Act on Special Measures Concerning Taxation

Where a nonresident or foreign corporation receives payment of redemption money on specified book-entry discount bonds for which the nonresident or foreign corporation has received entries or records under the book-entry transfer system in the account opened for them or it by a specified book-entry transfer institution, a specified account management institution or a specified secondary account management institution (hereinafter referred to in this paragraph as a "specified book-entry transfer institution, etc.") or by a qualified foreign intermediary, via a business office or any other office of the specified book-entry transfer institution, etc. located in Japan or the specified overseas business office, etc. of the qualified foreign intermediary, if, when seeking the application of the provisions of this paragraph for the first time with regard to the amount of gain pertaining to redemption money of specified book-entry discount bonds, the nonresident or foreign corporation has submitted a document stating to that effect, their or its name and address (meaning the address prescribed in Article 5-2, paragraph (1)), and any other matters specified by Order of the Ministry of Finance (referred to in paragraph (10) and paragraph (11) as a "written application for a tax exemption") to the district director having jurisdiction over the place where the head office or principal office of the specified book-entry transfer institution, etc. is located, via the specified book-entry transfer institution, etc. (where the specified book-entry discount bonds fall under public and corporate bonds other than the specified public and corporate bonds prescribed in Article 3, paragraph (1), item (i) (referred to in paragraph (10) and paragraph (11) as "general discount bonds"), limited to one that falls under the category of a qualified account management institution; hereinafter the same applies in this paragraph), or via the qualified foreign intermediary and the specified book-entry transfer institution, etc. through which the qualified foreign intermediary receives entries or records under the book-entry transfer system for the specified book-entry discount bonds (where the qualified foreign intermediary is a tertiary foreign account management institution, the specified book-entry transfer institution, etc. through which the secondary foreign account management institution pertaining to the entries or records under the book-entry transfer system for the specified book-entry discount bonds receives entries or records under the book-entry transfer system for the specified book-entry discount bonds), the provisions of Article 41-12-2 do not apply to the amount of gain pertaining to the redemption money so received.

Where a nonresident has received the application of the provisions of the preceding paragraph with respect to the amount of gain pertaining to redemption money of specified book-entry discount bonds, income tax is not imposed on profit from redemption (meaning the margin where the amount received through the redemption (meaning the redemption prescribed in Article 41-12-2, paragraph (1); the same applies in the following paragraph and paragraph (4)) of the specified book-entry discount bonds exceeds the acquisition price of the specified book-entry discount bonds) received with respect to those specified book-entry discount bonds.

Where a nonresident has received the application of the provisions of paragraph (1) with respect to the amount of gain pertaining to redemption money of specified book-entry discount bonds, the amount of loss arising from the redemption of those specified book-entry discount bonds is deemed not to exist with regard to the application of the provisions of laws and regulations concerning income tax.

The provisions of the preceding three paragraphs do not apply to the redemption money of specified book-entry discount bonds and the profit from redemption prescribed in paragraph (2) received by a specially-related person of the issuer of the specified book-entry discount bonds (meaning a person who has a special relationship specified by Cabinet Order with the issuer of the specified book-entry discount bonds; the same applies hereinafter in this Article), or to the amount of loss arising for that specially-related person from the redemption of the specified book-entry discount bonds (excluding those received by, or arising for, a nonresident or foreign corporation that is the trustee of a qualified foreign securities investment trust prescribed in Article 5-2, paragraph (2) as applied mutatis mutandis pursuant to paragraph (12), for the trust property of that qualified foreign securities investment trust, and those that the trustee of a foreign pension trust prescribed in paragraph (3) of that Article is deemed to receive, or deemed to incur, pursuant to the provisions of that paragraph as applied mutatis mutandis pursuant to paragraph (12)).

The provisions of paragraph (2) and paragraph (3) do not apply to the profit from redemption prescribed in paragraph (2) or the amount of loss prescribed in paragraph (3) that is received by a nonresident who has a permanent establishment or that arises for a nonresident who has a permanent establishment, and that falls under the domestic source income listed in Article 164, paragraph (1), item (i), (a) of the Income Tax Act.

With regard to the application of the provisions of Article 225 of the Income Tax Act in the case where the provisions of paragraph (1) apply, the phrase "the person making the delivery prescribed in that item who delivers the redemption money, etc." in paragraph (1), item (x) of that Article is deemed to be replaced with "the person making the delivery prescribed in that item who delivers the redemption money, etc. (or, where the nonresident has received the application of the provisions of paragraph (1) of Article 41-13-3 of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation of the Amount of Gain, etc. from Book-Entry Discount Bonds) with respect to the amount of gain prescribed in paragraph (7), item (ix) of that Article pertaining to the redemption money prescribed in item (viii) of that paragraph of the specified book-entry discount bonds prescribed in item (vii) of that paragraph (referred to as the "amount of gain pertaining to redemption money of specified book-entry discount bonds" in the following item), the specified book-entry transfer institution, etc. prescribed in paragraph (1) of that Article)", the phrase "foreign corporation" in item (xi) of that paragraph is deemed to be replaced with "foreign corporation (excluding foreign governments and other corporations specified by Cabinet Order)", and the phrase "person making the delivery" is deemed to be replaced with "person making the delivery (or, where the nonresident or the foreign corporation has received the application of the provisions of Article 41-13-3, paragraph (1) of the Act on Special Measures Concerning Taxation with respect to the amount of gain pertaining to redemption money of specified book-entry discount bonds, the specified book-entry transfer institution, etc. prescribed in that paragraph)".

In this Article, the meanings of the terms listed in the following items are as prescribed respectively in those items:

specified book-entry transfer institution: A specified book-entry transfer institution as prescribed in Article 5-2, paragraph (7), item (i) or a specified book-entry transfer institution as prescribed in Article 5-3, paragraph (4), item (i);

specified account management institution: A specified account management institution as prescribed in Article 5-2, paragraph (7), item (ii);

specified secondary account management institution: A specified secondary account management institution as prescribed in Article 5-2, paragraph (7), item (iii);

qualified foreign intermediary: A secondary foreign account management institution or tertiary foreign account management institution that has obtained, pursuant to the provisions of Cabinet Order, the approval of the Commissioner of the National Tax Agency as an institution that has its head office or principal office in the foreign state (referred to in the following item as a "treaty partner state, etc.") in the case where the information may be provided to a foreign authority pursuant to provisions specified by Cabinet Order as provisions concerning the provision of information on taxes to a contracting state or contracting party other than Japan to a convention prescribed in the proviso to Article 2, paragraph (1), item (viii)-4 of the Income Tax Act or any other international agreement concluded by Japan (limited to one that has provisions for the mutual provision of information on the assessment and collection of taxes), or to any other foreign authority;

specified overseas business office, etc.: A business office or any other office of a qualified foreign intermediary, which is located in a treaty partner state, etc.;

entries or records under the book-entry transfer system: Entries or records under the book-entry transfer system as prescribed in Article 5-2, paragraph (7), item (vi);

specified book-entry discount bonds: Of book-entry government bonds prescribed in Article 88 of the Act on Book-Entry Transfer of Corporate Bonds and Shares, book-entry municipal bonds prescribed in Article 5-2, paragraph (1) or book-entry corporate bonds, etc. prescribed in Article 5-3, paragraph (4), item (vii) (including corporate bonds listed in Article 66, item (i) of that Act that fall under the category of book-entry corporate bonds prescribed in that Article), those that fall under discount bonds prescribed in Article 41-12-2, paragraph (6), item (i) (limited to those other than bonds whose amount of redemption money is calculated on the basis of an indicator specified by Cabinet Order concerning the issuer of the discount bonds or a specially-related person of that issuer);

redemption money: The redemption money listed in Article 41-12-2, paragraph (1), item (i);

amount of gain: The amount of gain prescribed in Article 41-12-2, paragraph (6), item (iii);

qualified account management institution: A specified account management institution or specified secondary account management institution that has obtained the approval of the Commissioner of the National Tax Agency pursuant to the provisions of Cabinet Order;

tertiary foreign account management institution: A tertiary foreign account management institution as prescribed in Article 5-2, paragraph (7), item (vii);

secondary foreign account management institution: A secondary foreign account management institution as prescribed in Article 5-2, paragraph (7), item (viii).

Where an application for approval set forth in item (x) of the preceding paragraph has been filed, the Commissioner of the National Tax Agency may dismiss the application if there is a fact that falls under any of the following with regard to the applicant:

it is found that any document necessary for filing the application contains a defective or false entry, or it is otherwise found that the application has not been filed in accordance with the provisions of Cabinet Order prescribed in item (x) of the preceding paragraph;

there are reasonable grounds for finding that it is difficult for the applicant to submit the record prescribed in Article 225, paragraph (1) of the Income Tax Act as applied with the terms and phrases replaced pursuant to the provisions of paragraph (6), or to give the notice prescribed in paragraph (11).

When the Commissioner of the National Tax Agency finds that a fact that falls under any of the items of the preceding paragraph has occurred with regard to a person who has obtained the approval set forth in paragraph (7), item (x), the Commissioner may rescind the approval pursuant to the provisions of Cabinet Order.

Where a person who has submitted a written application for a tax exemption receives payment of redemption money on specified book-entry discount bonds (excluding those falling under general discount bonds; hereinafter the same applies in this paragraph) for which the person has made entries or records under the book-entry transfer system through a qualified foreign intermediary, the qualified foreign intermediary must, no later than the day preceding the day on which the person is to receive the payment of the redemption money, give notice of the brand of the specified book-entry discount bonds, the amount of redemption money for each brand, and any other matters specified by Order of the Ministry of Finance, to the specified account management institution or specified secondary account management institution through which the qualified foreign intermediary made entries or records under the book-entry transfer system regarding the specified book-entry discount bonds (in the case where the qualified foreign intermediary is a tertiary foreign account management institution, the specified account management institution or specified secondary account management institution through which the secondary foreign account management institution pertaining to the entries or records under the book-entry transfer system regarding the specified book-entry discount bonds made entries or records under the book-entry transfer system regarding the specified book-entry discount bonds), by way of a document or any other means specified by Cabinet Order.

Where a person who has submitted a written application for a tax exemption receives payment of redemption money on specified book-entry discount bonds (limited to those falling under general discount bonds; hereinafter the same applies in this paragraph) for which the person has made entries or records under the book-entry transfer system through a qualified account management institution or qualified foreign intermediary, the qualified account management institution or qualified foreign intermediary must, no later than the day preceding the day on which the person is to receive the payment of the redemption money, give notice of the brand of the specified book-entry discount bonds, the amount of redemption money for each brand, and any other matters specified by Order of the Ministry of Finance, to the person who pays the redemption money, via a specified book-entry transfer institution, or via the qualified account management institution through which the qualified foreign intermediary made entries or records under the book-entry transfer system regarding the specified book-entry discount bonds (in the case where the qualified foreign intermediary is a tertiary foreign account management institution, the qualified account management institution through which the secondary foreign account management institution pertaining to the entries or records under the book-entry transfer system regarding the specified book-entry discount bonds made entries or records under the book-entry transfer system regarding the specified book-entry discount bonds) and a specified book-entry transfer institution, by way of a document or any other means specified by Cabinet Order.

The issuer of specified book-entry discount bonds (excluding those falling under book-entry government bonds prescribed in paragraph (7), item (vii) or book-entry municipal bonds prescribed in that item) must, where income tax has not been collected under the provisions of Article 41-12-2, paragraph (2) or paragraph (3) with respect to the amount of gain pertaining to redemption money of the specified book-entry discount bonds on the basis that the provisions of paragraph (1) apply, submit to the district director, pursuant to the provisions of Cabinet Order, a document stating the name or title of the nonresident or foreign corporation that is a specially-related person of the issuer, its domicile or residence, or the location of its head office or principal office, located outside Japan, and other matters specified by Order of the Ministry of Finance.

The determination of whether a person who receives payment of redemption money of specified book-entry discount bonds is a specially-related person, matters concerning the preservation of documents, etc. pertaining to the notices set forth in paragraphs (10) and (11), and other necessary matters concerning the application of the provisions of paragraphs (1) through (6) and paragraph (8) through the preceding paragraph are specified by Cabinet Order.