Article 38Secondary Tax Liability of Persons in a Special Relationship Who Have Taken Over a Business

In the case where a taxpayer has transferred a business to an individual who is a relative sharing the same livelihood with the taxpayer or otherwise has a special relationship with the taxpayer, or to a controlled company (meaning a company that would fall under the company prescribed in Article 67, paragraph (2) of the Corporation Tax Act (Special Tax Rate for Specified Family Companies) if the taxpayer were selected as the shareholder or member forming the basis for the determination, and including a corporation similar thereto), in either case one specified by Cabinet Order, and the transferee carries on the same or a similar business, if the taxpayer is delinquent in paying the national tax pertaining to that business, and it is found that the amount to be collected is still insufficient even after the delinquent tax collection procedure has been executed on that national tax, the transferee is to bear secondary tax liability for the national tax pertaining to that delinquency, up to the limit of the value of the transferred property; provided, however, that this does not apply if the transfer was made one year or more before the statutory due date for tax payment of the national tax pertaining to the delinquency.