Act on Special Measures Concerning Taxation

Where a small and medium sized enterprise, etc. (meaning a small and medium sized enterprise prescribed in Article 42-4, paragraph (19), item (vii) (excluding one that falls under an excluded business operator prescribed in item (viii) of that paragraph) or an agricultural cooperative, etc. prescribed in item (ix) of that paragraph that files a blue return (limited to one specified by Cabinet Order as one for which consideration needs to be given to the administrative burden, and excluding a group tax sharing corporation and, of those that fall under a specified business operator, etc. prescribed in Article 42-12-4, paragraph (1) that has received the specified certification prescribed in that paragraph, one whose specified management improvement plan prescribed in that paragraph pertaining to that specified certification states the depreciable assets listed in item (ii) of that paragraph); hereinafter the same applies in this paragraph) holds depreciable assets that it has acquired, manufactured or constructed during the period from April 1, 2006 to March 31, 2029 and has used for the business of that small and medium sized enterprise, etc., and whose acquisition cost is less than 400,000 yen (excluding those whose acquisition cost is less than 100,000 yen, those that receive the application of the provisions listed in the items of Article 53, paragraph (1), and any other assets specified by Cabinet Order; hereinafter referred to as "low-value depreciable assets" in this Article), if it has carried out accounting as an expense or loss for an amount equivalent to the acquisition cost of those low-value depreciable assets in the business year that includes the day on which it used them for the business of that small and medium sized enterprise, etc., the amount for which it carried out that accounting as an expense or loss is included in deductible expenses in calculating the amount of income for that business year. In this case, where the total acquisition cost of low-value depreciable assets of that small and medium sized enterprise, etc. in that business year exceeds 3,000,000 yen (where that business year is less than one year, the amount calculated by dividing 3,000,000 yen by 12 and multiplying the result by the number of months in that business year; hereinafter the same applies in this paragraph), the amount included is limited to the total acquisition cost of the low-value depreciable assets up to 3,000,000 yen, out of that total acquisition cost.

The number of months referred to in the preceding paragraph is calculated in accordance with the calendar, and a fraction of less than one month is counted as one month.

The provisions of paragraph (1) apply only if a written statement concerning the acquisition cost of the low-value depreciable assets to which the provisions of that paragraph are applied is attached to the final return, etc.

Where the provisions of laws and regulations concerning corporation tax are applied to low-value depreciable assets to which the provisions of paragraph (1) have been applied, the amount included in deductible expenses in calculating the amount of income for each business year pursuant to the provisions of that paragraph is not included in the acquisition cost of those low-value depreciable assets.

Beyond what is provided for in the preceding three paragraphs, necessary matters concerning the application of the provisions of paragraph (1) are specified by Cabinet Order.

Where there is an amount of distributions of proceeds of a specified stock investment trust prescribed in Article 3-2 (excluding a specified stock investment trust linked to a foreign stock index prescribed in Article 9, paragraph (1), item (iii)) received by a corporation, with regard to the application of the provisions of Article 23 of the Corporation Tax Act, the phrase "or distribution of surplus" in paragraph (1), item (i) of that Article is deemed to be replaced with ", distribution of surplus", the phrase "pertaining to contributions)" with "pertaining to contributions) or distributions of proceeds of a specified stock investment trust prescribed in Article 67-6, paragraph (1) (Special Provisions on Exclusion from Gross Profit of Dividends Received, etc. Pertaining to Distributions of Proceeds of Specified Stock Investment Trusts) of the Act on Special Measures Concerning Taxation (hereinafter referred to as a 'specified stock investment trust' in this Article)", the phrase "the shares, etc. that are the principal" in paragraph (2) of that Article with "the shares, etc. (including beneficial interests in a specified stock investment trust; hereinafter the same applies in this paragraph) that are the principal", the phrase "the date specified in each of the following items for the category of the amount of dividends, etc. listed in that item" with "the date specified in each of the following items for the category of the amount of dividends, etc. listed in that item and, for distributions of proceeds of a specified stock investment trust, the last day of the period that served as the basis for their calculation", and the phrase "prescribed in the preceding paragraph)" in paragraph (6) of that Article with "prescribed in the preceding paragraph) and beneficial interests in a specified stock investment trust".

Cabinet Order provides for the necessary particulars concerning the application of the provisions of the preceding paragraph.

Where, in any business year of a corporation filing a blue return that conducts insurance business under a license prescribed in Article 3, paragraph (1) or Article 185, paragraph (1) of the Insurance Business Act, there is an amount of dividends and similar income prescribed in Article 23, paragraph (1) of the Corporation Tax Act (including as applied with the replacement of terms pursuant to the provisions of paragraph (1) of the preceding Article) received with respect to non-controlling-purpose shares, etc. prescribed in paragraph (6) of that Article (including as applied with the replacement of terms pursuant to the provisions of paragraph (1) of the preceding Article) held by it (hereinafter referred to as the "amount of dividends and similar income on special non-controlling-purpose shares, etc." in this paragraph), the amount not included in gross profit in calculating the amount of income for each of those business years pursuant to the provisions of Article 23, paragraph (1) of that Act with regard to that amount of dividends and similar income on special non-controlling-purpose shares, etc. is, notwithstanding the provisions of that paragraph, the amount equivalent to 40 percent of that amount of dividends and similar income on special non-controlling-purpose shares, etc.

Cabinet Order provides for the necessary particulars concerning the application of the provisions of the preceding paragraph.

Where, in any business year of a cooperative, etc., there is an amount of dividends and similar income (meaning the amount of dividends and similar income prescribed in Article 23, paragraph (1) of the Corporation Tax Act) received with respect to contributions held by it to a federation, etc. (meaning the Norinchukin Bank or any other cooperative, etc. whose members or partners are limited, pursuant to the provisions of the governing laws listed in the right-hand column of Appended Table 3 of the Corporation Tax Act, to other cooperatives, etc. and corporations equivalent thereto) (excluding those that fall under preferred equity investments prescribed in the Act on Preferred Equity Investment by Cooperative Structured Financial Institution; hereinafter referred to as "ordinary contributions" in this paragraph), then, with regard to the application of the provisions of that Article, those ordinary contributions are deemed not to fall under any of the shares, etc. of related corporations, the shares, etc. of wholly owned subsidiary corporations and the non-controlling-purpose shares, etc. prescribed in paragraphs (4) through (6) of that Article, notwithstanding those provisions.

Cabinet Order provides for the necessary particulars concerning the application of the provisions of the preceding paragraph.

Where a corporation falls under the category of a specified partner (meaning, of partners under a partnership contract (including persons similar thereto who are specified by Cabinet Order, and, for a silent partnership contract, etc., meaning a person who makes a contribution based on the silent partnership contract, etc. and a person who succeeds to that person's status pertaining to that silent partnership contract, etc.; hereinafter the same applies in this paragraph and paragraph (4)), those other than a partner who is involved in decisions on the execution of business concerning the disposal or acquisition of important property pertaining to the partnership business or concerning large borrowings pertaining to the partnership business, and who personally executes the important parts of that business, such as negotiations for concluding contracts, or any other partner specified by Cabinet Order; the same applies in paragraph (4)) or a specified beneficiary (meaning a beneficiary prescribed in Article 12, paragraph (1) of the Corporation Tax Act (including a person deemed to be a beneficiary prescribed in paragraph (1) of that Article pursuant to the provisions of paragraph (2) of that Article) of a trust (excluding a collective investment trust prescribed in Article 2, item (xxix) of that Act and a trust subject to corporation taxation; hereinafter the same applies in this Article); the same applies in paragraph (4)), and where the limit of the liability to repay the debts of the partnership business under that partnership contract or of that trust is substantially the value of the partnership property (for a silent partnership contract, etc., the property pertaining to the partnership business) or of the trust property, or in any other case specified by Cabinet Order, an amount equivalent to the portion of the partnership loss, etc. of the corporation for that business year (meaning the amount specified by Cabinet Order as the amount of loss of the corporation from that partnership business or that trust; hereinafter the same applies in this paragraph) that exceeds the amount calculated pursuant to the provisions of Cabinet Order on the basis of the value of the contribution of the corporation pertaining to that partnership business or the book value of the trust property of that trust (where the case falls under the case specified by Cabinet Order as one in which the profits and losses attributed to that partnership business or that trust property are expected not to result substantially in a loss, that partnership loss, etc.) (referred to as the "excess partnership loss, etc." in paragraph (3), item (iv)) is not included in deductible expenses in calculating the amount of income for that business year.

Where a corporation filing a final return, etc. has a total excess partnership loss, etc. in any business year, the amount of that total excess partnership loss, etc. up to the amount specified by Cabinet Order as the amount of profit of that corporation for that business year from the partnership business or trust (limited to one pertaining to that total excess partnership loss, etc.) is included in deductible expenses in calculating the amount of income for that business year.

In this Article, the meanings of the terms listed in the following items are as prescribed respectively in those items:

partnership contract: A partnership contract prescribed in Article 667, paragraph (1) of the Civil Code and an investment limited partnership agreement prescribed in Article 3, paragraph (1) of the Limited Partnership Act for Investment, and contracts similar thereto in a foreign state (including those specified by Cabinet Order), and silent partnership contracts, etc.;

silent partnership contract, etc.: A silent partnership contract (including a contract specified by Cabinet Order as equivalent thereto) and a contract similar thereto in a foreign state;

partnership business: A business carried on under a partnership contract (for a silent partnership contract, etc., a business of the person who receives contributions based on the silent partnership contract, etc. that is the purpose of that silent partnership contract, etc.);

total excess partnership loss, etc.: The amount obtained by totaling, for each partnership business or each trust, of the excess partnership losses, etc. in each business year up to and including the business year preceding that business year of the corporation referred to in the preceding paragraph, each excess partnership loss, etc. in the case where the corporation has continuously filed tax returns prescribed in Article 2, item (xxxi) of the Corporation Tax Act (hereinafter referred to as a "tax return" in this item) from the business year for which the provisions of paragraph (1) were applied to that excess partnership loss, etc. (hereinafter referred to as the "applicable business year" in this item) through the preceding business year (where the applicable business year is the preceding business year, in the case where it has filed the tax return for that applicable business year) (where there is an amount included in deductible expenses in calculating the amount of income for any business year up to the preceding business year pursuant to the provisions of the preceding paragraph, the amount after deducting the amount so included).

Beyond what is provided for in the preceding paragraph, matters concerning the application of the provisions of paragraph (1) in the case where a corporation has succeeded, through a qualified merger in which it is the merging corporation, to the status of a partner under a partnership contract or of a beneficiary of a trust of a merged corporation that falls under the category of a specified partner or a specified beneficiary, and other necessary matters concerning the application of the provisions of paragraph (1) or paragraph (2), are specified by Cabinet Order.