This Act comes into effect on April 1, 1998.

Except as otherwise provided in these Supplementary Provisions, the provisions of the Income Tax Act as amended by the provisions of Article 2 (hereinafter referred to as "the new Income Tax Act") apply to income tax for 1998 and subsequent years, and the provisions then in force continue to govern income tax for 1997 and earlier years.

The provisions of Article 45, paragraph (1) of the new Income Tax Act (limited to the part concerning item (vi)) apply to the things set forth in that item which are imposed on an individual on or after the Effective Date.

The provisions then in force continue to govern the calculation of real property income or business income for 1998 in connection with amounts that a Resident prescribed in Article 55, paragraph (1) of the Income Tax Act prior to amendment by the provisions of Article 2 (hereinafter referred to as "the former Income Tax Act") has transferred or transfers into a special repair reserves account in each year up to and including 1998.

If an individual has, as of December 31, 1998, an asset for which a special repair reserves account has been established, the provisions of Article 55 of the former Income Tax Act (including as applied pursuant to Article 165 of the former Income Tax Act) remain in force with respect to the amount in the special repair reserves account for that asset (limited to an amount intended to cover the costs required for the special repairs prescribed in paragraph (1) of that Article that are first carried out after that date (referred to as "special repairs" in the following paragraph)).

If, as of December 31 of each year from 1999 onward, the amount in the special repair reserves account for an asset referred to in the preceding paragraph which an individual has carried forward from the previous year includes any amount for which two years have elapsed from the day after December 31 of the year that includes the date specified by Cabinet Order as the scheduled completion date of the special repairs (or December 31, 1999, if that date is before December 31, 1999), the individual must, notwithstanding the provisions of that paragraph, withdraw the amount in the special repair reserves account for that asset, pursuant to Cabinet Order.

The amount in a special repair reserves account that must be withdrawn pursuant to the provisions of the preceding paragraph is included in gross revenue in the calculation of real property income or business income for the year that includes the day on which it became required to be withdrawn.

Necessary matters concerning the application of the preceding two paragraphs in the case where an individual having an amount in a special repair reserves account dies are specified by Cabinet Order.

With regard to the calculation of business income for each year from 1998 through 2003, the provisions of Article 55-2 of the former Income Tax Act (including as applied pursuant to Article 165 of the former Income Tax Act; the same applies hereinafter in this Article) remain in force. In this case, the phrase "calculated amount" in Article 55-2, paragraph (1) of the former Income Tax Act is deemed to be replaced with "amount equivalent to five-sixths of the calculated amount" for 1999, with "amount equivalent to four-sixths of the calculated amount" for 2000, with "amount equivalent to three-sixths of the calculated amount" for 2001, with "amount equivalent to two-sixths of the calculated amount" for 2002, and with "amount equivalent to one-sixth of the calculated amount" for 2003.

The amount in a product warranty reserves account that was included in necessary expenses in the calculation of business income for 2003 pursuant to the provisions of Article 55-2, paragraph (1) of the former Income Tax Act, as they remain in force pursuant to the preceding paragraph and are applied with the replacement of terms, is included in gross revenue in the calculation of business income for 2004.

Special provisions for the application of the preceding paragraph in the case where an individual having an amount in the product warranty reserves account referred to in that paragraph dies, and other necessary matters concerning the treatment of the amount in that product warranty reserves account, are specified by Cabinet Order.

The provisions of Article 65 of the new Income Tax Act apply to sales or similar transactions of assets falling under deferred payment sales or similar transactions prescribed in paragraph (1) of that Article for which the object is delivered or the services are provided in 1999 or a subsequent year, and the provisions then in force continue to govern instalment sales or similar transactions prescribed in Article 65, paragraph (1) of the former Income Tax Act, or deferred payment sales or deferred payment contracts for work prescribed in Article 66, paragraph (1) of the former Income Tax Act, of Inventory, services, or construction work for which the object was delivered or provided in 1998 or an earlier year.

If an individual who, in the calculation of business income for 1998, accounted for all instalment sales or similar transactions of Inventory or services prescribed in Article 65, paragraph (1) of the former Income Tax Act made in that year (hereinafter referred to as "instalment sales or similar transactions" in this paragraph) under the instalment basis method specified by Cabinet Order prescribed in paragraph (1) of that Article (hereinafter referred to as the "instalment basis method" in this paragraph) makes instalment sales or similar transactions of Inventory or services in any year from 1999 through 2003, then, in the calculation of business income for the year in which the individual made those instalment sales or similar transactions of Inventory or services (excluding those falling under deferred payment sales or similar transactions prescribed in Article 65, paragraph (2) of the new Income Tax Act; hereinafter referred to as an "instalment sale under the transitional rules" in this Article) and for each subsequent year, the amounts obtained by adding, to each of the amount of revenue and the amount of expenses that would be included in the gross revenue or necessary expenses for each of those years if the amount of revenue and the amount of expenses from that instalment sale under the transitional rules were accounted for under the instalment basis method, the amount specified in whichever of the following items sets forth the year in which the instalment sale under the transitional rules was made (or, if that amount exceeds the amount remaining after deducting, from the amount of revenue or the amount of expenses from the instalment sale under the transitional rules, an amount equivalent to the amounts already included in gross revenue or necessary expenses pursuant to the provisions of this paragraph for that instalment sale under the transitional rules up to the previous year, the amount remaining after that deduction) are included in gross revenue and necessary expenses, respectively:

The provisions of the preceding paragraph apply only if a statement of the amounts, out of the amount of revenue and the amount of expenses from the instalment sale under the transitional rules, that are included in gross revenue and necessary expenses for the year in which the instalment sale under the transitional rules was made (hereinafter referred to as the "year of sale" in this paragraph) is attached to the Tax Return (meaning a Tax Return prescribed in Article 2, paragraph (1), item (xxxvii) of the new Income Tax Act; hereinafter the same applies in this paragraph and the following paragraph) for the year of sale (or, if the year to which the provisions of the preceding paragraph are applied is a year after the year of sale, only if a statement of the amounts included in gross revenue and necessary expenses pursuant to the provisions of that paragraph is attached to the Tax Return for each year from the year of sale through that year).

Even if a Tax Return without the statement referred to in the preceding paragraph attached has been filed, the district director may apply the provisions of paragraph (2) on finding that there were unavoidable circumstances for the failure to attach it, but only if the statement referred to in that paragraph is submitted.

With regard to the application of the preceding two paragraphs, the Tax Return referred to in those paragraphs is to include a return under Article 123, paragraph (1) of the new Income Tax Act (including as applied mutatis mutandis pursuant to Article 166 of the new Income Tax Act) as applied mutatis mutandis pursuant to Article 37-12-2, paragraph (5) of the Act on Special Measures Concerning Taxation (including as applied mutatis mutandis pursuant to Article 37-13-2, paragraph (7) of that Act) or Article 41-15, paragraph (5) of that Act.

Special provisions for the treatment of the amount of revenue and the amount of expenses from instalment sales under the transitional rules in the case of the death or Absence From Japan of an individual to whom the provisions of paragraph (2) apply, and other necessary matters concerning the application of that paragraph, are specified by Cabinet Order.

The provisions of Article 66 of the new Income Tax Act apply to contracts for long-term, large-scale construction work prescribed in paragraph (1) of that Article and contracts for construction work prescribed in paragraph (2) of that Article under contracts for work that an individual concludes on or after the Effective Date, and the provisions then in force continue to govern contracts for long-term construction work prescribed in Article 67, paragraph (2) of the former Income Tax Act under contracts for work concluded before the Effective Date.

The provisions of Article 203-3 of the new Income Tax Act apply to public pensions or retirement packages prescribed in Article 203-2 of the new Income Tax Act (hereinafter referred to as "public pensions or retirement packages" in this Article) which are to be paid on or after the Effective Date, and the provisions then in force continue to govern public pensions or retirement packages which are to be paid before the Effective Date.

The provisions of Article 238, paragraph (1) of the new Income Tax Act apply to violations prescribed in that paragraph committed on or after the Effective Date, and the provisions then in force continue to govern violations prescribed in Article 238, paragraph (1) of the former Income Tax Act committed before the Effective Date.