Act on Special Measures Concerning Taxation

If a corporation that files a blue return has an amount of special experimental research expenses for a business year (excluding a business year that includes the date of dissolution (excluding dissolution due to a merger) and each business year during liquidation) (if the provisions of paragraph (1) or (4) of the preceding Article are applied in that business year, excluding the amount of special experimental research expenses that served as the basis for the calculation of the amount to be deducted from the corporation tax before adjustment on income for that business year pursuant to those provisions), the sum of the following amounts (hereinafter referred to as the "maximum tax credit" in this paragraph) is deducted from the corporation tax before adjustment on the corporation's income for that business year. In this case, if the maximum tax credit exceeds the amount equivalent to 10 percent of the corporation tax before adjustment on the corporation's income for that business year, the amount to be deducted is limited to the amount equivalent to that 10 percent.

the amount equivalent to 30 percent of the amount specified by Cabinet Order as the amount of experimental research expenses pertaining to experimental research conducted jointly with national experimental research institutions, universities, or other persons equivalent to them (hereinafter referred to as a "special experimental research institution, etc." in this item) or experimental research outsourced to a special experimental research institution, etc., out of the amount of credit-eligible special experimental research expenses for that business year (if the provisions of paragraph (1) or (4) of the preceding Article are applied in that business year, excluding the amount of credit-eligible special experimental research expenses that served as the basis for the calculation of the amount to be deducted from the corporation tax before adjustment on income for that business year pursuant to those provisions; the same applies in the following item and item (iii));

the amount equivalent to 25 percent of the amount specified by Cabinet Order as the amount of experimental research expenses pertaining to experimental research conducted jointly with another person or experimental research outsourced to another person that is innovative or is conducted to put to practical use the results of research and development at a national research and development agency or another person equivalent thereto, out of the amount of credit-eligible special experimental research expenses for that business year;

the amount equivalent to 20 percent of the amount, out of the amount of credit-eligible special experimental research expenses for that business year, other than the amounts specified by Cabinet Order prescribed in the preceding two items.

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

amount of special experimental research expenses: The amount specified by Cabinet Order as the amount of experimental research expenses pertaining to experimental research conducted jointly with national experimental research institutions, universities or other persons, experimental research outsourced to national experimental research institutions, universities or other persons, experimental research conducted by receiving from a small and medium sized enterprise the establishment or licensing of intellectual property rights held by it (meaning intellectual property rights prescribed in Article 2, paragraph (2) of the Intellectual Property Basic Act and those equivalent thereto in foreign states), experimental research on pharmaceuticals for which the number of persons targeted by their use is small, experimental research conducted by paying personnel expenses to persons who have advanced expert knowledge, etc. (meaning expert knowledge, skills or experience at an advanced level), or other experimental research specified by Cabinet Order, out of the amount of experimental research expenses;

amount of credit-eligible special experimental research expenses: The sum of the following amounts out of the amount of special experimental research expenses;

the amount equivalent to 50 percent of the amount of special experimental research expenses pertaining to overseas commissioned experimental research (70 percent for a business year that begins before April 1, 2027 (for a business year subject to application prescribed in paragraph (8), item (ii) of the preceding Article as applied mutatis mutandis pursuant to the preceding paragraph of a group tax sharing corporation referred to in paragraph (8), item (iii) of that Article as applied mutatis mutandis pursuant to the preceding paragraph, the business year subject to application prescribed in that item of that group tax sharing corporation which ends at the end of a business year of the group tax sharing parent corporation pertaining to that group tax sharing corporation that begins before that date), and 60 percent for a business year that begins within the period from April 1, 2027 to March 31, 2028 (for a business year subject to application prescribed in paragraph (8), item (ii) of that Article as applied mutatis mutandis pursuant to the preceding paragraph of a group tax sharing corporation referred to in paragraph (8), item (iii) of that Article as applied mutatis mutandis pursuant to the preceding paragraph, the business year subject to application prescribed in that item of that group tax sharing corporation which ends at the end of a business year of the group tax sharing parent corporation pertaining to that group tax sharing corporation that begins within that period));

the amount of special experimental research expenses pertaining to experimental research other than overseas commissioned experimental research.

The provisions of paragraph (1) apply only if a document stating the amount of credit-eligible special experimental research expenses, the amount of special experimental research expenses, the amount to be deducted, and the details of the calculation of that amount, which are subject to the deduction under that paragraph, is attached to the final return, etc. (including an amended return form or written request for reassessment, if one is filed to increase the amount to be deducted pursuant to the provisions of that paragraph). In this case, the amount of credit-eligible special experimental research expenses serving as the basis for the calculation of the amount to be deducted pursuant to that paragraph is limited to the amount of credit-eligible special experimental research expenses stated in the document attached to the final return, etc.

The provisions of paragraphs (23) and (24) of the preceding Article apply mutatis mutandis where the provisions of paragraph (1), or the provisions of paragraph (14) of that Article as applied mutatis mutandis pursuant to paragraph (2), are applied. In this case, the phrase "paragraphs (1), (4), (7) and (14)" in paragraph (23) of that Article is deemed to be replaced with "paragraph (1) of the following Article and paragraph (14) as applied mutatis mutandis pursuant to paragraph (2) of that Article".

The provisions of paragraphs (25) and (26) of the preceding Article apply mutatis mutandis where the provisions of paragraph (8), item (vi), (b) or item (vii) of that Article as applied mutatis mutandis pursuant to paragraph (2) are applied. In this case, the phrase "Article 42-4, paragraph (8), item (vi), (b) and item (vii) (" in paragraph (25) of that Article is deemed to be replaced with "Article 42-4, paragraph (8), item (vi), (b) and item (vii) of that Act as applied mutatis mutandis pursuant to Article 42-4-2, paragraph (2) (Special Corporation Tax Credit Where Special Experimental Research Is Conducted) (", the phrase "Article 42-4, paragraph (8), item (vi), (b) and item (vii)'" is deemed to be replaced with "Article 42-4, paragraph (8), item (vi), (b) and item (vii) of that Act as applied mutatis mutandis pursuant to Article 42-4-2, paragraph (2)'", and the phrase "and" in paragraph (26) of that Article is deemed to be replaced with "and, as applied mutatis mutandis pursuant to paragraph (2) of the following Article,".

Beyond what is provided for in paragraph (3) through the preceding paragraph, matters concerning special provisions on returns or refunds under the provisions of Part II, Chapter I, Section 3 of the Corporation Tax Act and other matters concerning the application of the provisions of that Act and the Local Corporation Tax Act where the provisions of paragraph (8), item (vi), (b) or item (vii) of the preceding Article as applied mutatis mutandis pursuant to paragraph (2) are applied, and other necessary matters concerning the application of the provisions of paragraphs (1) and (2), are specified by Cabinet Order.