①If a small and medium sized enterprise (meaning a corporation that falls under the category of small and medium sized enterprises specified by Cabinet Order) that falls under neither an excluded business operator prescribed in Article 42-4, paragraph (19), item (viii) nor a group tax sharing excluded business operator prescribed in item (viii)-2 of that paragraph, or an agricultural cooperative, etc. prescribed in item (ix) of that paragraph or a shopping district promotion association, that files a blue return (excluding one that falls under a specified business operator, etc. prescribed in Article 42-12-4, paragraph (1) that has obtained a specified certification prescribed in that paragraph and whose specified management improvement plan prescribed in that paragraph pertaining to that specified certification states depreciable assets listed in item (ii) of that paragraph; hereinafter referred to as a "small and medium sized enterprise, etc." in this Article), within the period from June 1, 1998 to March 31, 2027 (referred to as the "designated period" in the following paragraph), acquires any of the following depreciable assets (for the depreciable assets listed in items (i) through (iii), limited to those of a scale specified by Cabinet Order, and excluding those to be put to use for a business that is the object of a silent partnership agreement or any other contract specified by Cabinet Order as being similar thereto; hereinafter referred to as "specified machinery and equipment, etc." in this Article) that have not been put to use for business since their manufacture, or manufactures specified machinery and equipment, etc., and puts it to use in the manufacturing business, construction business or any other business specified by Cabinet Order that the small and medium sized enterprise, etc. conducts in Japan (excluding use for lending by a corporation other than a corporation conducting the business prescribed in item (v) that is specified by Cabinet Order; hereinafter referred to as "use in a designated business" in this Article), the maximum amount to be included in deductible expenses as the depreciation allowance for the specified machinery and equipment, etc. for the business year that includes the date on which it was put to use in a designated business (excluding the business year that includes the date of dissolution (other than dissolution due to a merger) and business years during liquidation; referred to as the "business year of commencement of use" in the following paragraph and paragraph (8)) (hereinafter referred to as the "depreciation limit" in this Section) is, notwithstanding the provisions of Article 31, paragraph (1) or (2) of the Corporation Tax Act, the sum of the ordinary depreciation limit of the specified machinery and equipment, etc. (meaning the amount equivalent to the depreciation limit prescribed in paragraph (1) of that Article or the depreciation limit prescribed in paragraph (2) of that Article; the same applies hereinafter in this Section) and its special depreciation limit (meaning the amount equivalent to 30 percent of the acquisition cost of the specified machinery and equipment, etc. (for the depreciable assets listed in item (v), the amount calculated by multiplying the acquisition cost by the rate specified by Cabinet Order; referred to as the "base acquisition cost" in the following paragraph)).

②If a specified small and medium sized enterprise, etc. (meaning a small and medium sized enterprise, etc. other than a corporation specified by Cabinet Order; the same applies hereinafter in this paragraph), within the designated period, acquires specified machinery and equipment, etc. that have not been put to use for business since their manufacture, or manufactures specified machinery and equipment, etc., and puts it to use in a designated business conducted by the specified small and medium sized enterprise, etc. in Japan, and the provisions of the preceding paragraph are not applied to the specified machinery and equipment, etc., the amount equivalent to 7 percent of the total base acquisition cost of the specified machinery and equipment, etc. put to use in a designated business (hereinafter referred to as the "maximum tax credit" in this paragraph and paragraph (4)) is deducted from the corporation tax before adjustment on the income for the business year of commencement of use (meaning the corporation tax before adjustment prescribed in Article 42-4, paragraph (19), item (ii); the same applies hereinafter through paragraph (4)). In this case, if the maximum tax credit of the specified small and medium sized enterprise, etc. for the business year of commencement of use exceeds the amount equivalent to 20 percent of the corporation tax before adjustment of the specified small and medium sized enterprise, etc. on the income for that business year of commencement of use, the amount to be deducted is limited to the amount equivalent to that 20 percent.

③If a corporation that files a blue return has a carried-over excess of the tax credit limit in a business year (excluding the business year that includes the date of dissolution (other than dissolution due to a merger) and business years during liquidation), the amount equivalent to that carried-over excess of the tax credit limit is deducted from the corporation tax before adjustment on the income for that business year. In this case, if the carried-over excess of the tax credit limit of the corporation for that business year exceeds the amount equivalent to 20 percent of the corporation tax before adjustment of the corporation on the income for that business year (if there is an amount to be deducted from the corporation tax before adjustment on the income for that business year pursuant to the provisions of the preceding paragraph with respect to specified machinery and equipment, etc. put to use in a designated business in that business year, or an amount to be deducted from the corporation tax before adjustment on the income for that business year pursuant to the provisions of Article 42-12-4, paragraph (2), the remaining amount after deducting those amounts), the amount to be deducted is limited to the amount equivalent to that 20 percent.

④The carried-over excess of the tax credit limit prescribed in the preceding paragraph means the sum of the amounts, out of the maximum tax credit of the corporation for each business year that began within one year before the first day of the business year in question (limited to each business year in which the corporation has filed blue returns continuously up to that business year), that could not be fully deducted even after the deduction under paragraph (2) (if there is an amount already deducted from the corporation tax before adjustment in each such business year pursuant to the provisions of the preceding paragraph, the remaining amount after deducting that amount).

⑤The provisions of paragraph (1) do not apply to specified machinery and equipment, etc. acquired by a small and medium sized enterprise, etc. through a lease transaction without transfer of ownership (meaning, among the lease transactions prescribed in Article 64-2, paragraph (3) of the Corporation Tax Act, those specified by Cabinet Order as not involving the transfer of ownership; the same applies hereinafter in this Chapter).

⑥The provisions of paragraph (1) apply only if the tax return, etc. has a written statement attached thereto concerning the calculation of the depreciation limit of the specified machinery and equipment, etc.

⑦The provisions of paragraph (2) apply only if a document stating the acquisition cost of the specified machinery and equipment, etc., the amount to be deducted, and the details of the calculation of that amount, which are subject to the deduction under that paragraph, is attached to the tax return, etc. (including an amended return or written request for reassessment, if one is filed to increase the amount to be deducted pursuant to the provisions of that paragraph). In this case, the acquisition cost of the specified machinery and equipment, etc. serving as the basis for the calculation of the amount to be deducted pursuant to that paragraph is limited to the acquisition cost of the specified machinery and equipment, etc. stated in the document attached to the tax return, etc.

⑧The provisions of paragraph (3) apply only if a written statement of the carried-over excess of the tax credit limit prescribed in that paragraph is attached to the final return prescribed in Article 2, item (xxxi) of the Corporation Tax Act for each business year from the business year of commencement of use onward, and a document stating the carried-over excess of the tax credit limit prescribed in that paragraph, the amount to be deducted, and the details of the calculation of that amount, which are subject to the deduction under that paragraph, is attached to the tax return, etc. for the business year for which the application of the provisions of that paragraph is sought (including an amended return or written request for reassessment, if one is filed to increase the amount to be deducted pursuant to the provisions of that paragraph).

⑨The provisions of Article 42-4, paragraphs (23) and (24) apply mutatis mutandis where the provisions of paragraph (2) or (3) are applied. In this case, the phrase "paragraphs (1), (4), (7) and (14)" in paragraph (23) of that Article is deemed to be replaced with "Article 42-6, paragraphs (2) and (3)".

⑩Beyond what is provided for in paragraph (5) through the preceding paragraph, necessary matters concerning the application of the provisions of paragraphs (1) through (4) are specified by Cabinet Order.