Act on Special Measures Concerning Taxation

The term "expenditure for undisclosed purposes" as used in the preceding paragraph means an expenditure of money made by a corporation (including the delivery of assets other than money for the purpose of a gift, the provision of benefits, or any other similar purpose; hereinafter the same applies in this Article) for which the corporation, without reasonable grounds, has not entered the name or title and the address or location of the recipient and the reason for the expenditure (hereinafter referred to as the "name, etc. of the recipient" in this Article) in its books and documents (excluding one that is clearly made as payment of consideration for the acquisition of assets or any other transaction (limited to one for which the money or the assets other than money pertaining to the expenditure are found to be reasonable as consideration for that transaction)).

Even where the expenditures of money made by a corporation include one for which the name, etc. of the recipient has not been entered in the books and documents of the corporation, the district director may, when the district director finds that the failure to make that entry is not for the purpose of concealing the name, etc. of the recipient, exclude that expenditure of money from the expenditure for undisclosed purposes prescribed in paragraph (1).

The provisions of paragraph (1) do not apply to an expenditure of money by a corporation listed in each of the following items that pertains to a business other than the business specified in that item:

a public interest corporation, etc. or an association or foundation without juridical personality (limited to one that has its head office or principal office in Japan): profit-making business;

a foreign corporation: the business pertaining to the domestic source income (limited to that listed in Article 138, paragraph (1), item (i) or item (iv) of the Corporation Tax Act) specified in each item of Article 141 of that Act according to which of the foreign corporations listed in those items the foreign corporation falls under (for an association or foundation without juridical personality, the profit-making business pertaining to that domestic source income).

The time for determining whether a corporation has entered the name, etc. of the recipient of an expenditure of money in its books and documents and other necessary matters concerning the application of the provisions of paragraph (1) are specified by Cabinet Order.

With regard to the application of the provisions of Article 67 of the Corporation Tax Act in the case where the provisions of paragraph (1) apply, the phrase "paragraphs (1), (2), and (6) of the preceding Article, and Article 69, paragraph (19) (Foreign Tax Credit) (including as applied mutatis mutandis pursuant to paragraph (23) of that Article; the same applies in paragraph (3))" in paragraph (1) of that Article is deemed to be replaced with "Article 62, paragraph (1) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation Where There Is Expenditure for Undisclosed Purposes)", the phrase "these" is deemed to be replaced with "that paragraph", and the phrase "paragraphs (1), (2), and (6) of the preceding Article, and Article 69, paragraph (19)" in paragraph (3) of that Article is deemed to be replaced with "Article 62, paragraph (1) of the Act on Special Measures Concerning Taxation".

With regard to the application of the provisions of Part II, Chapter I (excluding Section 2) and Part III, Chapter II (excluding Section 2) of the Corporation Tax Act in the case where the provisions of paragraph (1) apply, the following provisions apply:

the amount listed in Article 72, paragraph (1), item (ii) of the Corporation Tax Act is the amount of corporation tax that would be calculated if the period prescribed in that paragraph (for a group tax sharing subsidiary corporation, the period prescribed in paragraph (5), item (i) of that Article) were deemed to be one business year and the provisions of Part II, Chapter I, Section 2 of that Act (excluding Article 67, Article 68, paragraph (3), and Article 70) and the provisions of paragraph (1) (referred to as the "special tax addition provisions" in the following item through item (iv)) were applied to the amount of income listed in Article 72, paragraph (1), item (i) of that Act;

the amount listed in Article 74, paragraph (1), item (ii) of the Corporation Tax Act is the amount of corporation tax calculated by applying the provisions of Part II, Chapter I, Section 2 of that Act and the special tax addition provisions to the amount of income listed in item (i) of that paragraph;

the amount listed in Article 144-4, paragraph (1), item (iii) or item (iv) or paragraph (2), item (ii) of the Corporation Tax Act is the amount of corporation tax that would be calculated if the period prescribed in paragraph (1) or paragraph (2) of that Article were deemed to be one business year and the provisions of Part III, Chapter II, Section 2 of that Act (excluding Article 144 (limited to the part that applies mutatis mutandis the provisions of Article 68, paragraph (3) of that Act)) and the special tax addition provisions were applied to the amount of income pertaining to the domestic source income listed in paragraph (1), item (i) or item (ii) or paragraph (2), item (i) of that Article;

the amount listed in Article 144-6, paragraph (1), item (iii) or item (iv) or paragraph (2), item (ii) of the Corporation Tax Act is the amount of corporation tax calculated by applying the provisions of Part III, Chapter II, Section 2 of that Act and the special tax addition provisions to the amount of income pertaining to the domestic source income listed in paragraph (1), item (i) or item (ii) or paragraph (2), item (i) of that Article.

Beyond what is provided for in the preceding two paragraphs, necessary matters concerning the application of the provisions of the Corporation Tax Act and other laws and regulations concerning corporation tax with regard to returns or refunds of corporation tax, and of the provisions of the Local Corporation Tax Act and other laws and regulations concerning local corporation tax with regard to returns or refunds of local corporation tax, in the case where the provisions of paragraph (1) apply, are specified by Cabinet Order.

The provisions of paragraph (1) do not preclude, in the case where those provisions apply to an expenditure of money made by a corporation, the asking of questions, the inspection, or the request for presentation or submission under the provisions of Article 74-2 of the Act on General Rules for National Taxes (limited to the part pertaining to paragraph (1), item (ii)) with regard to the name, etc. of the recipient.