Act on Special Measures Concerning Taxation

Where a resident or a nonresident who has a permanent establishment receives, with respect to shares held by the person, shares of a foreign parent corporation of a merging corporation (meaning shares in a foreign parent corporation of a merging corporation prescribed in paragraph (6), item (ii) of the preceding Article; the same applies hereinafter in this paragraph) through a specified non-qualified merger (meaning a Specified Merger prescribed in paragraph (6), item (i) of the preceding Article that does not fall under the category of qualified merger prescribed in Article 2, item (xii)-8 of the Corporation Tax Act) by the domestic corporation that issued the shares, and the shares of a foreign parent corporation of a merging corporation fall under the category of shares of a specified foreign corporation with less tax burden, etc. (meaning a specified foreign corporation with less tax burden, etc. prescribed in Article 68-2-2, paragraph (5), item (i); the same applies hereinafter in this Article), the amount equivalent to the value of the shares of a foreign parent corporation of a merging corporation received (excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act) is deemed to be revenue pertaining to capital gains, etc. on general shares, etc. if the shares held by the person fall under the category of general shares, etc., or revenue pertaining to capital gains, etc. on listed shares, etc. if the shares held by the person fall under the category of listed shares, etc., and the provisions of that Act and this Chapter apply.

Where a resident or a nonresident who has a permanent establishment receives, with respect to shares held by the person, shares of a foreign parent corporation of a successor in a company split (meaning shares in a foreign parent corporation of a successor in a company split prescribed in paragraph (6), item (iv) of the preceding Article; the same applies hereinafter in this paragraph) through a specified non-qualified company split by split-off (meaning a specified company split by split-off prescribed in paragraph (6), item (iii) of the preceding Article that is a company split prescribed in Article 68-2-2, paragraph (2), item (i) and does not fall under the category of qualified company split by split-off prescribed in Article 2, item (xii)-12 of the Corporation Tax Act) carried out by the domestic corporation that issued the shares, and the shares of a foreign parent corporation of a successor in a company split fall under the category of shares of a specified foreign corporation with less tax burden, etc., the amount equivalent to the value of the shares of a foreign parent corporation of a successor in a company split received (excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act) is deemed to be revenue pertaining to capital gains, etc. on general shares, etc. if the shares held by the person fall under the category of general shares, etc., or revenue pertaining to capital gains, etc. on listed shares, etc. if the shares held by the person fall under the category of listed shares, etc., and the provisions of that Act and this Chapter apply.

Where a resident or a nonresident who has a permanent establishment has, with respect to shares held by the person (hereinafter referred to as "old shares" in this paragraph), transferred the old shares to the wholly owning parent corporation in a share exchange prescribed in Article 2, item (xii)-6-3 of the Corporation Tax Act through a specified non-qualified share exchange (meaning a specified share exchange prescribed in paragraph (6), item (vii) of the preceding Article that does not fall under the category of qualified share exchange, etc. prescribed in Article 2, item (xii)-17 of the Corporation Tax Act) carried out by the domestic corporation that issued the old shares, and has received shares of a foreign corporation fully controlling the parent in a share exchange (meaning shares in a foreign corporation fully controlling the parent in a share exchange prescribed in paragraph (6), item (viii) of the preceding Article; the same applies hereinafter in this paragraph), and the shares of a foreign corporation fully controlling the parent in a share exchange fall under the category of shares of a specified foreign corporation with less tax burden, etc., the provisions of Article 57-4, paragraph (1) of the Income Tax Act (including the case where a calculation is made in accordance with that paragraph pursuant to the provisions of Article 165, paragraph (1) of that Act) do not apply to the transfer of the old shares.

Where the provisions of the preceding three paragraphs apply, the following provisions apply:

with regard to the application of the provisions of Article 37-12-2 in the case where the shares held prescribed in paragraph (1) or (2) fall under the category of listed shares, etc., the phrase "or the items of Article 37-11, paragraph (4)" in paragraph (2), item (iv) of that Article is deemed to be replaced with "or the items of Article 37-11, paragraph (4), or Article 37-14-4, paragraph (1) or (2)", and the phrase "the items of paragraph (2)" in paragraph (6) of that Article is deemed to be replaced with "the items of paragraph (2) (including the case where item (iv) of that paragraph is applied with the terms replaced pursuant to the provisions of Article 37-14-4, paragraph (4), item (i))";

with regard to the application of those provisions in the case where the old shares prescribed in the preceding paragraph fall under the category of listed shares, etc. in a tax-exempt account prescribed in Article 37-14, paragraph (1) or listed shares, etc. in a minor's account prescribed in Article 37-14-2, paragraph (1), the phrase "those carried out" in Article 37-14, paragraph (1) is deemed to be replaced with "those carried out and the transfer of old shares prescribed in Article 37-14-4, paragraph (3) to the wholly owning parent corporation in a share exchange prescribed in Article 2, item (xii)-6-3 of the Corporation Tax Act through a specified non-qualified share exchange prescribed in that paragraph".

The provisions of paragraphs (1) through (3) and the preceding paragraph (limited to the part of item (ii) pertaining to Article 37-14, paragraph (1)) apply mutatis mutandis where a nonresident who does not have a permanent establishment receives shares of a foreign parent corporation of a merging corporation prescribed in paragraph (1) that fall under the category of shares of a specified foreign corporation with less tax burden, etc., shares of a foreign parent corporation of a successor in a company split prescribed in paragraph (2) that fall under the category of shares of a specified foreign corporation with less tax burden, etc., or shares of a foreign corporation fully controlling the parent in a share exchange prescribed in paragraph (3) that fall under the category of shares of a specified foreign corporation with less tax burden, etc., through a specified non-qualified merger prescribed in paragraph (1), a specified non-qualified company split by split-off prescribed in paragraph (2), or a specified non-qualified share exchange prescribed in paragraph (3). In this case, in paragraph (1), the phrase "excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act" is deemed to be replaced with "excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act, and limited to that which falls under the domestic source income of the nonresident listed in Article 164, paragraph (1), item (ii) of that Act", the phrase "capital gains, etc. on general shares, etc." is deemed to be replaced with "domestic source income from the transfer of general shares, etc. (meaning domestic source income from the transfer of general shares, etc. prescribed in Article 37-12, paragraph (1); the same applies in the following paragraph)", and the phrase "capital gains, etc. on listed shares, etc." is deemed to be replaced with "domestic source income from the transfer of listed shares, etc. (meaning domestic source income from the transfer of listed shares, etc. prescribed in Article 37-12, paragraph (3); the same applies in the following paragraph)", and in paragraph (2), the phrase "excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act" is deemed to be replaced with "excluding the amount of the portion that falls under the provisions of Article 25, paragraph (1) of the Income Tax Act, and limited to that which falls under the domestic source income of the nonresident listed in Article 164, paragraph (1), item (ii) of that Act", the phrase "capital gains, etc. on general shares, etc." is deemed to be replaced with "domestic source income from the transfer of general shares, etc.", and the phrase "capital gains, etc. on listed shares, etc." is deemed to be replaced with "domestic source income from the transfer of listed shares, etc.".

Special provisions for the calculation of the acquisition cost of shares received in the case where the provisions of paragraphs (1) through (3) apply, and other necessary matters concerning the application of the provisions of paragraphs (1) through (3) and the preceding paragraph are specified by Cabinet Order.

No income tax is imposed on income from the transfer of discount bonds prescribed in Article 41-12, paragraph (7) to which the provisions of paragraph (1) of that Article apply with regard to the profit from redemption prescribed in paragraph (7) of that Article, long-term credit bank bonds, etc. prescribed in Article 2, paragraph (2), item (v) of the Deposit Insurance Act, beneficial interest in a loan trust, and other items specified by Cabinet Order (referred to as "beneficial interest in a loan trust, etc." in the following paragraph).

Where the revenue from the transfer of beneficial interest in a loan trust, etc. is less than the sum of the acquisition cost of the beneficial interest in a loan trust, etc. and the expenses required for the transfer thereof as prescribed in Article 33, paragraph (3) of the Income Tax Act, or is less than the necessary expenses for the transfer thereof, the amount of the shortfall is deemed not to exist for the purpose of applying the provisions of that Act.

Where a person listed in Article 225, paragraph (1), item (x) or (xi) of the Income Tax Act prepares, pursuant to the provisions of Order of the Ministry of Finance, the report on payment or delivery prescribed in those provisions for each single payment or delivery to the same individual or to the same domestic corporation or foreign corporation prescribed in item (xi) of that paragraph, the person must, notwithstanding the provisions of that paragraph, submit the report to the district director no later than the last day of the month following the month that includes the day on which the payment or delivery was finalized.

Where a person who, in connection with the person's business, receives payment of consideration for the transfer of shares, etc. prescribed in Article 228, paragraph (2) of the Income Tax Act (meaning payment prescribed in that paragraph; the same applies hereinafter in this paragraph) as a nominee on behalf of another person prepares, pursuant to the provisions of Order of the Ministry of Finance, the report on consideration prescribed in paragraph (2) of that Article for each single payment to the same person, the person must, notwithstanding the provisions of that paragraph, submit the report to the district director no later than the last day of the month following the month that includes the day on which the payment was received.

Where a person (excluding a corporation listed in Appended Table 1 of the Corporation Tax Act and any other person specified by Cabinet Order (referred to as a "public corporation, etc." in paragraph (5))) who holds an investment trust or specified trust that issues beneficiary certificates (hereinafter referred to as an "investment trust, etc." in this paragraph and paragraph (5)) whose beneficial rights fall under the category of listed shares, etc. prescribed in Article 37-11, paragraph (2) (hereinafter referred to as "listed shares, etc." in this paragraph), or public and corporate bonds, bond-type beneficial interests, or separate-interest public and corporate bonds prescribed in Article 224-3, paragraph (4), item (iv) of the Income Tax Act (hereinafter referred to as "public and corporate bonds, etc." in this paragraph and paragraph (5)) that fall under the category of listed shares, etc., receives delivery of redemption money or a similar asset prescribed in paragraph (4) of that Article (limited to that delivered in Japan; hereinafter referred to as "redemption money or a similar asset" in this paragraph and the following paragraph) pertaining to the investment trust, etc. or public and corporate bonds, etc. through a delivery handler in Japan that is specified by Cabinet Order (hereinafter referred to as a "delivery handler" in this paragraph), the provisions of paragraph (4) of that Article and Article 225, paragraph (1), item (x) or (xi) of the Income Tax Act apply by deeming the delivery handler to be the person making the delivery prescribed in those provisions with regard to the redemption money or a similar asset.

With regard to a person who delivers redemption money or a similar asset that is subject to the provisions of the preceding paragraph, the provisions of Article 224-3, paragraph (4) and Article 225, paragraph (1) of the Income Tax Act, insofar as they pertain to the redemption money or a similar asset, do not apply.

Where a person (excluding a public corporation, etc.) who holds beneficial rights of an investment trust, etc. or public and corporate bonds, etc. issued outside Japan receives delivery of redemption money or a similar asset prescribed in Article 224-3, paragraph (4) of the Income Tax Act (limited to that delivered outside Japan; the same applies hereinafter in this paragraph) pertaining to the investment trust, etc. or public and corporate bonds, etc. through a delivery handler in Japan that is specified by Cabinet Order (hereinafter referred to as a "delivery handler" in this paragraph), the provisions of paragraph (4) of that Article and Article 225, paragraph (1), item (x) or (xi) of that Act apply by deeming that the redemption money or a similar asset is delivered in Japan and that the delivery handler is the person making the delivery prescribed in those provisions with regard to the redemption money or a similar asset.

Special provisions of Article 228 of the Income Tax Act concerning the redemption money or a similar asset prescribed in paragraph (3) or the preceding paragraph to which those provisions apply, and other necessary matters concerning the application of the provisions of paragraph (3) or the preceding paragraph are specified by Cabinet Order.