Act on Special Measures Concerning Taxation

Where a domestic corporation that is a specially-related shareholder, etc. has the amount listed in Article 23, paragraph (1), item (i) of the Corporation Tax Act (hereinafter referred to in this Article as the "amount of dividend of surplus, etc.") received from a foreign corporation (excluding one that falls under the category of foreign subsidiary prescribed in Article 23-2, paragraph (1) of that Act; hereinafter the same applies in this paragraph), the portion of the amount of dividend of surplus, etc. up to the specified taxable amount pertaining to the foreign corporation is not included in gross profit in calculating the amount of income of the domestic corporation for each business year.

Where a domestic corporation that is a specially-related shareholder, etc. has an amount of dividend of surplus, etc. received from a foreign corporation (limited to the portion of the amount to which the provisions of Article 23-2, paragraph (1) of the Corporation Tax Act apply; hereinafter the same applies in this paragraph), with regard to the application of the provisions of paragraph (1) of that Article to the portion of the amount of dividend of surplus, etc. up to the specified taxable amount pertaining to the foreign corporation, the phrase "the amount obtained by deducting, from the amount of dividend of surplus, etc., the amount calculated pursuant to the provisions of Cabinet Order as the amount equivalent to the amount of expenses pertaining to that amount of dividend of surplus, etc." in that paragraph is deemed to be replaced with "the amount of dividend of surplus, etc.".

Where a domestic corporation that is a specially-related shareholder, etc. has an amount of dividend of surplus, etc. received from a foreign corporation (limited to the portion of the amount to which the provisions of Article 23-2, paragraph (2) of the Corporation Tax Act apply; hereinafter the same applies in this paragraph), the portion of the amount of dividend of surplus, etc. up to the specified taxable amount pertaining to the foreign corporation is not included in gross profit in calculating the amount of income of the domestic corporation for each business year.

The specified taxable amount prescribed in the preceding three paragraphs means the sum of the following amounts:

the amount specified by Cabinet Order as the portion corresponding to the number of shares, etc. held directly by the domestic corporation in the foreign corporation (meaning the number of shares, etc. held directly prescribed in Article 66-8, paragraph (4), item (i); the same applies in the following item and paragraph (9)), out of the taxable amount, partially taxable amount or partially taxable amount for a financial affiliated corporation pertaining to the foreign corporation that is included in gross profit in calculating the amount of income for the business year that includes the day on which a domestic corporation that is a specially-related shareholder, etc. receives the amount of dividend of surplus, etc. from the foreign corporation, pursuant to the provisions of Article 66-9-2, paragraph (1), paragraph (8) or paragraph (10) in that business year;

the amount specified by Cabinet Order as the portion corresponding to the number of shares, etc. held directly by the domestic corporation in the foreign corporation, out of the taxable amount, partially taxable amount or partially taxable amount for a financial affiliated corporation pertaining to the foreign corporation that was included in gross profit in calculating the amount of income for each business year that began within ten years before the first day of the business year that includes the day on which a domestic corporation that is a specially-related shareholder, etc. receives the amount of dividend of surplus, etc. from the foreign corporation (hereinafter referred to in this item as "each business year within the preceding ten years"), pursuant to the provisions of Article 66-9-2, paragraph (1), paragraph (8) or paragraph (10) in each business year within the preceding ten years (if there is an amount of dividend of surplus, etc. received from the foreign corporation in each business year within the preceding ten years (limited to the portion of the amount to which the provisions of the preceding three paragraphs were applied; hereinafter the same applies in this item), the balance remaining after deducting the amount equivalent to that amount of dividend of surplus, etc.).

Where a domestic corporation that is a specially-related shareholder, etc. has an amount of dividend of surplus, etc. received from a foreign corporation (excluding one that falls under the category of foreign subsidiary prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act; hereinafter the same applies in this paragraph), the portion of the amount of dividend of surplus, etc. (excluding the portion of the amount to which the provisions of paragraph (1) apply) up to the indirect specified taxable amount pertaining to the foreign corporation is not included in gross profit in calculating the amount of income of the domestic corporation for each business year.

Where a domestic corporation that is a specially-related shareholder, etc. has an amount of dividend of surplus, etc. received from a foreign corporation (limited to the portion of the amount to which the provisions of Article 23-2, paragraph (1) of the Corporation Tax Act apply; hereinafter the same applies in this paragraph), with regard to the application of the provisions of paragraph (1) of that Article to the portion of the amount of dividend of surplus, etc. (excluding the portion of the amount to which the provisions of paragraph (2) apply) up to the indirect specified taxable amount pertaining to the foreign corporation, the phrase "the amount obtained by deducting, from the amount of dividend of surplus, etc., the amount calculated pursuant to the provisions of Cabinet Order as the amount equivalent to the amount of expenses pertaining to that amount of dividend of surplus, etc." in that paragraph is deemed to be replaced with "the amount of dividend of surplus, etc.".

Where a domestic corporation that is a specially-related shareholder, etc. has an amount of dividend of surplus, etc. received from a foreign corporation (limited to the portion of the amount to which the provisions of Article 23-2, paragraph (2) of the Corporation Tax Act apply; hereinafter the same applies in this paragraph), the portion of the amount of dividend of surplus, etc. (excluding the portion of the amount to which the provisions of paragraph (3) apply) up to the indirect specified taxable amount pertaining to the foreign corporation is not included in gross profit in calculating the amount of income of the domestic corporation for each business year.

The indirect specified taxable amount prescribed in the preceding three paragraphs means whichever is the smaller of the following amounts:

the amount specified by Cabinet Order as the portion corresponding to the number of shares, etc. held directly by the domestic corporation in the foreign corporation, out of the amount of dividend of surplus, etc. received by the foreign corporation from another foreign corporation during the period from the first day of the earliest of the business years that began within two years before the first day of the business year of the domestic corporation that includes the day on which a domestic corporation that is a specially-related shareholder, etc. receives the amount of dividend of surplus, etc. from the foreign corporation (hereinafter referred to in this paragraph as the "dividend business year") (those business years hereinafter referred to in this paragraph as "each business year within the preceding two years") to the end of the dividend business year (excluding the amount specified by Cabinet Order as the amount of dividend of surplus, etc. received before the first day of the business year of the other foreign corporation to which the provisions of Article 66-9-2, paragraph (1), paragraph (8) or paragraph (10) apply) (if there is an amount of dividend of surplus, etc. received from the foreign corporation in each business year within the preceding two years (limited to the portion, out of the amount to which the provisions of the preceding three paragraphs were applied, corresponding to the amount of dividend of surplus, etc. received by the foreign corporation from the other foreign corporation; hereinafter the same applies in this item), the balance remaining after deducting the amount equivalent to that amount of dividend of surplus, etc.);

the sum of the following amounts:

the amount specified by Cabinet Order as the portion corresponding to the number of shares, etc. held indirectly by the domestic corporation referred to in that item in the other foreign corporation (meaning the number of shares, etc. held indirectly prescribed in Article 66-8, paragraph (10), item (ii), (a); the same applies in (b)), out of the taxable amount, partially taxable amount or partially taxable amount for a financial affiliated corporation pertaining to the other foreign corporation referred to in the preceding item that is included in gross profit in calculating the amount of income for the dividend business year pursuant to the provisions of Article 66-9-2, paragraph (1), paragraph (8) or paragraph (10) in the dividend business year;

the amount specified by Cabinet Order as the portion corresponding to the number of shares, etc. held indirectly by the domestic corporation referred to in that item in the other foreign corporation, out of the taxable amount, partially taxable amount or partially taxable amount for a financial affiliated corporation pertaining to the other foreign corporation referred to in the preceding item that was included in gross profit in calculating the amount of income for each business year within the preceding two years pursuant to the provisions of Article 66-9-2, paragraph (1), paragraph (8) or paragraph (10) in each business year within the preceding two years (if there is an amount of dividend of surplus, etc. received from the foreign corporation referred to in that item in each business year within the preceding two years (limited to the portion, out of the amount to which the provisions of the preceding three paragraphs were applied, corresponding to the amount of dividend of surplus, etc. received by the foreign corporation from the other foreign corporation; hereinafter the same applies in this item), the balance remaining after deducting the amount equivalent to that amount of dividend of surplus, etc.).

With regard to the application of the provisions of the Corporation Tax Act in the case where the provisions of paragraph (1) or paragraph (3) or paragraph (6) or paragraph (8) apply, the phrase "Article 23-2 (Exclusion from Gross Profit of Dividends Received from Foreign Subsidiaries)" in Article 67, paragraph (3), item (iii) of that Act is deemed to be replaced with "Article 23-2 (Exclusion from Gross Profit of Dividends Received from Foreign Subsidiaries) or Article 66-9-4 (Special Provisions on Taxation of the Income of the Foreign Affiliated Corporations of a Domestic Corporation That Is a Specially-Related Shareholder, etc.) of the Act on Special Measures Concerning Taxation", and other necessary matters concerning the calculation of the amount of revenue reserves are specified by Cabinet Order.

With regard to the application of the provisions of the Corporation Tax Act in the case where the provisions of paragraph (2) or paragraph (7) apply, the phrase "excluding the portion of the amount to which the provisions of Article 23-2, paragraph (2) apply" in Article 39-2 of that Act is deemed to be replaced with "excluding the portion of the amount to which the provisions of Article 23-2, paragraph (2) apply and the portion of the amount to which the provisions of Article 66-9-4, paragraph (2) and paragraph (7) (Special Provisions on Taxation of the Income of the Foreign Affiliated Corporations of a Domestic Corporation That Is a Specially-Related Shareholder, etc.) of the Act on Special Measures Concerning Taxation apply", and the phrase "Article 23-2 (Exclusion from Gross Profit of Dividends Received from Foreign Subsidiaries)" in Article 67, paragraph (3), item (iii) of that Act is deemed to be replaced with "Article 23-2 (Exclusion from Gross Profit of Dividends Received from Foreign Subsidiaries) (including as applied by replacing the terms pursuant to the provisions of Article 66-9-4, paragraph (2) or paragraph (7) (Special Provisions on Taxation of the Income of the Foreign Affiliated Corporations of a Domestic Corporation That Is a Specially-Related Shareholder, etc.) of the Act on Special Measures Concerning Taxation)", and other necessary matters concerning the calculation of the amount of revenue reserves are specified by Cabinet Order.

Matters concerning the determination as to whether or not there is a specified relationship prescribed in Article 66-9-2, paragraph (1) between a specially-related shareholder, etc. and a specially-related domestic corporation, and other necessary matters concerning the application of the provisions of the preceding three Articles are specified by Cabinet Order.