Act on Special Measures Concerning Taxation

Where a corporation that files a blue return and that engages in mining, in each business year that includes a day within the period from April 1, 1965 to March 31, 2028 (referred to in item (i) as the "designated period") (excluding the business year that includes the day of dissolution and each business year during liquidation), in preparation for the expenditure of new mineral deposit exploration expenses pertaining to minerals specified by Cabinet Order as those for which it is particularly necessary to secure a stable supply (hereinafter referred to in this Article as "minerals"), sets aside as a reserve for exploration, by the method of accounting as an expense or loss, an amount not exceeding the lower of the amounts listed in item (i) and item (ii) (where the corporation did not make any expenditure of new mineral deposit exploration expenses pertaining to minerals in any of the business years that began within five years before the first day of that business year, the amount obtained by deducting the amount listed in item (iii) from that lower amount; referred to in paragraph (8) and paragraph (14) as the "accumulation limit") (including where it sets aside the amount as a reserve for exploration by the method of setting it aside as a reserve fund through the appropriation of surplus by the day on which the settlement of accounts for that business year is finalized), the amount so set aside is included in deductible expenses in calculating the amount of income for that business year.

the amount equivalent to 12 percent of the amount specified by Cabinet Order as the revenue within the designated period of that business year from the sale of minerals mined by the corporation;

the amount equivalent to 50 percent of the amount specified by Cabinet Order as the amount of extraction income pertaining to the revenue prescribed in the preceding item;

the balance obtained by deducting the amount listed in paragraph (1), item (i) of the following Article for that business year from the sum of the following amounts (where that balance exceeds the amount calculated by multiplying the lower of the amounts listed in the preceding two items by 25 percent, that calculated amount):

the amount of the reserve for exploration for which the five years referred to in paragraph (4) have elapsed that is to be included in gross profit in that business year pursuant to the provisions of that paragraph;

the amount specified in paragraph (5), item (iv) pertaining to the amount of the reserve for exploration prescribed in that item that has been included, or is to be included, in gross profit in that business year pursuant to the provisions of that paragraph.

Where a domestic mining operator (meaning a corporation that files a blue return and is specified by Cabinet Order as a corporation that engages mainly in mining in Japan; the same applies hereinafter in this paragraph) and a corporation that files a blue return and is specified by Cabinet Order as being equivalent to a domestic mining operator (hereinafter referred to in this Article as a "domestic mining operator, etc."), in each business year that includes a day within the period from April 1, 1975 to March 31, 2028 (hereinafter referred to in this paragraph and paragraph (13) as the "designated period") (excluding the business year that includes the day of dissolution and each business year during liquidation), in preparation for the expenditure of new mineral deposit exploration expenses pertaining to minerals located outside Japan, sets aside as a reserve for overseas exploration, by the method of accounting as an expense or loss, an amount not exceeding the amount equivalent to 40 percent of the amount specified by Cabinet Order as the amount of extraction income pertaining to the revenue within the designated period of that business year from the sale of minerals pertaining to the mine acquired from an overseas independent development corporation (meaning a foreign corporation that has a mine for which a substantial part of the funds necessary for its development has been borne, directly or indirectly, by that domestic mining operator, etc. and domestic corporations investing jointly with it, and that is specified by Cabinet Order as a corporation whose business contributes significantly to the stable supply of resources in Japan) (including minerals acquired via a corporation other than that overseas independent development corporation based on a contract concerning the offtake of those minerals) (where the corporation did not make any expenditure of new mineral deposit exploration expenses pertaining to minerals located outside Japan in any of the business years that began within five years before the first day of that business year, the amount obtained by deducting, from that equivalent amount, the balance obtained by deducting the amount listed in item (ii) from the amount listed in item (i) (where that balance exceeds the amount calculated by multiplying that equivalent amount by 25 percent, that calculated amount)) (including where it sets aside the amount as a reserve for overseas exploration by the method of setting it aside as a reserve fund through the appropriation of surplus by the day on which the settlement of accounts for that business year is finalized), the amount so set aside is included in deductible expenses in calculating the amount of income for that business year.

the sum of the following amounts:

the amount of the reserve for overseas exploration for which the five years referred to in paragraph (4) have elapsed that is to be included in gross profit in that business year pursuant to the provisions of that paragraph;

the amount specified in paragraph (5), item (iv) pertaining to the amount of the reserve for overseas exploration prescribed in that item that has been included, or is to be included, in gross profit in that business year pursuant to the provisions of that paragraph;

the amount listed in paragraph (2), item (i) of the following Article for that business year.

The new mineral deposit exploration expenses prescribed in the preceding two paragraphs means the expenses required for geological surveys, boring or the excavation of tunnels for exploration, and other expenses required for exploration, which are specified by Cabinet Order, and investments that are certain to be appropriated to those expenses for the exploration of minerals located outside Japan, which are specified by Cabinet Order (referred to in paragraph (5) of the following Article as "investment in an overseas exploration corporation").

Where, as of the end of each business year of a corporation prescribed in paragraph (1) or paragraph (2), the amount of the reserve for exploration or the amount of the reserve for overseas exploration carried over from the preceding business year (where there are amounts that have been included, or are to be included, in gross profit by that day pursuant to the provisions of the following paragraph, or amounts that were included in gross profit by the end of the preceding business year pursuant to the provisions of this paragraph, the amount obtained by deducting those amounts; hereinafter the same applies in this Article) includes an amount for which five years have elapsed from the day following the end of the business year in which it was set aside (referred to in the following paragraph as the "business year of accumulation"), the amount of the reserve for exploration or the amount of the reserve for overseas exploration for which those five years have elapsed is included in gross profit in calculating the amount of income for the business year that includes the day on which those five years elapsed.

Where a corporation that has set aside the reserve for exploration referred to in paragraph (1) or the reserve for overseas exploration referred to in paragraph (2) comes to fall under any of the cases listed in the following items (excluding where a qualified merger in which that corporation is the merged corporation has taken place, or where it has transferred a mining office (meaning a mining office prescribed in Article 68 of the Mining Act (Act No. 289 of 1950); the same applies hereinafter in this Article) through a qualified company split or a qualified capital contribution in kind (limited to where it has also transferred the prospecting right for which the new mineral deposit exploration expenses prescribed in paragraph (3) are being expended)), the amount equivalent to the amount specified in that item is included in gross profit in calculating the amount of income for the business year that includes the day on which it came to fall under that case (in the case listed in item (ii), the business year that includes the day before the date of the merger). In this case, where the corporation falls under the case listed in item (iv), the amounts into which the amount of the reserve for exploration or the amount of the reserve for overseas exploration prescribed in that item is divided by the business year of accumulation in which they were set aside are to be included in gross profit in order beginning with the amount with the earliest business year of accumulation.

where the corporation has discontinued mining (excluding where it falls under the following item) or has ceased to fall under a domestic mining operator, etc.: the amount of the reserve for exploration or the amount of the reserve for overseas exploration as of the day of the discontinuation or of ceasing to fall under it;

where a merger in which that corporation is the merged corporation has taken place: the amount of the reserve for exploration or the amount of the reserve for overseas exploration immediately before the merger;

where the corporation has dissolved (excluding dissolution through a merger): the amount of the reserve for exploration or the amount of the reserve for overseas exploration as of the day of dissolution;

where the corporation has reversed the amount of the reserve for exploration or the amount of the reserve for overseas exploration in a case other than the cases referred to in the preceding paragraph, the preceding three items and the following paragraph: the amount equivalent to the amount reversed out of the amount of the reserve for exploration or the amount of the reserve for overseas exploration as of the day of the reversal.

Where a corporation that has set aside the reserve for exploration referred to in paragraph (1) or the reserve for overseas exploration referred to in paragraph (2) has had the approval for filing blue returns revoked, or has submitted a written notification to the effect that it will discontinue filing returns by blue return, the amount of the reserve for exploration or the amount of the reserve for overseas exploration as of the day on which the fact that gave rise to the revocation of the approval occurred (where it falls under any of the cases listed in the following items, the day specified in that item) or the day on which the written notification was submitted (where the day on which the written notification was submitted is after the end of the business year in which it discontinued filing returns by blue return, the end of that business year) is included in gross profit in calculating the amount of income for the business year that includes that day. In this case, the provisions of the preceding two paragraphs and paragraphs (10) through (12) do not apply.

where a group tax sharing corporation has received the notice under Article 127, paragraph (2) of the Corporation Tax Act pertaining to the disposition of that revocation: the day before the day on which it received the notice (where that day before is the day of the end of the business year of the group tax sharing parent corporation pertaining to that group tax sharing corporation, the day on which it received the notice);

where a corporation that was a group tax sharing corporation has received the notice under Article 127, paragraph (2) of the Corporation Tax Act pertaining to the disposition of that revocation: the day on which the fact that gave rise to the revocation of the approval occurred or the day before the day on which the approval under Article 64-9, paragraph (1) of that Act ceased to be effective (where that day before is the day of the end of the business year of the group tax sharing parent corporation pertaining to that corporation, the day on which the approval ceased to be effective), whichever is later.

The provisions of Article 56, paragraph (6) apply mutatis mutandis to the application of the provisions of paragraph (1) or paragraph (2).

Where a corporation that files a blue return and that engages in mining, in each business year that includes a day within the designated period prescribed in paragraph (1) (excluding each business year during liquidation), transfers a mining office to a succeeding corporation in a company split or a corporation receiving a capital contribution in kind through a qualified company split or a qualified capital contribution in kind (limited to where it also transfers the prospecting right for which the new mineral deposit exploration expenses prescribed in paragraph (3) are being expended), if, in preparation for the expenditure of new mineral deposit exploration expenses prescribed in paragraph (3) pertaining to minerals, it sets aside as a reserve for exploration an amount not exceeding the amount equivalent to the accumulation limit that would be calculated pursuant to the provisions of paragraph (1) if the time immediately before that qualified company split or qualified capital contribution in kind were the end of the business year, the amount so set aside is included in deductible expenses in calculating the amount of income for that business year.

The provisions of the preceding paragraph apply only where the corporation prescribed in that paragraph has submitted, within two months after the date of the qualified company split or qualified capital contribution in kind, a document stating the amount of the reserve for exploration referred to in that paragraph and other matters specified by Order of the Ministry of Finance to the district director having jurisdiction over the place for tax payment.

The provisions of Article 55, paragraph (10), paragraph (11) and the first sentence of paragraph (12) apply mutatis mutandis where a qualified merger has taken place in which a corporation that has set aside the reserve for exploration referred to in paragraph (1) or the reserve for overseas exploration referred to in paragraph (2) is the merged corporation. In this case, the term "paragraph (3)" in the first sentence of paragraph (12) of that Article is deemed to be replaced with "Article 58, paragraph (4)".

The provisions of Article 55, paragraph (13), the first sentence of paragraph (14), paragraph (15) and the first sentence of paragraph (16) apply mutatis mutandis where a corporation that has set aside the reserve for exploration referred to in paragraph (1) or paragraph (8) has transferred a mining office to a succeeding corporation in a company split through a qualified company split (limited to where it has also transferred the prospecting right for which the new mineral deposit exploration expenses prescribed in paragraph (3) are being expended). In this case, the term "paragraph (3)" in the first sentence of paragraph (14) and the first sentence of paragraph (16) of that Article is deemed to be replaced with "Article 58, paragraph (4)".

The provisions of Article 55, paragraph (17), the first sentence of paragraph (18), paragraph (19) and the first sentence of paragraph (20) apply mutatis mutandis where a corporation that has set aside the reserve for exploration referred to in paragraph (1) or paragraph (8) has transferred a mining office to a corporation receiving a capital contribution in kind through a qualified capital contribution in kind (limited to where it has also transferred the prospecting right for which the new mineral deposit exploration expenses prescribed in paragraph (3) are being expended). In this case, the term "paragraph (3)" in the first sentence of paragraph (18) and the first sentence of paragraph (20) of that Article is deemed to be replaced with "Article 58, paragraph (4)".

With regard to the specified shares, etc. referred to in Article 55, paragraph (2), item (vi) of an overseas independent development corporation prescribed in paragraph (2) that are acquired within the designated period by a corporation that falls under a domestic mining operator, etc., the provisions of paragraph (1) and paragraph (8) of that Article do not apply.

Beyond what is provided for in paragraph (7) and the preceding paragraph, the calculation of the accumulation limit in the case where the provisions of paragraph (8) have been applied, and other necessary matters concerning the application of the provisions of paragraphs (1) through (6) and paragraphs (8) through (12) are specified by Cabinet Order.