Act on Special Measures Concerning Taxation

If a corporation that files a blue return and that has received, within the period from the date on which the Act Partially Amending the Industrial Technology Enhancement Act (Act No. 41 of 2026) comes into effect to March 31, 2029 (referred to as the "designated period" in the following paragraph and paragraph (3), item (i)), the certification under Article 22, paragraph (1) of the Industrial Technology Enhancement Act (referred to as "certification" in the following paragraph and paragraph (5)) for a priority research and development plan prescribed in that paragraph (hereinafter referred to as a "priority research and development plan" in this Article) has, for a business year of application pertaining to that certification (excluding a business year that includes the date of dissolution (excluding dissolution due to a merger) and each business year during liquidation), an amount of priority industrial technology experimental research expenses (if the provisions of Article 42-4, paragraph (1) or (4) or paragraph (1) of the preceding Article are applied for that business year of application, excluding the amount of priority industrial technology experimental research expenses that served as the basis for the calculation of the amount to be deducted pursuant to those provisions from the corporation tax before adjustment (meaning the corporation tax before adjustment prescribed in Article 42-4, paragraph (19), item (ii); the same applies hereinafter in this Article) on income for that business year of application), the sum of the amounts equivalent to 40 percent (or 50 percent, for the portion for which the amount of priority industrial technology experimental research expenses serving as the basis for the calculation of the amount of credit-eligible priority industrial technology experimental research expenses for that business year of application falls under the amount of special priority industrial technology experimental research expenses) of the amount of credit-eligible priority industrial technology experimental research expenses for that business year of application (if the provisions of Article 42-4, paragraph (1) or (4) or paragraph (1) of the preceding Article are applied for that business year of application, excluding the amount of credit-eligible priority industrial technology experimental research expenses that served as the basis for the calculation of the amount to be deducted pursuant to those provisions from the corporation tax before adjustment on income for that business year of application) (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 of application. 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 of application, the amount to be deducted is limited to the amount equivalent to that 10 percent.

If, for a business year of application (excluding a business year that includes the date of dissolution (excluding dissolution due to a merger) and each business year during liquidation) pertaining to the certification of a corporation that files a blue return and that has received certification for a priority research and development plan within the designated period, the amount of experimental research expenses (meaning the amount of experimental research expenses prescribed in Article 42-4, paragraph (19), item (i); the same applies hereinafter in this Article) exceeds the amount of experimental research expenses for the business year that includes the day before the first day of that business year of application (hereinafter referred to as the "previous business year" in this paragraph) (if the number of months in that previous business year differs from the number of months in that business year of application, the amount calculated by multiplying that amount of experimental research expenses by the number of months in that business year of application and dividing the product by the number of months in that previous business year), and the corporation has a carried-over excess of the tax credit limit, the amount equivalent to that carried-over excess of the tax credit limit is deducted from the corporation tax before adjustment on income for that business year of application. In this case, if the corporation's carried-over excess of the tax credit limit for that business year of application exceeds the amount equivalent to 10 percent of the corporation tax before adjustment on the corporation's income for that business year of application (if there is an amount to be deducted from the corporation tax before adjustment on income for that business year of application pursuant to the provisions of the preceding paragraph in that business year of application, the remaining amount after deducting that amount), the amount to be deducted is limited to the amount equivalent to that 10 percent.

The provisions of the preceding two paragraphs apply to a group tax sharing corporation as follows:

the certification prescribed in the preceding two paragraphs of a group tax sharing corporation is to include the certification prescribed in paragraph (1) that another group tax sharing corporation that has a group tax sharing full controlling interest with the group tax sharing corporation on the date of the end of the relevant business year of the group tax sharing corporation (limited to a business year ending on the date of the end of the business year of the group tax sharing parent corporation pertaining to the group tax sharing corporation) has received for a priority research and development plan within the designated period, and the business year of application of the group tax sharing corporation is to include, among the business years of the group tax sharing corporation, a business year that includes a day within the applicable period prescribed in paragraph (5), item (i) of that other group tax sharing corporation;

The number of months referred to in the preceding two paragraphs is calculated in accordance with the calendar, and any fraction of less than one month is counted as one month.

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

business year of application: Each business year that includes a day within the applicable period (meaning the period from the day on which the corporation received the certification to the day on which five years have elapsed from that day (in the case where the certification is revoked by that day or in any other case specified by Cabinet Order, the period specified by Cabinet Order)) of a corporation that has received certification for a priority research and development plan;

amount of priority industrial technology experimental research expenses: Out of the amount of experimental research expenses, the amount specified by Cabinet Order as the amount of experimental research expenses pertaining to research and development (meaning research and development prescribed in Article 27, paragraph (1) of that Act; the same applies in item (iv)) conducted by a corporation that has received certification in accordance with the certified priority research and development plan prescribed in Article 23, paragraph (2) of the Industrial Technology Enhancement Act pertaining to that certification (referred to as the "certified priority research and development plan" in item (iv));

amount of credit-eligible priority industrial technology experimental research expenses: Out of the amount of priority industrial technology experimental research expenses, the sum of the following amounts:

the amount equivalent to 50 percent (or 70 percent, for a business year beginning before April 1, 2027 (for the eligible business year prescribed in Article 42-4, paragraph (8), item (ii) as applied mutatis mutandis pursuant to paragraph (3), item (ii) of a group tax sharing corporation referred to in item (iii) of paragraph (8) of that Article as applied mutatis mutandis pursuant to paragraph (3), item (ii), the eligible business year prescribed in that item of the group tax sharing corporation ending on the date of the end of a business year of the group tax sharing parent corporation pertaining to the group tax sharing corporation beginning before that date), and 60 percent, for a business year beginning during the period from that April 1 to March 31, 2028 (for the eligible business year prescribed in Article 42-4, paragraph (8), item (ii) as applied mutatis mutandis pursuant to paragraph (3), item (ii) of a group tax sharing corporation referred to in item (iii) of paragraph (8) of that Article as applied mutatis mutandis pursuant to paragraph (3), item (ii), the eligible business year prescribed in that item of the group tax sharing corporation ending on the date of the end of a business year of the group tax sharing parent corporation pertaining to the group tax sharing corporation beginning within that period)) of the amount of priority industrial technology experimental research expenses pertaining to experimental research outsourced abroad prescribed in Article 42-4, paragraph (19), item (xiv);

the amount of priority industrial technology experimental research expenses pertaining to experimental research other than experimental research outsourced abroad prescribed in Article 42-4, paragraph (19), item (xiv).

amount of special priority industrial technology experimental research expenses: Out of the amount of priority industrial technology experimental research expenses, the amount specified by Cabinet Order as the amount of experimental research expenses pertaining to research and development conducted jointly with, or research and development entrusted to, a priority industrial technology joint research and development institution prescribed in Article 29, paragraph (4) of the Industrial Technology Enhancement Act (hereinafter referred to as a "priority industrial technology joint research and development institution" in this item), conducted by a corporation that has received certification in accordance with the certified priority research and development plan pertaining to that certification;

carried-over excess of the tax credit limit: The sum of the amounts, out of the maximum tax credit prescribed in paragraph (1) of a corporation for each business year that began within three years before the first day of the business year of application (limited to each business year in which the corporation has filed blue returns continuously up to that business year of application), that could not be fully deducted even after the deduction under that paragraph (if there is an amount already deducted from the corporation tax before adjustment, pursuant to the provisions of paragraph (2), in those business years, the remaining amount after deducting that amount).

The provisions of paragraph (1) apply only if a document stating the amount of credit-eligible priority industrial technology experimental research expenses, the amount of priority industrial technology experimental research expenses and the amount of special priority industrial technology 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 priority industrial technology experimental research expenses serving as the basis for the calculation of the amount to be deducted pursuant to the provisions of that paragraph is limited to the amount of credit-eligible priority industrial technology experimental research expenses stated in the document attached to the final return, etc.

The provisions of paragraph (2) apply only if a written statement of the carried-over excess of the tax credit limit is attached to the final return prescribed in Article 2, item (xxxi) of the Corporation Tax Act for each business year from the business year of application in which the provisions of paragraph (1) were applied onward, and a document stating the carried-over excess of the tax credit limit, the amount to be deducted, and the details of the calculation of that amount, which are subject to the deduction under paragraph (2), is attached to the final return, etc. for the business year of application for which the application of the provisions of paragraph (2) is sought (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).

The provisions of Article 42-4, paragraphs (23) and (24) apply mutatis mutandis to the case where the provisions of paragraph (1) or (2), or the provisions of paragraph (14) of that Article as applied mutatis mutandis pursuant to paragraph (3), item (ii), apply. In this case, the phrase "paragraphs (1), (4), (7) and (14)" in paragraph (23) of that Article is deemed to be replaced with "Article 42-5, paragraphs (1) and (2) and paragraph (14) as applied mutatis mutandis pursuant to paragraph (3), item (ii) of that Article".

The provisions of Article 42-4, paragraphs (25) and (26) apply mutatis mutandis to the case where the provisions of Article 42-4, paragraph (8), item (vi), (b) or item (vii) as applied mutatis mutandis pursuant to paragraph (3), item (ii) apply. 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 42-5, paragraph (3), item (ii) (Special Corporation Tax Credit Where Priority Industrial Technology Experimental Research Is Conducted) (", the phrase "Article 42-4, paragraph (8), item (vi), (b) and item (vii)" that closes a quoted phrase 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 42-5, paragraph (3), item (ii)" closing that quoted phrase, and the phrase "and" in paragraph (26) of that Article is deemed to be replaced with "and, as applied mutatis mutandis pursuant to Article 42-5, paragraph (3), item (ii),".

Beyond what is provided for in paragraph (4) through the preceding paragraph, the calculation of the amount of experimental research expenses for the previous business year prescribed in paragraph (2) in the case where the corporation seeking the application of the provisions of that paragraph is a merging corporation, a splitting corporation or a succeeding corporation in a company split, a corporation making a capital contribution in kind or a corporation receiving a capital contribution in kind, or a corporation making a distribution in kind or a corporation receiving a distribution in kind, 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 in the case where the provisions of Article 42-4, paragraph (8), item (vi), (b) or item (vii) as applied mutatis mutandis pursuant to paragraph (3), item (ii) apply, and other necessary matters concerning the application of the provisions of paragraphs (1) through (3) are specified by Cabinet Order.