Act on Special Measures Concerning Taxation

Where a corporation has, in each business year beginning on or after April 1, 1986, conducted a transaction for the sale of assets, purchase of assets, provision of services or any other transaction with a foreign affiliate of the corporation (meaning a foreign corporation that has a relationship with the corporation whereby either corporation holds, directly or indirectly, shares or capital contributions that account for 50 percent or more of the total number or total amount of issued shares of or capital contributions to the other corporation (excluding the shares or capital contributions held by the other corporation) or any other special relationship specified by Cabinet Order (referred to in the following paragraph, paragraph (5) and paragraph (10) as a "special relationship"); hereinafter the same applies in this Article), if the amount of the consideration received by the corporation from the foreign affiliate with respect to the transaction (excluding, where the foreign affiliate is a foreign corporation that has a permanent establishment, a transaction specified by Cabinet Order as a transaction pertaining to the domestic source income listed in Article 141, item (i), (a) of the Corporation Tax Act of the foreign affiliate; hereinafter referred to in this Article as a "transaction with a foreign affiliate") is less than the arm's length price or if the amount of the consideration paid by the corporation to the foreign affiliate with respect to the transaction exceeds the arm's length price, with regard to the application of the provisions of that Act and any other provisions concerning corporation tax on the corporation's income for the business year, the transaction with the foreign affiliate is deemed to have been conducted at the arm's length price.

The arm's length price prescribed in the preceding paragraph means the amount calculated, from among the methods specified in the following items for the category of transaction listed in the relevant item corresponding to the transaction with a foreign affiliate, by the method that is most appropriate for calculating the amount of the consideration that should be paid for the transaction with a foreign affiliate if it were conducted between independent enterprises under normal transaction terms, taking into account the details of the transaction with a foreign affiliate, the functions performed by the parties to the transaction with a foreign affiliate, and other circumstances:

sale or purchase of inventory assets: the following methods:

comparable uncontrolled price method (meaning the method which uses, as the amount of the consideration for a transaction with a foreign affiliate, the amount equivalent to the amount of the consideration for a transaction wherein the seller and the buyer who are not in a special relationship have sold or bought inventory assets of the same type as the inventory assets pertaining to the transaction with the foreign affiliate, under circumstances where the transaction level, transaction volume and any other conditions are similar to those of the transaction with the foreign affiliate (in the case where such inventory assets of the same type have been sold or bought under circumstances where the transaction level, transaction volume and any other conditions are different from those of the transaction with the foreign affiliate, and any variance arising from such difference in the conditions can be adjusted, the amount of the consideration as adjusted is included));

resale price method (meaning the method which uses, as the amount of the consideration for a transaction with a foreign affiliate, the amount calculated by deducting, from the amount of the consideration gained by the buyer of the inventory assets involved in the transaction with the foreign affiliate for having sold the inventory assets to a person without a special relationship thereto (hereinafter referred to in this paragraph as the "resale price"), the amount of normal profit (meaning the amount calculated by multiplying the resale price by the normal profit margin specified by Cabinet Order));

cost plus method (meaning the method which uses, as the amount of the consideration for a transaction with a foreign affiliate, the amount calculated by adding, to the amount of the cost incurred by the seller of the inventory assets involved in the transaction with the foreign affiliate for having acquired the inventory assets by purchase, manufacture or any other acts, the amount of normal profit (meaning the amount calculated by multiplying the amount of cost by the normal profit margin specified by Cabinet Order)); or

a method equivalent to the methods listed in (a) through (c) or any other method specified by Cabinet Order.

a transaction other than the transaction listed in the preceding item: a method equivalent to the methods listed in (a) through (d) of that item.

Any part of the amount of donations (meaning the amount of donations prescribed in Article 37, paragraph (7) of the Corporation Tax Act; hereinafter the same applies in this paragraph and the following paragraph) expended by a corporation in each business year, which has been paid to a foreign affiliate of the corporation (excluding any amount of donations paid to a foreign affiliate that is a foreign corporation having a permanent establishment, which is included in the amount of gross profits in the calculation of the amount of income pertaining to the domestic source income listed in Article 141, item (i), (a) of the Act of the foreign affiliate for the relevant business year), is not included in the amount of deductible expenses in the calculation of the amount of the corporation's income for the relevant business year. In this case, with regard to the application of the provisions of Article 37 of the Act to the corporation, the term "the following paragraph" in paragraph (1) of the Article is deemed to be replaced with "the following paragraph or the provisions of Article 66-4, paragraph (3) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation on Transactions with Foreign Affiliates)".

In the case where the provisions of paragraph (1) apply, any variance between the amount of the consideration for a transaction with a foreign affiliate and the arm's length price prescribed in the paragraph which pertains to the transaction with the foreign affiliate (excluding a variance that is deemed to be the amount of donations) is not included in the amount of deductible expenses in the calculation of the corporation's income for each business year.

In the case specified by Cabinet Order where a corporation conducts a transaction with its foreign affiliate via another person (excluding any other foreign affiliate of the corporation, and a domestic corporation that has a special relationship to such other foreign affiliate; hereinafter referred to in this paragraph as a "non-affiliate"), the transaction between the corporation and the non-affiliate is deemed to be a transaction with the foreign affiliate by the corporation, and the provisions of paragraph (1) are applied thereto.

If a corporation has, in that business year, conducted a transaction with a foreign affiliate with a foreign affiliate of the corporation, it must prepare or obtain, by the due date for filing the return under the provisions of Article 74, paragraph (1) or Article 144-6, paragraph (1) or (2) of the Corporation Tax Act for that business year, the documents specified by Order of the Ministry of Finance as documents considered to be necessary for calculating the arm's length price prescribed in paragraph (1) pertaining to that transaction with a foreign affiliate (including, where an electronic or magnetic record (meaning a record that is made in an electronic form, a magnetic form, or any other form that cannot be perceived by the human senses, and that is used in information processing by computers; hereinafter the same applies in this Article) has been prepared in lieu of preparing those documents, that electronic or magnetic record), and must preserve them pursuant to the provisions of Order of the Ministry of Finance.

With regard to the documents considered to be necessary for calculating the arm's length price prescribed in paragraph (1) pertaining to the transactions with a foreign affiliate that a corporation has conducted with one foreign affiliate of the corporation in that business year, the provisions of the preceding paragraph do not apply where the transactions with a foreign affiliate that the corporation conducted with that one foreign affiliate in the business year preceding that business year (where there is no preceding business year or in any other case specified by Cabinet Order, the transactions with a foreign affiliate that the corporation conducted with that one foreign affiliate in that business year) fall under both of the following, or in the case specified by Cabinet Order as a case where there are no transactions with a foreign affiliate that the corporation conducted with that one foreign affiliate in the preceding business year:

the total of the amount of consideration received from that one foreign affiliate and the amount of consideration paid to that one foreign affiliate with respect to the transactions with a foreign affiliate conducted with that one foreign affiliate is less than 5 billion yen;

the total of the amount of consideration received from that one foreign affiliate and the amount of consideration paid to that one foreign affiliate with respect to the transactions with a foreign affiliate conducted with that one foreign affiliate (limited to the transfer or lending of an intangible asset (meaning an asset specified by Cabinet Order as an asset other than tangible assets and financial assets; hereinafter the same applies in this item and the following paragraph) (including the creation of rights pertaining to an intangible asset and any other act of having another person use an intangible asset), or transactions similar thereto) is less than 300 million yen.

Where, with regard to a foreign related transaction in specified intangible assets (meaning, among transactions with a foreign affiliate, the transfer or lending of a specified intangible asset (meaning an intangible asset specified by Cabinet Order as one that is difficult to value at the time the transaction with a foreign affiliate is conducted; hereinafter the same applies in this paragraph) (including the creation of rights pertaining to a specified intangible asset and any other act of having another person use a specified intangible asset), or transactions similar thereto; hereinafter the same applies in this paragraph) conducted by a corporation with a foreign affiliate of the corporation in each business year, facts that differ from the details of the matters that formed the basis for calculating the amount of consideration for that foreign related transaction in specified intangible assets (limited to those that the corporation predicted at the time it conducted that foreign related transaction in specified intangible assets) have come to light, the district director may make a reassessment prescribed in Article 2, item (xxxix) of the Corporation Tax Act (hereinafter referred to in this Article as a "reassessment") or a determination prescribed in Article 2, item (xl) of that Act (referred to in paragraphs (12), (14) and (27) as a "determination") with regard to the amount of income or the amount of loss of the corporation for that business year, by deeming the amount calculated by the method most appropriate for calculating the amount of consideration that should be paid for that foreign related transaction in specified intangible assets if that foreign related transaction in specified intangible assets were conducted between independent enterprises under normal transaction terms, taking into account the details of that foreign related transaction in specified intangible assets, the functions performed by the parties to that foreign related transaction in specified intangible assets, and other circumstances (including those differing facts and the probability of occurrence of the cause of that discrepancy (limited to a probability that satisfies the requirements specified by Cabinet Order, such as having been calculated based on objective facts at the time that foreign related transaction in specified intangible assets was conducted)), from among the methods specified in the items of paragraph (2) according to the category of transaction listed in each of those items into which it falls, to be the arm's length price prescribed in paragraph (1); provided, however, that this does not apply in the case specified by Cabinet Order as a case where the amount of consideration for that foreign related transaction in specified intangible assets does not significantly differ from the amount that would be deemed to be the arm's length price prescribed in paragraph (1) if the provisions of the main clause of this paragraph were applied.

The provisions of the main clause of the preceding paragraph do not apply where a corporation has prepared or obtained documents stating all of the following matters pertaining to the foreign related transaction in specified intangible assets referred to in that paragraph (limited to one for which the documents that must, pursuant to the provisions of paragraph (25), be attached to the tax return (meaning a tax return prescribed in Article 2, item (xxxi) of the Corporation Tax Act; the same applies in that paragraph) for a business year in which the corporation has conducted a transaction with a foreign affiliate of the corporation contain a statement of the matters prescribed in that paragraph pertaining to that foreign related transaction in specified intangible assets; hereinafter the same applies in this paragraph and the following paragraph) (including, where an electronic or magnetic record has been prepared in lieu of preparing those documents, that electronic or magnetic record):

the matters specified by Order of the Ministry of Finance as the details of the matters that formed the basis for calculating the amount of consideration for that foreign related transaction in specified intangible assets (limited to those that the corporation predicted at the time it conducted that foreign related transaction in specified intangible assets; the same applies in the following item);

the fact that, where facts that differ from the details of the matters that formed the basis for calculating the amount of consideration for that foreign related transaction in specified intangible assets have come to light, it was difficult for the corporation to predict, at the time it conducted that foreign related transaction in specified intangible assets, the occurrence of the cause of that discrepancy (hereinafter referred to in this item as the "cause of discrepancy") because it was a disaster or other similar event, or the fact that the corporation had calculated the amount of consideration for that foreign related transaction in specified intangible assets by taking into account the probability of occurrence of the cause of discrepancy (limited to a probability that satisfies the requirements specified by Cabinet Order, such as having been calculated based on objective facts at the time that foreign related transaction in specified intangible assets was conducted).

Where the amount of profit that was predicted to arise from the use of, or other acts concerning, the specified intangible asset during the determination period pertaining to a foreign related transaction in specified intangible assets of a corporation (meaning the period from the day on which the business year begins that includes the day on which revenue from the use of, or other acts concerning, the specified intangible asset referred to in paragraph (8), received from a person who has no special relationship with the corporation or from a person who has no special relationship with the foreign affiliate that conducted that foreign related transaction in specified intangible assets with the corporation, first arose (where that day is before the day on which that foreign related transaction in specified intangible assets was conducted, the day on which that foreign related transaction in specified intangible assets was conducted) until the day on which five years have elapsed; hereinafter the same applies in this paragraph) and the amount of profit that arose from the use of, or other acts concerning, that specified intangible asset during that determination period fall under the case specified by Cabinet Order as a case where they do not significantly differ, the provisions of the main clause of paragraph (8) do not apply to that foreign related transaction in specified intangible assets after the day on which that determination period elapses.

Where the relevant official of the National Tax Agency or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over a corporation's place for tax payment has requested the corporation to present or submit documents showing that the provisions of the preceding two paragraphs apply (including, in the case where an electronic or magnetic record has been prepared or preserved in lieu of preparing or preserving those documents, that electronic or magnetic record; hereinafter the same applies in this paragraph) or copies thereof, if these are not presented or submitted by the day designated by the official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 60 days from the day on which the presentation or submission was requested (or, where the documents or copies requested fall under the documents specified by Order of the Ministry of Finance prescribed in paragraph (6) (including, in the case where an electronic or magnetic record has been prepared or preserved in lieu of preparing or preserving those documents, that electronic or magnetic record; the same applies in the following paragraph and paragraph (17)) pertaining to a transaction with a foreign affiliate subject to contemporaneous documentation (meaning a transaction with a foreign affiliate other than a transaction with a foreign affiliate to which the provisions of paragraph (7) apply; the same applies in the following paragraph and paragraph (17)) or copies thereof, 45 days from the day on which the presentation or submission was requested), the provisions of the preceding two paragraphs are not to apply.

Where the relevant official of the National Tax Agency or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over a corporation's place for tax payment has requested the corporation to present or submit the documents specified by Order of the Ministry of Finance prescribed in paragraph (6) pertaining to a transaction with a foreign affiliate subject to contemporaneous documentation in each business year or copies thereof, and these are not presented or submitted by the day designated by the official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 45 days from the day on which the presentation or submission was requested, or where such an official has requested the corporation to present or submit the documents specified by Order of the Ministry of Finance as documents considered to be important for calculating the arm's length price prescribed in paragraph (1) (including an amount deemed to be that arm's length price pursuant to the provisions of the main clause of paragraph (8)) pertaining to a transaction with a foreign affiliate subject to contemporaneous documentation in each business year (including, in the case where an electronic or magnetic record has been prepared or preserved in lieu of preparing or preserving those documents, that electronic or magnetic record; hereinafter the same applies in this paragraph and paragraph (17)) or copies thereof, and these are not presented or submitted by the day designated by the official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 60 days from the day on which the presentation or submission was requested, the district director may presume the amount calculated by the method listed in any of the following items (the method listed in item (ii) may be applied only where the method listed in item (i) is unavailable) to be the arm's length price prescribed in paragraph (1), and thereby make a reassessment or determination with respect to the corporation's amount of income or amount of loss for the relevant business year; provided, however, that this does not apply where the provisions of paragraph (8) or (9) apply to the transaction with a foreign affiliate subject to contemporaneous documentation in the relevant business year.

the method listed in paragraph (2), item (i), (b) or (c) or the method specified in paragraph (2), item (ii) (limited to the method equivalent to the method listed in paragraph (2), item (i), (b) or (c)), which is applied based on the gross profit margin gained by another corporation from its business on condition that such other corporation's business is the same type as the corporation's business involving the transaction with the foreign affiliate, and that the size and other details are similar between the two businesses, or any other ratio specified by Cabinet Order as a ratio equivalent to the gross profit margin; or

a method specified by Cabinet Order as being similar to the method prescribed in paragraph (2), item (i), (d) or the method specified in paragraph (2), item (ii) (limited to the method equivalent to the method specified by Cabinet Order).

Where the provisions of paragraph (10) apply to the transaction with a foreign affiliate subject to contemporaneous documentation referred to in the preceding paragraph, the provisions of the main clause of the preceding paragraph do not apply after the day on which the period elapses as prescribed in paragraph (10).

Where the relevant official of the National Tax Agency or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over a corporation's place for tax payment has requested the corporation to present or submit the documents specified by Order of the Ministry of Finance as documents that are considered to be important for the calculation of the arm's length price prescribed in paragraph (1) (including an amount deemed to be that arm's length price pursuant to the provisions of the main clause of paragraph (8)) which pertains to a transaction with a foreign affiliate exempt from contemporaneous documentation (meaning a transaction with a foreign affiliate to which the provisions of paragraph (7) apply; hereinafter the same applies in this paragraph and paragraph (18)) in each business year (including, in the case where an electronic or magnetic record has been prepared or preserved in lieu of preparing or preserving those documents, that electronic or magnetic record; hereinafter the same applies in this paragraph and paragraph (18)) or copies of such documents, if these are not presented or submitted by the day designated by the official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 60 days from the day on which the presentation or submission was requested, the district director may presume the amount calculated by the method listed in any of the items of paragraph (12) (the method listed in item (ii) of that paragraph may be applied only where the method listed in item (i) of that paragraph is unavailable) to be the arm's length price prescribed in paragraph (1), and thereby make a reassessment or determination with respect to the corporation's amount of income or amount of loss for the relevant business year; provided, however, that this does not apply where the provisions of paragraph (8) or (9) apply to the transaction with a foreign affiliate exempt from contemporaneous documentation in the relevant business year.

Where the provisions of paragraph (10) apply to the transaction with a foreign affiliate exempt from contemporaneous documentation referred to in the preceding paragraph, the provisions of the main clause of the preceding paragraph do not apply after the day on which the period elapses as prescribed in paragraph (10).

The relevant official of the National Tax Agency or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over a corporation's place for tax payment may, when it is necessary in the examination concerning the transaction between the corporation and a foreign affiliate of the corporation, request the corporation to present or submit the books and documents preserved by the foreign affiliate (including, in the case where an electronic or magnetic record has been prepared or preserved in lieu of preparing or preserving those books and documents, that electronic or magnetic record; hereinafter the same applies in this Article) or copies thereof.

Where the relevant official of the National Tax Agency or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over a corporation's place for tax payment has requested the corporation to present or submit the documents specified by Order of the Ministry of Finance prescribed in paragraph (6) pertaining to a transaction with a foreign affiliate subject to contemporaneous documentation in each business year or copies thereof, and these are not presented or submitted by the day designated by the official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 45 days from the day on which the presentation or submission was requested, or has requested the corporation to present or submit the documents specified by Order of the Ministry of Finance as documents considered to be important for calculating the arm's length price prescribed in paragraph (12) pertaining to a transaction with a foreign affiliate subject to contemporaneous documentation in each business year or copies thereof, and these are not presented or submitted by the day designated by the official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 60 days from the day on which the presentation or submission was requested, the official may, when it is necessary for the calculation of the arm's length price prescribed in paragraph (1) which pertains to the transaction with a foreign affiliate subject to contemporaneous documentation of the corporation in each business year, ask questions of a person who is engaged in a business that is the same type as the corporation's business involving that transaction with a foreign affiliate subject to contemporaneous documentation, inspect the books and documents concerning that business, or request the presentation or submission of those books and documents (including copies thereof), to the extent considered necessary for such calculation.

Where the relevant official of the National Tax Agency or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over a corporation's place for tax payment has requested the corporation to present or submit the documents specified by Order of the Ministry of Finance prescribed in paragraph (14) pertaining to a transaction with a foreign affiliate exempt from contemporaneous documentation in each business year or copies thereof, and these have not been presented or submitted by the day designated by the official, taking into account the number of days normally required to prepare the presentation or submission of the documents or copies requested, within a period not exceeding 60 days from the day on which the presentation or submission was requested, the official may, when it is necessary for the calculation of the corporation's arm's length price prescribed in paragraph (1) which pertains to a transaction with a foreign affiliate exempt from contemporaneous documentation in each business year, ask questions of a person who is engaged in a business that is the same type as the corporation's business involving the transaction with a foreign affiliate exempt from contemporaneous documentation, inspect the books and documents concerning the business, or request the presentation or submission of the books and documents (including copies thereof), to the extent considered necessary for such calculation.

The relevant official of the National Tax Agency or the relevant official of the tax office or Regional Taxation Bureau with jurisdiction over a corporation's place for tax payment may, when it is necessary for the calculation of the arm's length price prescribed in paragraph (1) which pertains to a transaction with a foreign affiliate of a corporation, retain the books and documents (including copies thereof) submitted pursuant to the provisions of the preceding two paragraphs.

The authority of the relevant official pursuant to the provisions of the preceding three paragraphs is not construed as being granted for criminal investigation.

The relevant official of the National Tax Agency, a Regional Taxation Bureau, or a tax office, when asking questions, conducting an inspection, or making a request for presentation or submission pursuant to the provisions of paragraph (17) or (18), must carry an identification card and present it to the person concerned when requested.

In any of the following cases, the person who has committed the violation is punished by a fine of 300,000 yen or less:

where a person has failed to answer or has given a false answer to the questions given by the relevant official pursuant to the provisions of paragraph (17) or (18), or has refused, obstructed or avoided the inspection pursuant to those provisions; or

where a person has, without justifiable grounds, failed to comply with a request for the presentation or submission of books and documents pursuant to the provisions of paragraph (17) or (18), or has presented or submitted books and documents (including copies thereof) containing false statements or records.

Where the representative of a corporation (including the administrator of an association or foundation without juridical personality) or an agent, employee or other worker of a corporation or an individual has committed any of the violations set forth in the preceding paragraph with regard to the operations of the corporation or individual, not only the offender is punished but also the corporation or individual is punished by the fine prescribed in the paragraph.

Where the provisions of the preceding paragraph apply to an association or foundation without juridical personality, its representative or administrator represents the association or foundation without juridical personality with regard to its procedural acts, and the legal provisions concerning criminal proceedings that are applicable in the case where a corporation stands as the defendant or the suspect apply mutatis mutandis.

A corporation, where it has conducted a transaction with a foreign affiliate of the corporation in each business year, must attach a document stating the foreign affiliate's name and the location of its head office or principal office and any other matters specified by Order of the Ministry of Finance, to the tax return for the relevant business year.

Where the provisions of paragraph (1) have applied to a transaction conducted by a corporation with a foreign affiliate of the corporation, and an event listed in Article 23, paragraph (1), item (i) or (iii) of the Act on General Rules for National Taxes has occurred with regard to the application of the provisions of paragraph (1), then, with regard to the application of the provisions of Article 23, paragraph (1) of that Act (excluding item (ii)) to corporation tax and local corporation tax, the phrase "five years" in that paragraph is deemed to be replaced with "seven years".

A reassessment or determination (hereinafter referred to in this paragraph as a "reassessment or determination") or an assessment and determination prescribed in Article 32, paragraph (5) of the Act on General Rules for National Taxes (hereinafter referred to in this Article as an "assessment and determination"), which is listed in any of the following items, may be made until the day on which seven years have elapsed from the due date or other date specified in the relevant item, notwithstanding the provisions of Article 70, paragraph (1) of that Act. In this case, with regard to the application of the provisions of paragraphs (3) and (4) of that Article, Article 71, paragraph (1) of that Act, and Article 26, paragraphs (1) and (3) of the Local Corporation Tax Act, the phrase "pursuant to the provisions of the preceding two paragraphs" in Article 70, paragraph (3) of the Act on General Rules for National Taxes is deemed to be replaced with "pursuant to the provisions of the preceding two paragraphs and Article 66-4, paragraph (27) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation on Transactions with Foreign Affiliates)", and the phrase "notwithstanding the provisions of the preceding two paragraphs" with "notwithstanding the provisions of the preceding two paragraphs and paragraph (27) of that Article"; the phrase "pursuant to the provisions of paragraph (1)" in paragraph (4) of that Article with "pursuant to the provisions of paragraph (1) and Article 66-4, paragraph (27) of the Act on Special Measures Concerning Taxation", and the phrase "notwithstanding the provisions of paragraph (1)" with "notwithstanding the provisions of paragraph (1) and Article 66-4, paragraph (27) of that Act"; the phrase "pursuant to the provisions of the preceding Article" in Article 71, paragraph (1) of that Act with "pursuant to the provisions of the preceding Article and Article 66-4, paragraph (27) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation on Transactions with Foreign Affiliates)", the phrase "notwithstanding the provisions of that Article" with "notwithstanding the provisions of the preceding Article and that paragraph", and the phrase "the preceding Article" in item (iv), (b) of that paragraph with "the preceding Article and Article 66-4, paragraph (27) of the Act on Special Measures Concerning Taxation"; the phrase "Article 70, paragraph (3)" in Article 26, paragraph (1) of the Local Corporation Tax Act with "Article 70, paragraph (3) (including as applied with the terms replaced pursuant to the provisions of Article 66-4, paragraph (27) of the Act on Special Measures Concerning Taxation; hereinafter the same applies in this paragraph)", the phrase "request for reassessment (that Act" with "request for reassessment (the Act on General Rules for National Taxes", the phrase "and (2)" with "and (2) and Article 66-4, paragraph (27) of the Act on Special Measures Concerning Taxation", and the phrase "paragraph (3) of that Article" with "Article 70, paragraph (3) of the Act on General Rules for National Taxes"; and the phrase "limited to the part pertaining to item (iii)" in paragraph (3) of that Article with "limited to the part pertaining to item (iii), and including as applied with the terms replaced pursuant to the provisions of Article 66-4, paragraph (27) of the Act on Special Measures Concerning Taxation", the phrase "that Act" with "the Act on General Rules for National Taxes", the phrase "or paragraph (1)" with ", Article 66-4, paragraph (27) of the Act on Special Measures Concerning Taxation or paragraph (1)", and the phrase "and paragraph (1)" with ", Article 66-4, paragraph (27) of the Act on Special Measures Concerning Taxation and paragraph (1)".

a reassessment or determination of corporation tax to be made based on the fact that a corporation has conducted a transaction with a foreign affiliate of the corporation at the amount of consideration that is different from the arm's length price prescribed in paragraph (1), or a reassessment or determination of corporation tax to be made, upon the reassessment or determination, to make a change to the tax base, etc. prescribed in Article 19, paragraph (1) of the Act on General Rules for National Taxes (hereinafter referred to in this paragraph as the "tax base, etc.") or the tax amount, etc. prescribed in that paragraph (hereinafter referred to in this paragraph as the "tax amount, etc."): The statutory due date of tax return prescribed in Article 2, item (vii) of the Act with regard to corporation tax pertaining to the relevant reassessment or determination (for a reassessment based on a return of refund claim prescribed in Article 61, paragraph (1) of the Act: the day on which the return of refund claim has been filed);

a reassessment or determination of corporation tax to be made based on the fact prescribed in the preceding item or submission of a tax return prescribed in Article 2, item (vi) of the Act on General Rules for National Taxes (excluding a return filed by the due date prescribed in Article 17, paragraph (2) of the Act; hereinafter referred to in this paragraph as a "tax return"), or an assessment and determination to be made, upon the reassessment or determination or submission of a tax return, so as to impose penalty tax prescribed in Article 69 of the Act (referred to in item (iv) as "penalty tax") with regard to the corporation tax to which the change prescribed in the preceding item should be made upon the reassessment or determination or the submission of a tax return: The date of the establishment of the relevant tax liability;

a reassessment or determination of local corporation tax to be made, upon the reassessment or determination listed in item (i), to make a change to the tax base, etc. or the tax amount, etc.: The statutory due date of tax return prescribed in Article 2, item (vii) of the Act on General Rules for National Taxes with regard to local corporation tax pertaining to the relevant reassessment or determination (where the reassessment of corporation tax referred to in item (i) is a reassessment based on a return of refund claim prescribed in Article 61, paragraph (1) of that Act: the day on which the return of refund claim has been filed);

an assessment and determination to be made, upon a reassessment or determination of local corporation tax to which a change to the tax base, etc. or the tax amount, etc. should be made upon the reassessment or determination listed in item (i), upon the submission of a tax return of corporation tax based on the fact prescribed in that item or upon the submission of a tax return of corporation tax to which the change prescribed in that item should be made, or upon the submission of a tax return, so as to impose penalty tax with regard to that local corporation tax: The date of the establishment of the relevant tax liability.

Where, with regard to corporation tax and local corporation tax, the tax amount payable due to the fact that a corporation has conducted a transaction with a foreign affiliate of the corporation at the amount of consideration that is different from the arm's length price prescribed in paragraph (1) falls short, or the amount of the refund prescribed in Article 2, item (vi) of the Act on General Rules for National Taxes is in excess, the prescription of the right of collection of national taxes prescribed in Article 72, paragraph (1) of the Act does not run for two years from the statutory due date prescribed in Article 72, paragraph (1) of the Act for the corporation tax and local corporation tax (excluding a statutory due date pertaining to a reassessment or an assessment and determination under the provisions of Article 70, paragraph (3) of the Act or an assessment and determination under the provisions of paragraph (4) of that Article), except where the provisions of Article 73, paragraph (3) of the Act apply.

In the case referred to in the preceding paragraph, the provisions of the proviso of Article 73, paragraph (3) of the Act on General Rules for National Taxes apply mutatis mutandis.

With regard to the application of the provisions of Article 72, paragraph (1) of the Act on General Rules for National Taxes to corporation tax and local corporation tax payable as a result of a reassessment or an assessment and determination under the provisions of Article 70, paragraph (3) of that Act as applied with the terms replaced pursuant to the provisions of paragraph (27), or an assessment and determination under the provisions of paragraph (4) of that Article as so applied, the phrase "(Article 70, paragraph (3)" in Article 72, paragraph (1) of that Act is deemed to be replaced with "(Article 70, paragraph (3) as applied with the terms replaced pursuant to the provisions of Article 66-4, paragraph (27) of the Act on Special Measures Concerning Taxation (Special Provisions on Taxation on Transactions with Foreign Affiliates)", the phrase ", Article 70, paragraph (3)" with ", Article 70, paragraph (3) as applied with the terms replaced pursuant to the provisions of Article 66-4, paragraph (27) of that Act", and the phrase "Article 70, paragraph (4)" with "Article 70, paragraph (4) as applied with the terms replaced pursuant to the provisions of Article 66-4, paragraph (27) of that Act".

Where the provisions of paragraph (1) apply, and with respect to the arm's length price prescribed in paragraph (1) which pertains to a transaction with a foreign affiliate conducted between a corporation and its foreign affiliate (limited to a foreign affiliate who is deemed, pursuant to the provisions of a convention prescribed in the proviso to Article 2, item (xii)-19 of the Corporation Tax Act (hereinafter referred to in this paragraph and paragraph (1) of the following Article as a "tax treaty"), to be a resident or corporation in a contracting state or contracting party other than Japan (hereinafter referred to in this paragraph and paragraph (1) of the following Article as the "treaty partner state, etc.") of the tax treaty), the Minister of Finance has reached an agreement under the tax treaty with the competent authority of the treaty partner state, etc., or any other requirement specified by Cabinet Order has been satisfied, the regional commissioner or the district director may, pursuant to the provisions of Cabinet Order, grant an exemption from the part of the delinquent tax imposed with regard to the corporation tax and the delinquent tax imposed with regard to the local corporation tax payable by the corporation pursuant to the provisions of paragraph (1), which corresponds to the base period for the calculation of the delinquent tax for which the Minister of Finance has reached an agreement with the competent authority of the treaty partner state, etc.

Matters concerning the determination as to whether or not a foreign corporation falls under the category of foreign affiliate, and other necessary matters concerning the application of the provisions of paragraph (1) to paragraph (15) and paragraph (19) are specified by Cabinet Order.