Act on Special Measures Concerning Taxation

Where a resident or nonresident who has a permanent establishment has acquired (excluding an acquisition to which the provisions of the main clause of Article 29-2, paragraph (1) are applied; hereinafter the same applies in this paragraph and the following paragraph) by payment (limited to payment made upon the issuance of the shares; hereinafter the same applies in this paragraph and the following paragraph) the shares specified in the following items (hereinafter referred to in this paragraph as "specified new shares") according to the category of stock company listed in each of those items (hereinafter referred to in this paragraph as a "specified new small and medium-sized company"), the resident or nonresident who has a permanent establishment (excluding a person who, on the day of that acquisition, was such a shareholder in the case where the specified new small and medium-sized company would fall under a family company prescribed in Article 2, item (x) of the Corporation Tax Act if that person were selected as a shareholder forming the basis for the determination, or any other person specified by Cabinet Order) may apply the provisions of Article 78 of the Income Tax Act (including where the calculation is made in accordance with that Article pursuant to the provisions of Article 165, paragraph (1) of that Act) with respect to the amount specified by Cabinet Order as the amount required for the acquisition of the specified new shares acquired by that payment during that year (limited to those specified by Cabinet Order as being held on December 31 of that year; hereinafter referred to in this Article as "deductible specified new shares") (where the total of those amounts exceeds 8,000,000 yen, 8,000,000 yen). In this case, the phrase "makes a specified donation" in Article 78, paragraph (1) of that Act is deemed to be replaced with "makes a specified donation, or acquires (meaning the acquisition prescribed in Article 41-18-4, paragraph (1) (Special Provisions on Taxation Where Shares Issued by a Specified New Small and Medium-Sized Company Are Acquired) of the Act on Special Measures Concerning Taxation; hereinafter the same applies in this paragraph) the specified new shares prescribed in that paragraph by payment prescribed in that paragraph", the phrase "specified donations made during the year" in item (i) of that paragraph is deemed to be replaced with "specified donations made during the year and the amount specified by Cabinet Order prescribed in Article 41-18-4, paragraph (1) of the Act on Special Measures Concerning Taxation as the amount required for the acquisition of the deductible specified new shares prescribed in that paragraph acquired during the year", and the phrase "A deduction under paragraph (1)" in paragraph (3) of that Article is deemed to be replaced with "A deduction under paragraph (1) (including a deduction under the provisions of Article 41-18-4, paragraph (1) of the Act on Special Measures Concerning Taxation)".

a stock company that falls under a specified new small and medium sized enterprise prescribed in Article 6 of the Act on Strengthening the Management of Small and Medium-Sized Enterprises, etc. (limited to one specified by Order of the Ministry of Finance, such as one for which the period from the day of its establishment is less than one year): shares issued by that stock company;

a stock company among domestic corporations for which five years have not elapsed since the day of its establishment (limited to one that satisfies the requirements specified by Order of the Ministry of Finance, such as being a company that falls under a small and medium sized enterprise prescribed in Article 37-13, paragraph (1), item (ii)): shares issued by that stock company that are listed in (a) or (b) of that item;

a designated company listed in Article 37-13, paragraph (1), item (iii): shares issued by that designated company;

a stock company prescribed in Article 27-5 of the National Strategic Special Zones Act: shares issued by that stock company during the period from the effective date of the provisions listed in Article 1, item (i) of the Supplementary Provisions of the Act Partially Amending the National Strategic Special Zones Act and the Act on Special Districts for Structural Reform (Act No. 56 of 2015) to March 31, 2029;

a stock company, among domestic corporations, prescribed in Article 16 of the Local Revitalization Act that conducts the business prescribed in that Article: shares issued by that stock company during the period from the effective date of the Act Partially Amending the Local Revitalization Act (Act No. 38 of 2018) to March 31, 2029.

With respect to deductible specified new shares to which the provisions of the preceding paragraph have been applied and shares of the same class as those deductible specified new shares that were acquired by payment during the year in which those provisions were applied, the provisions of Article 37-13, paragraph (1) or the provisions of paragraph (3) or paragraph (6) of that Article (including as applied mutatis mutandis pursuant to paragraph (9), item (ii) of that Article) and the provisions of Article 37-13-2, paragraph (1) or the provisions of Article 37-13, paragraph (3) or paragraph (6) as applied mutatis mutandis pursuant to paragraph (4) of that Article (including as applied mutatis mutandis pursuant to paragraph (9), item (ii) of that Article) do not apply.

Special provisions on the calculation of the acquisition cost of shares of the same class as deductible specified new shares in the case where the provisions of paragraph (1) have been applied, and other necessary matters concerning the application of the provisions of the preceding two paragraphs are specified by Cabinet Order.