Taxable gross income, taxable retirement income, or taxable timber income is whatever remains after the deductions under Section 4 (Deductions from Income) of the preceding Chapter are taken against gross income, retirement income, or timber income.

If the sum total of a Resident's Fluctuating Income and Ad Hoc Income for the year (or the Resident's Ad Hoc Income for the year, if Fluctuating Income for the year is 50% or less of the sum total of the Fluctuating Income for the previous year and the year before that) makes up 20% or more of the Resident's gross income for the year, the amount of income taxes imposed on the Resident's taxable income for the year is the sum total of the following amounts:

The rate prescribed in item (ii) of the preceding paragraph is calculated to two decimal places; any decimal places beyond this are disregarded.

The average taxable amount as prescribed in paragraph (1) means the sum total of Fluctuating Income (or the amount by which Fluctuating Income for the current year exceeds 50% of the sum total of the Fluctuating Income for the previous year and the year before that, if there was Fluctuating Income in the previous year or the year before that) and Ad Hoc Income.

The provisions of paragraph (1) apply only if a Tax Return, Amended Return, or request for Reassessment indicates recourse to the application of the provisions of that paragraph and has attached to it a document giving the details of the calculation of the sum total of the amounts set forth in the items of that paragraph.

If a Resident has dividend income arising from dividends of surplus (meaning dividends of surplus as prescribed in Article 24, paragraph (1) (Dividend Income); hereinafter the same applies in this Article), dividends of profits (meaning dividends of profits as prescribed in that paragraph; hereinafter the same applies in this Article), distributions of surplus (meaning distributions of surplus as prescribed in that paragraph; hereinafter the same applies in this Article), distributions of monies (meaning distributions of monies as prescribed in that paragraph; hereinafter the same applies in this Article), or distributions of proceeds from a Securities Investment Trust (other than as set forth in Article 9, paragraph (1), item (xi) (Nontaxability of Distributions of Proceeds Constituting a Return of Principal); hereinafter the same applies in this Article) (such dividend income excludes income from amounts received from a Foreign Corporation (other than income from a distribution of proceeds from a Securities Investment Trust established as a trust at a Foreign Corporation's business office, business establishment, or any other place equivalent thereto in Japan); hereinafter the same applies in this Article), the amount that each of the following items prescribes for the category of case set forth in the item is allowed as a credit against the Resident's amount of income tax (meaning the amount of income taxes under the preceding Section (Tax Rates); hereinafter the same applies in this Article) for the year:

The amount allowed as a credit under the preceding paragraph is applied against the amount of income taxes imposed on taxable gross income, taxable timber income, and taxable retirement income, in that order. In such a case, if the amount allowed as a credit exceeds the amount of income taxes for the year, the amount allowed as a credit is equivalent to the amount of income taxes.

A credit under the provisions of paragraph (1) is referred to as a dividend tax credit.

If, in any year, a Resident receives payment of a distribution of proceeds from a collective Investment Trust prescribed in Article 176, paragraph (3) (Special Provisions on Taxation of Interest and Similar Income from Trust Property), an amount equivalent to the amount prescribed by Cabinet Order as the portion corresponding to the distribution of proceeds the Resident receives, out of the amount of foreign tax adjusted at the time of distribution with respect to that distribution of proceeds (meaning a tax equivalent to income tax imposed pursuant to the foreign laws or orders prescribed in that paragraph, which is prescribed by Cabinet Order) that has been deducted from the amount of income tax on that distribution of proceeds pursuant to the provisions of that paragraph or Article 180-2, paragraph (3) (Special Provisions on Taxation of Interest and Similar Income from Trust Property) (referred to as the "amount equivalent to the foreign tax adjusted at distribution" in the following paragraph), is allowed as a credit against the amount of income tax for the year.

The provisions of the preceding paragraph apply only if a Tax Return, Amended Return, or request for Reassessment has attached to it a document giving the amount equivalent to the foreign tax adjusted at distribution that is subject to the credit under that paragraph, the amount to be credited, and the details of the calculation of that amount, and any other documents specified by Ministry of Finance Order. In such a case, the amount to be credited under that paragraph is limited to the amount stated as the amount equivalent to the foreign tax adjusted at distribution in the document giving those details.

The provisions of paragraph (2) of the preceding Article apply mutatis mutandis to the amount to be credited under paragraph (1).

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

A credit under paragraph (1) is referred to as a credit for the amount equivalent to foreign tax adjusted at the time of distribution.

If a Resident has to pay foreign income taxes in any year (meaning taxes imposed pursuant to foreign laws or orders which are equivalent to income taxes and provided for by Cabinet Order; hereinafter the same applies in this paragraph and paragraph (9)), the amount of those foreign income taxes (other than any foreign income taxes imposed on income arising from a transaction provided for by Cabinet Order as one that cannot be regarded as an ordinary transaction undertaken by a Resident; other than any foreign income taxes prescribed by Cabinet Order as being imposed pursuant to foreign income tax laws or orders using as the tax base an amount on which income taxes are not to be imposed under the provisions of laws and orders concerning a Resident's income taxes; and any other foreign income taxes as prescribed by Cabinet Order; hereinafter referred to as the "amount of credit-eligible foreign income tax" in this Article) is allowed as a credit against the amount of income tax for the year, up to what is calculated pursuant to Cabinet Order as the part of the amount of income tax for the year as calculated pursuant to the provisions of Article 89 through Article 93 (Tax Rates and Related Matters) which corresponds to the amount of foreign income arising in that year (meaning the amount prescribed by Cabinet Order as equivalent to the amount that would be the tax base if income tax were imposed only on income related to foreign source income) (hereinafter the amount so calculated is referred to as the "maximum credit" in this Article).

If the credit-eligible foreign income taxes which a Resident has to pay in any year exceed the sum total of the maximum credit for the year and the amount specified by Cabinet Order as the maximum credit for local taxes, and part of the maximum credit in any of the three years prior to the relevant year (hereinafter referred to as "any of the last three years" in this Article) is an amount prescribed by Cabinet Order as being carried over to the relevant year (hereinafter referred to as the "maximum carry-over credit" in this Article), the amount by which the former exceeds the latter is credited against income taxes for the year pursuant to Cabinet Order, up to maximum carry-over credit.

If the credit-eligible foreign income taxes which a Resident has to pay in any year are less than the maximum credit for the year, and part of the credit-eligible foreign income taxes that the Resident has had to pay in any of the last three years constitute an amount prescribed by Cabinet Order as being carried over to the relevant year (hereinafter referred to as "carry-over, credit-eligible foreign income taxes" in this Article), the carry-over, credit-eligible foreign income taxes are credited against income taxes for the year pursuant to Cabinet Order, up to the amount remaining when the credit-eligible foreign income taxes that the Resident is to pay that year are deducted from the maximum credit.

The foreign source income prescribed in paragraph (1) means the following:

The internal transactions prescribed in item (i) of the preceding paragraph means a transfer of assets, provision of services, or any other fact that occurred between a Resident's foreign office or similar establishment and place of business or similar place, which, if the same fact had occurred between independent business operators, would be found to constitute a sale of assets, purchase of assets, provision of services, or any other transaction (excluding a guarantee of an obligation related to the borrowing of funds, underwriting of reinsurance for insurance liability under an insurance contract, or any other transaction prescribed by Cabinet Order as similar thereto) between those business operators.

If a tax treaty contains provisions on foreign source income (meaning foreign source income prescribed in paragraph (1); the same applies hereinafter in this paragraph) that differ from the provisions of the preceding two paragraphs, then with regard to a Resident who is subject to the application of that tax treaty, notwithstanding those provisions, foreign source income is as prescribed in that tax treaty to the extent of those different provisions.

In calculating the income of a Resident set forth in paragraph (4), item (i), if the Resident's foreign office or similar establishment is located in the treaty partner of a tax treaty (limited to a tax treaty that provides that taxes may be imposed on the income of the Resident set forth in that item, and excluding one that provides that income arises from the internal transactions prescribed in that item), the internal transactions prescribed in that item are not to include a fact equivalent to the payment of interest (including anything prescribed by Cabinet Order as equivalent thereto) between the Resident's foreign office or similar establishment and place of business or similar place, or any other fact prescribed by Cabinet Order.

If a Resident's foreign office or similar establishment is located in the treaty partner of a tax treaty (limited to a tax treaty that provides that, if a Resident's foreign office or similar establishment conducts operations of purchasing Inventory for the place of business or similar place as well as other operations, the income arising from the operations of purchasing that Inventory is not included in the income that should be attributed to that foreign office or similar establishment) and the Resident's foreign office or similar establishment conducts operations of purchasing Inventory for the place of business or similar place as well as other operations, the income set forth in paragraph (4), item (i) arising from the operations of that foreign office or similar establishment of purchasing that Inventory is deemed not to exist.

If the foreign income taxes that a Resident has had to pay are reduced in any of the seven years beginning in the year after one in which the Resident is subject to any of paragraphs (1) through (3) with respect to those foreign income taxes, Cabinet Order provides for the application of those provisions for the year in which the day that the amount is reduced falls.

The provisions of paragraph (1) apply only if a Tax Return, Amended Return, or request for Reassessment (referred to as a "Tax Return or similar filing" in the following paragraph) is accompanied by a document giving the amount allowed as a credit under the provisions of paragraph (1) and the details of the calculation thereof, a document evidencing that the amount of credit-eligible foreign income tax has been imposed, and the other documents prescribed by Ministry of Finance Order (referred to as the "detailed statement" in this paragraph). In such a case, the amount of credit-eligible foreign income tax and the other amounts prescribed by Ministry of Finance Order that form the basis for calculating the amount allowed as a credit under the provisions of paragraph (1) are limited to the amounts stated as those amounts in the detailed statement, except in the case where the district director finds that there are special circumstances.

The provisions of paragraph (2) and paragraph (3) apply only if the Tax Return or similar filing for each of the years in association with which there is a maximum carry-over credit or carry-over, credit-eligible foreign income taxes, beginning with the earliest year, is accompanied by a document indicating the maximum credit for that year and the amount of credit-eligible foreign income tax that the Resident has had to pay in that year, and if the Tax Return or similar filing for the year in which the Resident seeks to apply those provisions is accompanied by a document giving the amount allowed as a credit under those provisions and information to be used as the basis for calculating the maximum carry-over credit or the carry-over, credit-eligible foreign income taxes, and by the other documents prescribed by Ministry of Finance Order. In such a case, the maximum credit for each of those years, the amount of credit-eligible foreign income tax that the Resident has had to pay in each of those years, and the other amounts prescribed by Ministry of Finance Order that form the basis for calculating the amount allowed as a credit under those provisions are limited to the amounts stated as the amounts forming the basis for that calculation in the documents attached to the Tax Return or similar filing for each of those years pursuant to the provisions of the first sentence of this paragraph, except in the case where the district director finds that there are special circumstances.

A Resident who is subject to the application of the provisions of paragraphs (1) through (3) must, pursuant to Ministry of Finance Order, prepare a document giving the details of the transactions attributed to the Resident's foreign office or similar establishment and other documents specified by Ministry of Finance Order, with regard to those transactions the Resident has conducted with other persons in which the income arising from the transaction is attributed to the Resident's foreign office or similar establishment in the calculation of the Resident's amount of foreign income prescribed in paragraph (1) for the year.

A Resident who is subject to the application of the provisions of paragraphs (1) through (3) must, if a transfer of assets, provision of services, or any other fact between the Resident's place of business or similar place and foreign office or similar establishment falls under the internal transactions prescribed in paragraph (4), item (i), prepare, pursuant to Ministry of Finance Order, a document giving the details of that fact and other documents specified by Ministry of Finance Order.

The first sentence of Article 92, paragraph (2) (Dividend Tax Credits) applies mutatis mutandis to an amount allowed as a credit under paragraphs (1) through (3).

Beyond what is provided for in paragraph (9) through the preceding paragraph, necessary matters concerning the application of the provisions of paragraphs (1) through (8) are specified by Cabinet Order.

A credit under paragraphs (1) through (3) is referred to as a foreign tax credit.

If an individual who has been subject to the application of the provisions of paragraphs (1) through (3) of Article 60-2 with respect to income tax for the year that includes the date of departure from Japan (meaning departure from Japan prescribed in Article 60-2, paragraph (1) (Special Provisions on Capital Gains and Similar Income upon Departure from Japan); the same applies hereinafter in this paragraph and the following paragraph) and who has received a tax payment grace period under the provisions of Article 137-2, paragraph (1) (Tax Payment Grace Period Where the Special Provisions on Capital Gains and Similar Income upon Departure from Japan Apply) (including as applied pursuant to paragraph (2) of that Article) (including that individual's heir) has, by the expiration base date prescribed in paragraph (1) of that Article in connection with that tax payment grace period, made a transfer (meaning a transfer prescribed in Article 60-2, paragraph (4); the same applies hereinafter in this paragraph and the following paragraph) of Securities and similar interests (meaning Securities and similar interests prescribed in Article 60-2, paragraph (1); the same applies hereinafter in this paragraph and the following paragraph) that the individual has continued to hold since the time of that departure from Japan, or a transfer or settlement of a contract related to an unsettled margin transaction or similar transaction (meaning an unsettled margin transaction or similar transaction prescribed in Article 60-2, paragraph (2); the same applies hereinafter in this paragraph and the following paragraph) or an unsettled derivatives transaction (meaning an unsettled derivatives transaction prescribed in Article 60-2, paragraph (3); the same applies hereinafter in this paragraph and the following paragraph) that has not been settled, or a transfer of these by way of a gift or inheritance with limited liability (meaning a gift or inheritance with limited liability prescribed in Article 60-2, paragraph (8); the same applies hereinafter in this paragraph and the following paragraph), and has to pay foreign income tax (meaning foreign income tax prescribed in paragraph (1) of the preceding Article, limited to that imposed in the country or region in which an individual has a domicile, has a residence for more than a certain period, or has nationality or anything similar thereto, by reason of having that domicile, residence, or nationality or anything similar thereto; the same applies hereinafter in this paragraph) on income arising from that transfer or settlement or transfer by way of a gift or inheritance with limited liability (limited to the case where the laws or orders concerning that foreign income tax provide that, in calculating the amount of that foreign income tax, the fact that the provisions of Article 60-2 have been applied is not to be taken into account), the provisions of the preceding Article apply by deeming the amount calculated pursuant to Cabinet Order as the portion of the amount of that foreign income tax that corresponds to the income arising from the transfer of those Securities and similar interests, the transfer or settlement of the contract related to the unsettled margin transaction or similar transaction or unsettled derivatives transaction, or the transfer by way of a gift or inheritance with limited liability, to be an amount the individual has to pay in the year that includes the date of that departure from Japan.

The provisions of the preceding paragraph apply mutatis mutandis where an individual who is to be subject to the application of the provisions of Article 60-2, paragraphs (1) through (3) with respect to income tax for the year that includes the date of departure from Japan and who has given notification of a tax agent under the provisions of Article 117, paragraph (2) (Tax Agent) of the Act on General Rules for National Taxes by the time of that departure from Japan has, by the Filing Deadline for income tax for the year that includes that date, made a transfer of Securities and similar interests that the individual has continued to hold since that date, or a transfer or settlement of a contract related to an unsettled margin transaction or similar transaction or an unsettled derivatives transaction that has not been settled, or a transfer of these by way of a gift or inheritance with limited liability.

Special provisions on the calculation of the maximum credit prescribed in paragraph (1) of the preceding Article in the case where the provisions of paragraph (1) (including as applied mutatis mutandis pursuant to the preceding paragraph; the same applies hereinafter in this paragraph) apply, and other necessary matters concerning the application of the provisions of paragraph (1), are specified by Cabinet Order.