specified corporation by the covered person or any other person specified by Cabinet Order in the case specified by Cabinet Order as a case where they are found to be substantially received from the family corporation;

the sum of the amount of money and the value of assets other than money received as interest pertaining to separated-interest public and corporate bonds (meaning, of public and corporate bonds whose principal portion and interest portion are separated and each traded independently, public and corporate bonds that were the interest portion).

The following amounts that a resident or a nonresident who has a permanent establishment holding a beneficial interest in an investment trust or a specified trust that issues beneficiary certificates (hereinafter referred to as an "investment trust, etc." in this paragraph) that falls under general shares, etc., or a bond-type beneficial interest that falls under general shares, etc., receives with respect to those beneficial interests are deemed to be revenue pertaining to capital gains, etc. on general shares, etc., and the provisions of the Income Tax Act and this Chapter apply:

the sum of the amount of money and the value of assets other than money received through the termination of the delisted specified trust that issues beneficiary certificates (meaning a specified trust that issues beneficiary certificates that meets the requirements specified by Cabinet Order, such as that its beneficial interests were listed on a financial instruments exchange prescribed in Article 2, paragraph (16) of the Financial Instruments and Exchange Act; hereinafter the same applies in this item and the following item) (where the termination pertains to a merger of trusts of the delisted specified trust that issues beneficiary certificates, limited to one pertaining to a merger of trusts in which assets other than beneficial interests in the trust newly formed by the merger of trusts were delivered to the beneficiaries of the delisted specified trust that issues beneficiary certificates (excluding money or other assets delivered to beneficiaries who oppose the merger of trusts as consideration based on their demand for purchase)) or through its partial cancellation;

of the sum of the amount of money and the value of assets other than money received through the termination of the investment trust, etc. (excluding a delisted specified trust that issues beneficiary certificates; hereinafter the same applies in this item) (where the termination pertains to a merger of trusts of the investment trust, etc., limited to one pertaining to a merger of trusts in which assets other than beneficial interests in the trust newly formed by the merger of trusts were delivered to the beneficiaries of the investment trust, etc. (excluding money or other assets delivered to beneficiaries who oppose the merger of trusts as consideration based on their demand for purchase)) or through its partial cancellation, the amount up to the amount held in trust for the investment trust, etc. (limited to the amount of the portion pertaining to the beneficial interests in the investment trust, etc.);

of the sum of the amount of money and the value of assets other than money received through a trust split pertaining to the specified trust that issues beneficiary certificates (limited to one in which the beneficiaries of the split trust (meaning a trust that transfers part of its trust property through a trust split as trust property of another trust having the same trustee or of a new trust; the same applies in paragraph (4), item (ii) of the following Article) were delivered assets other than beneficial interests in the successor trust (meaning a trust that receives a transfer of part of the trust property from another trust having the same trustee through a trust split; the same applies in that item) (excluding money or other assets delivered to beneficiaries who oppose the trust split as consideration based on a demand for acquisition of beneficial interests prescribed in Article 103, paragraph (6) of the Trust Act)), the amount up to the amount held in trust for the specified trust that issues beneficiary certificates (limited to the amount of the portion pertaining to the beneficial interests in the specified trust that issues beneficiary certificates);

the amount of money received through a refund of the principal of the specified trust that issues beneficiary certificates (excluding one made through the termination or partial cancellation of the trust pertaining to the specified trust that issues beneficiary certificates or through a trust split);

the sum of the amount of money and the value of assets other than money received through the redemption of the principal of a bond-type beneficial interest.

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

Where the provisions of paragraph (1) apply, the following applies:

for the purpose of applying the provisions of Article 2, paragraph (1), items (xxx) through (xxxiv)-5 of the Income Tax Act, the phrase "amount of timber income" in item (xxx) of that paragraph is deemed to be replaced with "amount of timber income and the amount of capital gains, etc. on general shares, etc. prescribed in Article 37-10, paragraph (1) (Special Provisions on Taxation of Capital Gains, etc. on General Shares, etc.) of the Act on Special Measures Concerning Taxation (hereinafter referred to as the "amount of capital gains, etc. on general shares, etc.")";

for the purpose of applying the provisions of Article 24, paragraph (2) of the Income Tax Act, the phrase "or miscellaneous income" in that paragraph is deemed to be replaced with ", capital gains or miscellaneous income";

for the purpose of applying the provisions of Article 33, paragraph (3) of the Income Tax Act, the phrase "Capital gains is" in that paragraph is deemed to be replaced with "Capital gains on general shares, etc. is", the phrase "the cost to transfer those assets" is deemed to be replaced with "the cost to transfer those assets and the interest on liabilities payable during that year that was incurred to acquire those assets", the phrase ", adding together the net balances" is deemed to be replaced with ", and adding together the net balances", and the phrase "; hereinafter such an amount is referred to as 'net gain' in this Article), then applying the special capital gains deduction against the net gain" is deemed to be replaced with ")";

for the purpose of applying the provisions of Article 69 of the Income Tax Act, the phrase "amount of capital gains" in paragraph (1) of that Article is deemed to be replaced with "amount of capital gains (for the amount of business income and the amount of capital gains, the amount calculated as if there were no capital gains, etc. on general shares, etc. prescribed in Article 37-10, paragraph (1) (Special Provisions on Taxation of Capital Gains, etc. on General Shares, etc.) of the Act on Special Measures Concerning Taxation)", and the phrase "amount of each type of income" is deemed to be replaced with "amount of each type of income (excluding the amount of capital gains, etc. on general shares, etc.)";

for the purpose of applying the provisions of Article 71 and Articles 72 through 87 of the Income Tax Act, the phrase "amount of gross income" in those provisions is deemed to be replaced with "amount of gross income, amount of capital gains, etc. on general shares, etc.";

for the purpose of applying the provisions of Articles 92, 95 and 165-6 of the Income Tax Act, the phrase "the preceding Section (Tax Rates)" in Article 92, paragraph (1) of that Act is deemed to be replaced with "the preceding Section (Tax Rates) and Article 37-10, paragraph (1) (Special Provisions on Taxation of Capital Gains, etc. on General Shares, etc.) of the Act on Special Measures Concerning Taxation", the phrase "taxable gross income" is deemed to be replaced with "the sum of the taxable gross income and the amount of taxable capital gains, etc. on general shares, etc. prescribed in Article 37-10, paragraph (1) of the Act on Special Measures Concerning Taxation", the phrase "amount of income tax on taxable gross income" in paragraph (2) of that Article is deemed to be replaced with "amount of income tax on taxable gross income, the amount of income tax under Article 37-10, paragraph (1) of the Act on Special Measures Concerning Taxation", and the phrase "amount of income tax for that year" in Article 95 and Article 165-6 of that Act is deemed to be replaced with "amount of income tax for that year and the amount of income tax under Article 37-10, paragraph (1) (Special Provisions on Taxation of Capital Gains, etc. on General Shares, etc.) of the Act on Special Measures Concerning Taxation";

beyond what is specified in the preceding items, special provisions concerning applications or returns under Part II, Chapter V of the Income Tax Act and other necessary matters concerning the application of the provisions of laws and regulations on income tax in the case where the provisions of paragraph (1) apply are specified by Cabinet Order.