Act on Special Measures Concerning Taxation

Where a financial instruments business operator, etc. that pays, in Japan, to a resident or a nonresident who has a permanent establishment, the consideration for a transfer of listed shares, etc. held in a specified account pertaining to a specified account (meaning a specified account prescribed in paragraph (3), item (i) of the preceding Article; hereinafter the same applies in this Article) opened at its business office, or an amount equivalent to the gain pertaining to the settlement of margin transactions, etc. in listed shares, etc. processed in that specified account (excluding a settlement in which delivery of the shares, etc. (meaning shares, etc. prescribed in Article 37-10, paragraph (2)) pertaining to the margin transactions, etc. is to be made; hereinafter referred to as a "cash settlement" up to Article 37-11-6), has received from the resident or nonresident who has a permanent establishment, pursuant to the provisions of Cabinet Order, by the earlier of the time when the person first transfers listed shares, etc. held in a specified account pertaining to the specified account in that year or the time when the person first makes a cash settlement in that year for margin transactions, etc. in listed shares, etc. processed in the specified account, the submission to the head of the business office of the financial instruments business operator, etc. at which the specified account is opened of a written notification choosing withholding for a specified account (meaning a document stating that the person is to receive the application of the provisions of this paragraph and other matters specified by Order of the Ministry of Finance; hereinafter the same applies in this paragraph) (including the provision, by electronic or magnetic means, of the matters to be stated in the written notification choosing withholding for a specified account in lieu of submitting the written notification choosing withholding for a specified account), if an adjusted income amount in a withholding-selected account arises from a transfer of listed shares, etc. held in a specified account pertaining to that specified account (hereinafter referred to as a "withholding-selected account" up to that Article) or from a cash settlement for margin transactions, etc. in listed shares, etc. processed in the withholding-selected account during that year, the financial instruments business operator, etc. must, when paying the consideration for the transfer or the amount equivalent to the gain pertaining to the cash settlement, collect income tax in the amount calculated by multiplying the adjusted income amount in a withholding-selected account by a tax rate of 15 percent, and pay it to the State by January 10 of the year following the year that includes the date of collection (or, in the case specified by Cabinet Order, by the date specified by Cabinet Order).

The adjusted income amount in a withholding-selected account prescribed in the preceding paragraph means, in the case where a transfer of listed shares, etc. held in a specified account pertaining to the withholding-selected account of a resident or a nonresident who has a permanent establishment opened at a business office of a financial instruments business operator, etc., or a cash settlement for margin transactions, etc. in listed shares, etc. processed in that withholding-selected account (excluding those deemed to be transfers pursuant to the provisions of Article 60-2, paragraph (1) or Article 60-3, paragraph (1) of the Income Tax Act; hereinafter referred to as a "covered transfer, etc." in this paragraph and the following paragraph), takes place, if the amount listed in item (i) pertaining to that withholding-selected account of the resident or nonresident who has a permanent establishment (referred to as the "cumulative income amount in a withholding account" in the following paragraph) exceeds the amount listed in item (ii) (referred to as the "preceding cumulative income amount in a withholding account" in the following paragraph), the amount of the excess.

the amount obtained by adding together the amount listed in (a) and the amount listed in (b) (or zero, if that amount is below zero):

the amount obtained by deducting, from the total revenue from the transfer (meaning the amount specified by Cabinet Order as revenue from the transfer of listed shares, etc. held in a specified account; the same applies in (a) of the following item) pertaining to transfers of listed shares, etc. held in a specified account made in that year at or before the time of the covered transfer, etc., the total amount of acquisition costs, etc. (meaning the amount specified by Cabinet Order as the amount required for the acquisition of the listed shares, etc. held in a specified account so transferred and the amount of expenses incurred for the transfer; the same applies in (a) of that item) pertaining to the listed shares, etc. held in a specified account so transferred;

the amount obtained by deducting, from the total of the amounts specified by Cabinet Order as the amount of gain arising from cash settlements for margin transactions, etc. in listed shares, etc. made in that year at or before the time of the covered transfer, etc. (referred to as the "amount of gain" in (b) of the following item), the total of the amounts specified by Cabinet Order as the amount of loss arising from cash settlements for margin transactions, etc. in listed shares, etc. made at or before the time of the covered transfer, etc. (referred to as the "amount of settlement loss" in (b) of that item);

the amount obtained by adding together the amount listed in (a) and the amount listed in (b) (or zero, if that amount is below zero):

the amount obtained by deducting, from the total revenue from the transfer pertaining to transfers of listed shares, etc. held in a specified account made in that year before the time of the covered transfer, etc., the total amount of acquisition costs, etc. pertaining to the listed shares, etc. held in a specified account so transferred;

the amount obtained by deducting, from the total of the amounts of gain arising from cash settlements for margin transactions, etc. in listed shares, etc. made in that year before the time of the covered transfer, etc., the total of the amounts of settlement loss arising from cash settlements for margin transactions, etc. in listed shares, etc. made before the time of the covered transfer, etc.

Where, in the withholding-selected account of a resident or a nonresident who has a permanent establishment, the cumulative income amount in a withholding account pertaining to a covered transfer, etc. made during the year becomes less than the preceding cumulative income amount in a withholding account as a result of the covered transfer, etc., or where there is an amount of specified expenses (meaning, of the amount of expenses payable to the financial instruments business operator, etc. based on a discretionary investment contract prescribed in Article 2, paragraph (8), item (xii), (b) of the Financial Instruments and Exchange Act concluded by the person, the amount that is to be included in necessary expenses in calculating the amount of business income or the amount of miscellaneous income pertaining to the covered transfer, etc., and that, as of December 31 of that year (or, in the case specified by Cabinet Order, the date specified by Cabinet Order), is not included in the amounts processed in calculating the total amount of acquisition costs, etc. prescribed in item (i), (a) of the preceding paragraph or the amount of gain and the amount of settlement loss prescribed in (b) of that item; hereinafter the same applies in this paragraph) for covered transfers, etc. made during the year, the financial instruments business operator, etc. that has opened the withholding-selected account must, each time, refund to the resident or nonresident who has a permanent establishment the income tax equivalent to the amount calculated by multiplying the amount of the shortfall or the amount of specified expenses (where the amount of specified expenses exceeds the cumulative income amount in a withholding account pertaining to the last covered transfer, etc. made in the withholding-selected account during that year, the amount after deducting the excess) by 15 percent.

Income tax to be collected and paid pursuant to the provisions of paragraph (1) is deemed to be income tax pertaining to withholding at the source prescribed in Article 2, paragraph (1), item (xlv) of the Income Tax Act, and the provisions of that Act, the Act on General Rules for National Taxes and the National Tax Collection Act apply thereto.

Beyond what is specified in the preceding paragraph, special provisions concerning the application of laws and regulations concerning income tax in the case where there is an amount of income tax collected pursuant to the provisions of paragraph (1), and other necessary matters concerning the application of the provisions of paragraphs (1) through (3) are specified by Cabinet Order.

A resident or a nonresident who has a permanent establishment who holds a withholding-selected account pertaining to income tax for a given year and has the amounts listed in the following items with respect to that withholding-selected account may, with respect to income tax for that year, apply the provisions of Articles 120 through 127 of the Income Tax Act (including as applied mutatis mutandis pursuant to Article 166 of that Act) and of Article 123, paragraph (1) of that Act (including as applied mutatis mutandis pursuant to Article 166 of that Act) as applied mutatis mutandis pursuant to Article 37-12-2, paragraph (9) (including as applied mutatis mutandis pursuant to Article 37-13-3, paragraph (10)), by excluding the amounts listed in those items (where the amounts listed in those items pertain to the same withholding-selected account, for that withholding-selected account, the amount listed in item (i) and the amount listed in item (ii)) from the calculation of the amount of capital gains, etc. on listed shares, etc. prescribed in Article 37-11, paragraph (1) or the amount of capital losses on listed shares, etc. prescribed in Article 37-12-2, paragraph (2) or (6), or of the amount of income other than employment income and retirement income prescribed in Article 121, paragraph (1) of the Income Tax Act (including as applied mutatis mutandis pursuant to Article 166 of that Act) or the amount of income other than miscellaneous income pertaining to public pensions, etc. prescribed in Article 121, paragraph (3) of that Act (including as applied mutatis mutandis pursuant to Article 166 of that Act):

the amount of business income, the amount of capital gains and the amount of miscellaneous income from transfers of listed shares, etc. held in a specified account pertaining to a withholding-selected account (where the person holds two or more withholding-selected accounts, each of them; the same applies in the following item) made during that year, calculated under the provisions of Article 37-11-3, paragraph (1) with respect to those transfers, and the amount of losses arising in the calculation of the amount of that income;

the amount of business income and the amount of miscellaneous income from transfers of listed shares, etc. through margin transactions, etc. prescribed in Article 37-11-3, paragraph (2) pertaining to cash settlements processed in a withholding-selected account during that year, calculated under the provisions of that paragraph with respect to those transfers, and the amount of losses arising in the calculation of the amount of that income.

Where a determination under Article 25 of the Act on General Rules for National Taxes (including a reassessment under Article 24 or Article 26 of that Act pertaining to the determination) is made with respect to income tax for that year of a resident or a nonresident who has a permanent establishment prescribed in the preceding paragraph, for the purpose of applying those provisions, the amounts listed in the items of that paragraph are not to be included in the tax base, etc. prescribed in those Articles.

Beyond what is prescribed in the preceding paragraph, Cabinet Order provides for the necessary particulars concerning the application of the provisions of paragraph (1).