①If a small and medium sized business operator prescribed in Article 10, paragraph (8), item (vi) who files a blue return (hereinafter referred to as a "small and medium sized business operator" in this Article), during the period from June 1, 1998 to March 31, 2027 (referred to as the "designated period" in paragraph (3)), 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 business operator conducts in Japan (excluding use for lending by a person other than a person conducting the business prescribed in item (v) who is specified by Cabinet Order; hereinafter referred to as "use in a designated business" in this Article), the amount to be included in necessary expenses as the depreciation allowance for the specified machinery and equipment, etc. in calculating the amount of business income of the small and medium sized business operator for the year that includes the date on which it was put to use in a designated business (excluding the year that includes the date on which the operator discontinued the business; referred to as the "year of commencement of use" in paragraphs (3) and (9)) is, notwithstanding the provisions of Article 49, paragraph (1) of the Income Tax Act, the amount calculated by the small and medium sized business operator as necessary expenses that does not exceed the sum (referred to as the "total depreciation limit" in the following paragraph) of the amount of the depreciation allowance calculated for the specified machinery and equipment, etc. pursuant to the provisions of that paragraph and the amount equivalent to 30 percent of its acquisition cost (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 paragraph (3)); provided, however, that the amount may not be less than the amount to be included in necessary expenses as the depreciation allowance for the specified machinery and equipment, etc. pursuant to the provisions of paragraph (1) of that Article.

②If the amount included in necessary expenses as the depreciation allowance for the specified machinery and equipment, etc. pursuant to the provisions of the preceding paragraph is less than its total depreciation limit, the amount to be included in necessary expenses as the depreciation allowance for the specified machinery and equipment, etc. in calculating the amount of business income for the year following the year in which the specified machinery and equipment, etc. was put to use in a designated business may be, notwithstanding the provisions of Article 49, paragraph (1) of the Income Tax Act, the amount equivalent to the sum of the amount to be included in necessary expenses as the depreciation allowance for the specified machinery and equipment, etc. pursuant to the provisions of that paragraph and the amount calculated by the small and medium sized business operator as necessary expenses that does not exceed the shortfall.

③If a small and medium sized business operator, during 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 small and medium sized business operator in Japan, and the provisions of paragraph (1) 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 (5)) is deducted, pursuant to the provisions of Cabinet Order, from the amount of income tax on the amount of gross income for the year of commencement of use. In this case, if the small and medium sized business operator's maximum tax credit for the year of commencement of use exceeds the amount equivalent to 20 percent of the small and medium sized business operator's income tax on business income before adjustment (meaning income tax on business income before adjustment prescribed in Article 10, paragraph (8), item (iv); the same applies in the following paragraph) for that year of commencement of use, the amount to be deducted is limited to the amount equivalent to that 20 percent.

④If an individual who files a blue return has a carried-over excess of the tax credit limit in a year (excluding the year that includes the date on which the individual discontinued the business), the amount equivalent to the carried-over excess of the tax credit limit is deducted, pursuant to the provisions of Cabinet Order, from the amount of income tax on the amount of gross income for that year. In this case, if the individual's carried-over excess of the tax credit limit for that year exceeds the amount equivalent to 20 percent of the individual's income tax on business income before adjustment for that year (if there is an amount deducted from the amount of income tax on the amount of gross income for that 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 year, or an amount deducted from the amount of income tax on the amount of gross income for that year pursuant to the provisions of Article 10-5-3, paragraph (3), the remaining amount after deducting those amounts), the amount to be deducted is limited to the amount equivalent to that 20 percent.

⑤The carried-over excess of the tax credit limit prescribed in the preceding paragraph means the amount, out of the individual's maximum tax credit for the year preceding the year in question (limited to the case where the individual has filed a blue return with respect to income tax for that preceding year), that could not be fully deducted even after the deduction under paragraph (3).

⑥The provisions of paragraph (1) do not apply to specified machinery and equipment, etc. acquired by a small and medium sized business operator through a lease transaction without transfer of ownership (meaning, among the lease transactions prescribed in Article 67-2, paragraph (3) of the Income Tax Act, those specified by Cabinet Order as not involving the transfer of ownership; the same applies hereinafter in this Chapter).

⑦The provisions of paragraphs (1) and (2) apply only if the final return contains an entry concerning the inclusion of the amount to be included in necessary expenses pursuant to those provisions and has a written statement attached thereto concerning the calculation of the amount of the depreciation allowance for the specified machinery and equipment, etc.

⑧The provisions of paragraph (3) 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 final return (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 final return.

⑨The provisions of paragraph (4) 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 returns for the year of commencement of use and the following year, 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 final return for that following year (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).

⑩With regard to the calculation of the amount of income tax listed in Article 120, paragraph (1), item (iii) of the Income Tax Act where the provisions of paragraph (3) or (4) are applied with respect to income tax for a year, the phrase "Chapter III (Calculating the Amount of Taxes)" in that item is deemed to be replaced with "Chapter III (Calculating the Amount of Taxes) and Article 10-3, paragraphs (3) and (4) of the Act on Special Measures Concerning Taxation (Special Tax Credit for Income Tax Where a Small and Medium Sized Business Operator Acquires Machinery, etc.)".