①Where, with respect to a person liable for the income levy of prefectural inhabitant tax (limited to a person who has acquired, by payment (limited to payment made upon the issuance of the shares; the same applies hereinafter in this Article), specified shares prescribed in Article 37-13, paragraph (1) of the Act on Special Measures Concerning Taxation (hereinafter in this Article referred to as "specified shares") of a specified small and medium-sized company prescribed in that paragraph (hereinafter in this paragraph and paragraph (11) referred to as "specified small and medium-sized company") (excluding acquisition to which the main clause of Article 29-2, paragraph (1) of that Act applies; the same applies hereinafter in this Article) (excluding a person who, on the day of that acquisition, was a shareholder, or any other person specified by Cabinet Order, in the case where, if that person were selected as a shareholder forming the basis for determination, that specified small and medium-sized company would fall under a company prescribed in Article 2, item (x) of the Corporation Tax Act), or who has acquired by payment specified shares at establishment prescribed in Article 37-13-2, paragraph (1) of the Act on Special Measures Concerning Taxation of a stock company prescribed in that paragraph (limited to a person who satisfies requirements specified by Cabinet Order, such as being a promoter of that stock company); the same applies in paragraphs (3), (5) and (6)), within the application period prescribed in Article 37-13-3, paragraph (1) of that Act (referred to as the "application period" in paragraphs (6), (11) and (16)), a fact set out in the items of that paragraph occurs as a case in which a loss arises because the specified shares acquired by that payment that the person holds have lost their value as shares, the occurrence of the fact set out in the items of that paragraph is deemed to be a transfer of those specified shares, and the amount specified by Cabinet Order as the amount of that loss is deemed to be the amount of a loss arising from the transfer of those specified shares, respectively, and the provisions concerning prefectural inhabitant tax, including those of this paragraph through paragraph (10) and Article 35-2, paragraphs (1) through (4) of the Supplementary Provisions, apply.

②The provisions of the preceding paragraph apply, as provided for by Cabinet Order, only where the return under Article 45-2, paragraph (1) or (3) for the fiscal year following the fiscal year that includes the last day of the year in which the fact prescribed in the preceding paragraph occurred (including a return submitted after the deadline for filing but by the time a tax notice for prefectural inhabitant tax is served, and the final return under Article 45-3, paragraph (1) submitted by that time) contains a statement to the effect that the person wishes to receive the application of the provisions of the preceding paragraph (including where the mayor of the municipality finds that there is a compelling reason why those returns do not contain that statement).

③The amount of capital loss on specified shares of a person liable for the income levy of prefectural inhabitant tax is to be deducted, only where the return under Article 45-2, paragraph (1) or (3) for the fiscal year following the fiscal year that includes the last day of the year in which that amount of capital loss on specified shares arose (including a return submitted after the deadline for filing but by the time a tax notice for prefectural inhabitant tax is served, and the final return under Article 45-3, paragraph (1) submitted by that time) contains a statement on matters concerning the deduction of that amount of capital loss on specified shares (including where the mayor of the municipality finds that there is a compelling reason why those returns do not contain that statement), notwithstanding the second sentence of Article 35-2, paragraph (1) of the Supplementary Provisions, in calculating the amount of capital gains, etc. on listed shares, etc. prescribed in Article 35-2-2, paragraph (1) of the Supplementary Provisions of that person, up to the limit of that amount.

④With regard to the application of the provisions of Article 35-2-2, paragraphs (1) through (4) of the Supplementary Provisions where the provisions of the preceding paragraph apply, the phrase "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on listed shares, etc. for the previous year (" in paragraph (1) of that Article is deemed to be replaced with "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on listed shares, etc. for the previous year (where the provisions of Article 35-3, paragraph (3) of the Supplementary Provisions apply, the amount after that application, and".

⑤The amount of capital loss on specified shares arising in each year within the three years preceding the previous year of a person liable for the income levy of prefectural inhabitant tax (excluding any amount deducted before the previous year pursuant to paragraph (3) or this paragraph) is to be deducted, only where the person has submitted, with regard to prefectural inhabitant tax for the fiscal year following the fiscal year that includes the last day of the year in which that amount of capital loss on specified shares arose, a return under Article 45-2, paragraph (1) or (3) stating matters concerning the deduction of the amount of capital loss on specified shares (including a return under Article 45-2, paragraph (4) as applied mutatis mutandis in paragraph (8); the same applies hereinafter in this paragraph) (including, where the mayor of the municipality finds that there are compelling circumstances, a case where those returns have been submitted after the deadline for filing but by the time a tax notice for prefectural inhabitant tax is served) and has continuously submitted those returns (including those submitted after the deadline for filing but by the time a tax notice for prefectural inhabitant tax is served) for prefectural inhabitant tax for the subsequent fiscal years, notwithstanding the second sentence of Article 35-2, paragraph (1) of the Supplementary Provisions, as provided for by Cabinet Order, in calculating the amount of capital gains, etc. on general shares, etc. prescribed in paragraph (1) of that Article and the amount of capital gains, etc. on listed shares, etc. prescribed in Article 35-2-2, paragraph (1) of the Supplementary Provisions of that person (where the provisions of paragraph (3) apply, the amount after that application; the same applies hereinafter in this paragraph), up to the limit of those amounts.

⑥The amount of capital loss on specified shares prescribed in paragraph (3) and the preceding paragraph means, of the amount calculated as provided for by Cabinet Order as the amount of a loss arising from a person liable for the income levy of prefectural inhabitant tax having, within the application period, made a transfer (meaning a transfer prescribed in Article 37-13-3, paragraph (8) of the Act on Special Measures Concerning Taxation) of specified shares acquired by payment, the amount calculated as provided for by Cabinet Order as the portion that still cannot be deducted even after deduction in calculating the amount of capital gains, etc. on general shares, etc. prescribed in Article 35-2, paragraph (1) of the Supplementary Provisions for prefectural inhabitant tax for the fiscal year following the fiscal year that includes the last day of the year in which that person liable for tax made that transfer.

⑦With regard to the application of the provisions of Article 35-2, paragraphs (1) through (3) of the Supplementary Provisions and Article 35-2-2, paragraphs (1) through (3) of the Supplementary Provisions where the provisions of paragraph (5) apply, the phrase "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on general shares, etc. for the previous year (" in Article 35-2, paragraph (1) of the Supplementary Provisions is deemed to be replaced with "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on general shares, etc. for the previous year (where the provisions of Article 35-3, paragraph (5) of the Supplementary Provisions apply, the amount after that application;", and the phrase "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on listed shares, etc. for the previous year (" in Article 35-2-2, paragraph (1) of the Supplementary Provisions is deemed to be replaced with "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on listed shares, etc. for the previous year (where the provisions of Article 35-3, paragraph (5) of the Supplementary Provisions apply, the amount after that application, and".

⑧The provisions of Article 45-2, paragraph (4) apply mutatis mutandis where a person prescribed in the proviso to paragraph (1) of that Article (excluding a person who has the obligation under paragraph (2) of that Article to submit the return referred to in paragraph (1) of that Article) wishes to receive the application of the provisions of paragraph (5) in a fiscal year on or after the fiscal year following the fiscal year concerned, and falls under neither a case where the person is to submit a return under paragraph (3) of that Article for the prefectural inhabitant tax of the fiscal year concerned nor a case where the person may submit the return referred to in paragraph (1) of that Article pursuant to paragraph (4) of that Article. In this case, the phrase "amount of net loss or casualty loss" in Article 45-2, paragraph (4) is deemed to be replaced with "amount of capital loss on specified shares prescribed in Article 35-3, paragraph (6) of the Supplementary Provisions", the phrase "by March 15, the return concerning prefectural inhabitant tax referred to in that paragraph" is deemed to be replaced with "by March 15, a return stating, as provided by Order of the Ministry of Internal Affairs and Communications, matters concerning the deduction of the amount of capital loss on specified shares prescribed in paragraph (5) of that Article and other matters specified by Cabinet Order", and the phrase "Article 317-2, paragraph (4)" is deemed to be replaced with "Article 317-2, paragraph (4) as applied mutatis mutandis in paragraph (18) of that Article".

⑨With regard to the application of the provisions of Article 45-3 where the provisions of paragraph (5) apply, the phrase "a final return prescribed in Article 2, paragraph (1), item (xxxvii) of the Income Tax Act (" in paragraph (1) of that Article is deemed to be replaced with "a final return prescribed in Article 2, paragraph (1), item (xxxvii) of the Income Tax Act (including a return under Article 123, paragraph (1) of the Income Tax Act as applied mutatis mutandis in Article 37-12-2, paragraph (9) of the Act on Special Measures Concerning Taxation as applied mutatis mutandis in Article 37-13-3, paragraph (10) of that Act;", the phrase "paragraphs (1) through (4) of the preceding Article" in that paragraph is deemed to be replaced with "paragraphs (1) through (4) of the preceding Article or paragraph (4) of the preceding Article as applied mutatis mutandis in Article 35-3, paragraph (8) of the Supplementary Provisions", and the phrase "paragraphs (1) through (4) of that Article" in Article 45-3, paragraph (2) is deemed to be replaced with "paragraphs (1) through (4) of that Article or paragraph (4) of that Article as applied mutatis mutandis in Article 35-3, paragraph (8) of the Supplementary Provisions".

⑩Cabinet Order provides for special provisions on the provisions of paragraph (1) where the fact prescribed in that paragraph occurs with respect to a person who holds specified shares acquired by payment and other shares of the same class as those specified shares, special provisions on the calculation of the amount of capital loss on specified shares prescribed in paragraph (6) where a loss arises from the transfer of those shares with respect to a person who holds those specified shares and other shares of the same class as those specified shares, and other particulars necessary for the application of the provisions of the preceding paragraphs.

⑪Where, with respect to a person liable for the income levy of municipal inhabitant tax (limited to a person who has acquired by payment specified shares of a specified small and medium-sized company (excluding a person who, on the day of that acquisition, was a shareholder, or any other person specified by Cabinet Order, in the case where, if that person were selected as a shareholder forming the basis for determination, that specified small and medium-sized company would fall under a company prescribed in Article 2, item (x) of the Corporation Tax Act), or who has acquired by payment specified shares at establishment prescribed in Article 37-13-2, paragraph (1) of the Act on Special Measures Concerning Taxation of a stock company prescribed in that paragraph (limited to a person who satisfies requirements specified by Cabinet Order, such as being a promoter of that stock company); the same applies in paragraphs (13), (15) and (16)), within the application period, a fact set out in the items of Article 37-13-3, paragraph (1) of that Act occurs as a case in which a loss arises because the specified shares acquired by that payment that the person holds have lost their value as shares, the occurrence of the fact set out in the items of that paragraph is deemed to be a transfer of those specified shares, and the amount specified by Cabinet Order as the amount of that loss is deemed to be the amount of a loss arising from the transfer of those specified shares, respectively, and the provisions concerning municipal inhabitant tax, including those of this paragraph through paragraph (20) and Article 35-2, paragraphs (5) through (8) of the Supplementary Provisions, apply.

⑫The provisions of the preceding paragraph apply, as provided for by Cabinet Order, only where the return under Article 317-2, paragraph (1) or (3) for the fiscal year following the fiscal year that includes the last day of the year in which the fact prescribed in the preceding paragraph occurred (including a return submitted after the deadline for filing but by the time a tax notice for municipal inhabitant tax is served, and the final return under Article 317-3, paragraph (1) submitted by that time) contains a statement to the effect that the person wishes to receive the application of the provisions of the preceding paragraph (including where the mayor of the municipality finds that there is a compelling reason why those returns do not contain that statement).

⑬The amount of capital loss on specified shares of a person liable for the income levy of municipal inhabitant tax is to be deducted, only where the return under Article 317-2, paragraph (1) or (3) for the fiscal year following the fiscal year that includes the last day of the year in which that amount of capital loss on specified shares arose (including a return submitted after the deadline for filing but by the time a tax notice for municipal inhabitant tax is served, and the final return under Article 317-3, paragraph (1) submitted by that time) contains a statement on matters concerning the deduction of that amount of capital loss on specified shares (including where the mayor of the municipality finds that there is a compelling reason why those returns do not contain that statement), notwithstanding the second sentence of Article 35-2, paragraph (5) of the Supplementary Provisions, in calculating the amount of capital gains, etc. on listed shares, etc. prescribed in Article 35-2-2, paragraph (5) of the Supplementary Provisions of that person, up to the limit of that amount.

⑭With regard to the application of the provisions of Article 35-2-2, paragraphs (5) through (8) of the Supplementary Provisions where the provisions of the preceding paragraph apply, the phrase "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on listed shares, etc. for the previous year (" in paragraph (5) of that Article is deemed to be replaced with "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on listed shares, etc. for the previous year (where the provisions of Article 35-3, paragraph (13) of the Supplementary Provisions apply, the amount after that application, and".

⑮The amount of capital loss on specified shares arising in each year within the three years preceding the previous year of a person liable for the income levy of municipal inhabitant tax (excluding any amount deducted before the previous year pursuant to paragraph (13) or this paragraph) is to be deducted, only where the person has submitted, with regard to municipal inhabitant tax for the fiscal year following the fiscal year that includes the last day of the year in which that amount of capital loss on specified shares arose, a return under Article 317-2, paragraph (1) or (3) stating matters concerning the deduction of the amount of capital loss on specified shares (including a return under Article 317-2, paragraph (4) as applied mutatis mutandis in paragraph (18); the same applies hereinafter in this paragraph) (including, where the mayor of the municipality finds that there are compelling circumstances, a case where those returns have been submitted after the deadline for filing but by the time a tax notice for municipal inhabitant tax is served) and has continuously submitted those returns (including those submitted after the deadline for filing but by the time a tax notice for municipal inhabitant tax is served) for municipal inhabitant tax for the subsequent fiscal years, notwithstanding the second sentence of Article 35-2, paragraph (5) of the Supplementary Provisions, as provided for by Cabinet Order, in calculating the amount of capital gains, etc. on general shares, etc. prescribed in paragraph (5) of that Article and the amount of capital gains, etc. on listed shares, etc. prescribed in Article 35-2-2, paragraph (5) of the Supplementary Provisions of that person (where the provisions of paragraph (13) apply, the amount after that application; the same applies hereinafter in this paragraph), up to the limit of those amounts.

⑯The amount of capital loss on specified shares prescribed in paragraph (13) and the preceding paragraph means, of the amount calculated as provided for by Cabinet Order as the amount of a loss arising from a person liable for the income levy of municipal inhabitant tax having, within the application period, made a transfer (meaning a transfer prescribed in Article 37-13-3, paragraph (8) of the Act on Special Measures Concerning Taxation) of specified shares acquired by payment, the amount calculated as provided for by Cabinet Order as the portion that still cannot be deducted even after deduction in calculating the amount of capital gains, etc. on general shares, etc. prescribed in Article 35-2, paragraph (5) of the Supplementary Provisions for municipal inhabitant tax for the fiscal year following the fiscal year that includes the last day of the year in which that person liable for tax made that transfer.

⑰With regard to the application of the provisions of Article 35-2, paragraphs (5) through (7) of the Supplementary Provisions and Article 35-2-2, paragraphs (5) through (7) of the Supplementary Provisions where the provisions of paragraph (15) apply, the phrase "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on general shares, etc. for the previous year (" in Article 35-2, paragraph (5) of the Supplementary Provisions is deemed to be replaced with "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on general shares, etc. for the previous year (where the provisions of Article 35-3, paragraph (15) of the Supplementary Provisions apply, the amount after that application;", and the phrase "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on listed shares, etc. for the previous year (" in Article 35-2-2, paragraph (5) of the Supplementary Provisions is deemed to be replaced with "the amount calculated as provided for by Cabinet Order as the amount of those capital gains, etc. on listed shares, etc. for the previous year (where the provisions of Article 35-3, paragraph (15) of the Supplementary Provisions apply, the amount after that application, and".

⑱The provisions of Article 317-2, paragraph (4) apply mutatis mutandis where a person prescribed in the proviso to paragraph (1) of that Article (excluding a person who has the obligation under paragraph (2) of that Article to submit the return referred to in paragraph (1) of that Article) wishes to receive the application of the provisions of paragraph (15) in a fiscal year on or after the fiscal year following the fiscal year concerned, and falls under neither a case where the person is to submit a return under paragraph (3) of that Article for the municipal inhabitant tax of the fiscal year concerned nor a case where the person may submit the return referred to in paragraph (1) of that Article pursuant to paragraph (4) of that Article. In this case, the phrase "amount of net loss or casualty loss" in paragraph (4) of that Article is deemed to be replaced with "amount of capital loss on specified shares prescribed in Article 35-3, paragraph (16) of the Supplementary Provisions", and the phrase "the return referred to in that paragraph by March 15" is deemed to be replaced with "a return stating, as provided by Order of the Ministry of Internal Affairs and Communications, matters concerning the deduction of the amount of capital loss on specified shares prescribed in paragraph (15) of that Article and other matters specified by Cabinet Order, by March 15".

⑲With regard to the application of the provisions of Article 317-3 where the provisions of paragraph (15) apply, the phrase "a final return referred to in Article 2, paragraph (1), item (xxxvii) of the Income Tax Act (" in paragraph (1) of that Article is deemed to be replaced with "a final return referred to in Article 2, paragraph (1), item (xxxvii) of the Income Tax Act (including a return under Article 123, paragraph (1) of the Income Tax Act as applied mutatis mutandis in Article 37-12-2, paragraph (9) of the Act on Special Measures Concerning Taxation as applied mutatis mutandis in Article 37-13-3, paragraph (10) of that Act;", the phrase "paragraphs (1) through (4) of the preceding Article" in that paragraph is deemed to be replaced with "paragraphs (1) through (4) of the preceding Article or paragraph (4) of the preceding Article as applied mutatis mutandis in Article 35-3, paragraph (18) of the Supplementary Provisions", and the phrase "paragraphs (1) through (4) of that Article" in Article 317-3, paragraph (2) is deemed to be replaced with "paragraphs (1) through (4) of that Article or paragraph (4) of that Article as applied mutatis mutandis in Article 35-3, paragraph (18) of the Supplementary Provisions".

⑳Cabinet Order provides for special provisions on the provisions of paragraph (11) where the fact prescribed in that paragraph occurs with respect to a person who holds specified shares acquired by payment and other shares of the same class as those specified shares, special provisions on the calculation of the amount of capital loss on specified shares prescribed in paragraph (16) where a loss arises from the transfer of those shares with respect to a person who holds those specified shares and other shares of the same class as those specified shares, and other particulars necessary for the application of the provisions of paragraph (11) through the preceding paragraph.