Act on Special Measures Concerning Taxation

The amount of entertainment expenses, etc. that a corporation disburses in each business year beginning during the period from April 1, 2014 to March 31, 2027 (hereinafter referred to as an "applicable business year" in this Article) (for a corporation whose amount of stated capital or amount of contributions (for a corporation that has no capital or contributions or any other corporation specified by Cabinet Order, the amount specified by Cabinet Order; hereinafter the same applies in this paragraph and the following paragraph) as of the date of the end of that applicable business year is 10 billion yen or less (excluding a group tax sharing corporation in the case where, among the other group tax sharing corporations that have a group tax sharing full controlling interest with the group tax sharing corporation as of the date of the end of that applicable business year of the group tax sharing corporation, the amount of stated capital or amount of contributions of any of them as of that date exceeds 10 billion yen), the portion of the amount of those entertainment expenses, etc. that exceeds the amount equivalent to 50 percent of the amount of food and drink expenses for entertainment) is not included in deductible expenses in calculating the amount of income for that applicable business year.

In the case referred to in the preceding paragraph, for a corporation (excluding an investment corporation prescribed in Article 2, paragraph (12) of the Act on Investment Trusts and Investment Corporations and a special purpose company prescribed in Article 2, paragraph (3) of the Act on the Securitization of Assets) whose amount of stated capital or amount of contributions as of the date of the end of the applicable business year is 100 million yen or less (excluding the following corporations), the portion of the amount of entertainment expenses, etc. referred to in the preceding paragraph that exceeds the fixed deduction limit (meaning the amount calculated by multiplying 8 million yen by the number of months in that applicable business year and dividing the result by 12) may be treated as the exceeding portion prescribed in that paragraph.

an ordinary corporation that, as of the date of the end of the applicable business year, falls under the category of a corporation listed in Article 66, paragraph (5), item (ii) or item (iii) of the Corporation Tax Act;

a group tax sharing corporation in the case where any of the other group tax sharing corporations that have a group tax sharing full controlling interest with the group tax sharing corporation as of the date of the end of the applicable business year of the group tax sharing corporation is any of the following corporations:

a corporation whose amount of stated capital or amount of contributions as of the date of the end of the applicable business year exceeds 100 million yen;

a corporation listed in the preceding item.

With regard to the application of the provisions of the preceding two paragraphs to a group tax sharing corporation (for a group tax sharing subsidiary corporation, limited to one that has a group tax sharing full controlling interest with the group tax sharing parent corporation pertaining to that group tax sharing subsidiary corporation as of the date of the end of the business year of that group tax sharing parent corporation), the following provisions apply:

the applicable business year of a group tax sharing subsidiary corporation is the business year of that group tax sharing subsidiary corporation ending on the date of the end of the applicable business year of the group tax sharing parent corporation pertaining to that group tax sharing subsidiary corporation;

the fixed deduction limit prescribed in the preceding paragraph is the amount (referred to as the "allocated group tax sharing fixed deduction limit" in paragraph (5)) calculated by multiplying the amount calculated by multiplying 8 million yen by the number of months in the business year of the group tax sharing parent corporation pertaining to the group tax sharing corporation that ends on the date of the end of the applicable business year and dividing the result by 12 (referred to as the "group tax sharing fixed deduction limit" in item (iv), (a)) by the ratio that the amount listed in (a) bears to the amount listed in (b);

the amount of entertainment expenses, etc. that the group tax sharing corporation disburses in the applicable business year;

the total of the amount of entertainment expenses, etc. that the group tax sharing corporation disburses in the applicable business year and the amount of entertainment expenses, etc. that the other group tax sharing corporations that have a group tax sharing full controlling interest with the group tax sharing corporation as of the date of the end of the applicable business year disburse in their business years ending on that date.

where the provisions of the preceding item are applied, if the amount of entertainment expenses, etc. referred to in (a) and (b) of that item differs from the amount stated, in the document attached to the final return, etc. (excluding a tax return form filed after the due date) for the applicable business year referred to in that item of the group tax sharing corporation referred to in that item or for the business year prescribed in (b) of that item of the other group tax sharing corporations referred to in (b) of that item (hereinafter referred to as a "group tax sharing business year" in this paragraph), as the amount of entertainment expenses, etc. disbursed in that group tax sharing business year (hereinafter referred to as the "initially reported amount of entertainment expenses, etc." in this item and item (v)), the initially reported amount of entertainment expenses, etc. is deemed to be the amount of entertainment expenses, etc. referred to in (a) and (b) of the preceding item;

where an amended return form is filed or a reassessment under the provisions of Article 24 or Article 26 of the Act on General Rules for National Taxes (referred to as a "reassessment" in the following item) is made for any of the group tax sharing business years, if any of the following cases applies, the provisions of the preceding item do not apply to the applicable business year referred to in item (ii) of the group tax sharing corporation referred to in that item:

where the amount listed in item (ii), (b) in the case where the provisions of the preceding item were not applied is the group tax sharing fixed deduction limit or less;

where the provisions of Article 64-5, paragraph (6) of the Corporation Tax Act apply;

where the provisions of Article 64-5, paragraph (8) of the Corporation Tax Act apply.

with regard to the application of the provisions of item (iii) after an amended return form has been filed or a reassessment has been made for a group tax sharing business year by applying the provisions of the preceding item (excluding the part pertaining to (c)), the amount stated, in the document attached to that amended return form or to the written notice of reassessment prescribed in Article 28, paragraph (2) of the Act on General Rules for National Taxes pertaining to that reassessment, as the amount of entertainment expenses, etc. disbursed in that group tax sharing business year is deemed to be the initially reported amount of entertainment expenses, etc.

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

Where there is an amount of entertainment expenses, etc. that another group tax sharing corporation that has a group tax sharing full controlling interest with the group tax sharing corporation referred to in paragraph (3) as of the date of the end of the applicable business year of that group tax sharing corporation (hereinafter referred to as an "other group tax sharing corporation" in this paragraph) disburses in its business year ending on that date, the provisions of paragraph (2) for that applicable business year apply, notwithstanding the provisions of paragraph (7), only if, for every other group tax sharing corporation that disburses that amount of entertainment expenses, etc., the final return, etc., amended return form, or written request for reassessment for its business year ending on that date has attached to it a written statement concerning the calculation of the allocated group tax sharing fixed deduction limit, and the final return, etc., amended return form, or written request for reassessment for that applicable business year has attached to it a written statement concerning the calculation of the allocated group tax sharing fixed deduction limit.

The term "entertainment expenses, etc." as used in paragraph (1), paragraph (3), and the preceding paragraph means entertainment expenses, hospitality expenses, confidential expenses, and other expenses that a corporation disburses for entertaining, hosting, recreation, gifts, or any other similar act (hereinafter referred to as "entertainment, etc." in this paragraph) for its customers, suppliers, or other persons, etc. related to its business (excluding expenses that fall under any of the following expenses), and the term "food and drink expenses for entertainment" as used in paragraph (1) means expenses, out of the entertainment expenses, etc. referred to in that paragraph, required for eating and drinking or any other similar act (excluding those disbursed exclusively for the entertainment, etc. of the officers prescribed in Article 2, item (xv) of the Corporation Tax Act or the employees of the corporation, or of their relatives; referred to as "food and drink expenses" in item (ii)), for which that fact has been made clear as specified by Order of the Ministry of Finance.

expenses normally required for athletic meets, entertainment events, trips, etc. held exclusively for the recreation of employees;

food and drink expenses for which the amount calculated, as specified by Cabinet Order, on the basis of the amount disbursed is the amount specified by Cabinet Order or less;

beyond the expenses listed in the preceding two items, expenses specified by Cabinet Order.

The provisions of paragraph (2) apply only if the final return, etc., amended return form, or written request for reassessment has attached to it a written statement concerning the calculation of the fixed deduction limit prescribed in that paragraph.

The provisions of paragraph (6), item (ii) apply only if the documents specified by Order of the Ministry of Finance are preserved.