Act on Special Measures Concerning Taxation

Income tax is not imposed on the following benefits paid by a prefecture, a municipality or a special ward:

the following benefits paid, based on the provisions of Article 7, item (i), (c) of the Act Partially Amending the Consumption Tax Act, etc., and Other Matters to Carry Out a Drastic Reform of the Tax System for Securing Stable Financial Resources for Social Security, etc. (Act No. 68 of 2012), from the perspective of giving consideration to low-income persons upon the consumption tax rate increase prescribed in that item (referred to as the "consumption tax rate increase" in the following item):

benefits specified by Order of the Ministry of Finance that are paid to persons recorded in the basic resident register under the Residential Basic Book Act (Act No. 81 of 1967) (limited to persons recorded in the basic resident register as of January 1, 2015 and other persons specified by Order of the Ministry of Finance as being equivalent thereto) who are not subject to the municipal inhabitant tax for fiscal 2015 under the provisions of the Local Tax Act (including the special ward inhabitant tax under the provisions of that Act, and excluding the income levy imposed under the provisions of Article 328 of that Act (including where it is applied mutatis mutandis pursuant to Article 736, paragraph (3) of that Act); hereinafter referred to in this item as "municipal inhabitant tax") or who have been exempted from that municipal inhabitant tax pursuant to the provisions of a Municipal Ordinance of a municipality (including a special ward) (excluding persons treated as dependents under the provisions of that Act of a person subject to that municipal inhabitant tax (excluding a person who has been exempted from that municipal inhabitant tax) and other persons specified by Order of the Ministry of Finance; referred to as "fiscal 2015 covered persons" in item (iii), (a));

benefits specified by Order of the Ministry of Finance that are paid to persons recorded in the basic resident register under the Residential Basic Book Act (limited to persons recorded in the basic resident register as of January 1, 2016 and other persons specified by Order of the Ministry of Finance as being equivalent thereto) who are not subject to the municipal inhabitant tax for fiscal 2016 under the provisions of the Local Tax Act or who have been exempted from that municipal inhabitant tax pursuant to the provisions of a Municipal Ordinance of a municipality (including a special ward) (excluding persons treated as dependents under the provisions of that Act of a person subject to that municipal inhabitant tax (excluding a person who has been exempted from that municipal inhabitant tax) and other persons specified by Order of the Ministry of Finance; referred to as "fiscal 2016 covered persons" in item (iii), (b));

benefits specified by Order of the Ministry of Finance that are paid, from the perspective of mitigating the economic impact, etc. of the consumption tax rate increase on households to which children belong, to persons who receive child allowances under the Child Allowance Act (Act No. 73 of 1971) and other persons specified by Order of the Ministry of Finance;

the following benefits paid from the perspective of support, etc. for low-income elderly persons, etc.:

benefits specified by Order of the Ministry of Finance that are paid to fiscal 2015 covered persons who are 64 years of age or older as of March 31, 2016;

benefits specified by Order of the Ministry of Finance that are paid to fiscal 2016 covered persons who receive the disability basic pension listed in Article 15, item (ii) or the survivors' basic pension listed in item (iii) of that Article of the National Pension Act (Act No. 141 of 1959) and other persons specified by Order of the Ministry of Finance (excluding persons who receive the benefits listed in (a));

benefits specified by Order of the Ministry of Finance that are paid, from the perspective of promoting measures against child poverty, etc., to persons who receive child rearing allowances under the Child Rearing Allowance Act (Act No. 238 of 1961) and other persons specified by Order of the Ministry of Finance;

benefits specified by Order of the Ministry of Finance that are paid, from the perspective of supporting the employment, etc. of low-income single parents, to persons specified by Order of the Ministry of Finance from among the persons who received the benefits listed in Article 31, item (ii) of the Act on Welfare of Mothers and Fathers with Dependents and Widows (Act No. 129 of 1964) (including where it is applied mutatis mutandis pursuant to Article 31-10 of that Act).

Where a person listed in any of the following items has been released from a debt pertaining to a loan of money that a prefecture, or a person that a prefecture considers appropriate, makes to a person listed in item (i), which is specified by Order of the Ministry of Finance as a loan made, in consideration of the fact that the person cannot expect economic support from the person's custodian prescribed in Article 6 of the Child Welfare Act and other circumstances, for the purpose of supporting the person's independence, in order to assist with the person's living expenses after the person goes on to higher education or finds employment, the rent for rental housing used as the person's residence, or the expenses required to obtain a license or qualification that contributes to finding employment, income tax is not imposed on the value of the economic benefit received as a result of the release:

a person admitted to a children's home prescribed in Article 41 of the Child Welfare Act as a result of an admission measure taken pursuant to the provisions of Article 27, paragraph (1), item (iii) or Article 27-2, paragraph (1) of that Act, a person for whom that admission measure has been terminated, and other persons specified by Order of the Ministry of Finance;

an heir of a person listed in the preceding item and other persons specified by Order of the Ministry of Finance.

Where a person who received a loan of money that a prefecture or a designated city (hereinafter referred to in this paragraph as a "prefecture, etc."), or a person that a prefecture, etc. considers appropriate, makes to a person who receives child rearing allowance under the Child Rearing Allowance Act (including a person specified by Order of the Ministry of Finance as being equivalent thereto) and who is receiving the support specified by Order of the Ministry of Finance, which is specified by Order of the Ministry of Finance as a loan made for the purpose of supporting the person's independence in order to assist with the rent for rental housing used as the person's residence, or the heir of that person or another person specified by Order of the Ministry of Finance, has been released from a debt pertaining to the loan, income tax is not imposed on the value of the economic benefit received as a result of the release.

With regard to money, goods or other economic benefits (hereinafter referred to in this Article as "prize money, etc. on prize-linked deposits, etc.") that an individual receives or is to receive by payment or delivery in Japan by means of a drawing of lots or any other method conducted, pursuant to the provisions of Cabinet Order, with respect to deposits and similar savings in which a deposit, trust or any other act specified by Cabinet Order (hereinafter referred to in this paragraph as a "placement") has been made under a contract pertaining to deposits and savings, jointly managed trusts or any other things specified by Cabinet Order (hereinafter referred to in this paragraph as "deposits and similar savings") (limited to deposits and similar savings in which the placement has been made and for which the contract satisfies the requirements specified by Cabinet Order, such as the contract continuing for a certain period), notwithstanding the provisions of Article 22, Article 89 and Article 165 of the Income Tax Act, income tax is imposed separately from other income, by applying a tax rate of 15 percent to the amount received or to be received by payment or delivery.

A domestic corporation or foreign corporation (excluding a domestic corporation listed in Appended Table 1 of the Income Tax Act, a financial institution prescribed in Article 8, paragraph (1) and a financial instruments business operator, etc. prescribed in paragraph (2) of that Article; the same applies in the following paragraph and paragraph (4)) is liable to pay income tax with respect to prize money, etc. on prize-linked deposits, etc. that it receives or is to receive by payment or delivery in Japan, and income tax is imposed by applying a tax rate of 15 percent to the amount received or to be received by payment or delivery.

A person who pays, delivers or gives prize money, etc. on prize-linked deposits, etc. in Japan to an individual, or to a domestic corporation or foreign corporation, must, at the time of the payment, delivery or giving, collect income tax in the amount calculated by multiplying the amount paid, delivered or given by a tax rate of 15 percent, and pay it to the State no later than the tenth day of the month following the month that includes the day of the collection.

Income tax to be collected and paid pursuant to the provisions of the preceding paragraph is deemed to be income tax pertaining to withholding at the source as 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. In this case, where the person who receives or is to receive by payment or delivery the prize money, etc. on prize-linked deposits, etc. is a domestic corporation or foreign corporation, with regard to the application of the provisions of the Corporation Tax Act to that domestic corporation or foreign corporation, the phrase "or prize money" in Article 68, paragraph (1) of that Act is deemed to be replaced with "or prize money, or prize money, etc. on prize-linked deposits, etc. prescribed in Article 41-9, paragraph (2) of the Act on Special Measures Concerning Taxation (Separate Taxation, etc. on Prize Money, etc. on Prize-Linked Deposits, etc.)", the phrase "that Act" is deemed to be replaced with "the Income Tax Act or the Act on Special Measures Concerning Taxation", and the phrase "of the Income Tax Act" in Article 144 of that Act is deemed to be replaced with "of the Income Tax Act or the Act on Special Measures Concerning Taxation".

Beyond what is specified in the preceding paragraph, special provisions on Article 225 of the Income Tax Act pertaining to prize money, etc. on prize-linked deposits, etc. and other necessary matters concerning the application of the provisions of paragraphs (1) through (3) are specified by Cabinet Order.

With regard to the compensation, interest, profit or gain listed in Article 174, items (iii) through (viii) of the Income Tax Act (hereinafter referred to in this Article and the following Article as "compensation for periodic deposits, etc.") that a resident or a nonresident who has a permanent establishment is to receive in Japan on or after April 1, 1988, notwithstanding the provisions of Article 22, Article 89 and Article 165 of that Act, income tax is imposed separately from other income, by applying a tax rate of 15 percent to the amount to be received.

The provisions of the preceding paragraph do not apply to compensation for periodic deposits, etc. received by a nonresident who has a permanent establishment that does not fall under the domestic source income listed in Article 164, paragraph (1), item (i), (a) of the Income Tax Act.

With regard to a person who makes payment of compensation for periodic deposits, etc. to a resident or nonresident on or after April 1, 1988, the provisions of Article 225, paragraph (1) of the Income Tax Act do not apply to the part pertaining to that compensation for periodic deposits, etc.

Where a person who makes payment of compensation for periodic deposits, etc. to be paid in Japan on or after April 1, 1988 to a domestic corporation or to a foreign corporation that has a permanent establishment prepares, pursuant to the provisions of Order of the Ministry of Finance, the report referred to in Article 225, paragraph (1) of the Income Tax Act concerning the payment of that compensation for periodic deposits, etc. for each single payment to the same domestic corporation or foreign corporation that has a permanent establishment, 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 finalized.