Article 165-5Exclusion of Allocated Expenses from Necessary Expenses If Documents on Allocated Expenses Are Not Retained

①If a Nonresident is subject to the provisions of Article 165, paragraph (2), item (ii) (Calculation of the Tax Base and Amount of Income Taxes Imposed on Aggregate Income), and documents used as the basis for calculating the allocation and other documents prescribed by Ministry of Finance Order are not retained with regard to the amount allocated pursuant to Cabinet Order as prescribed in that item (hereinafter referred to as "allocated expenses" in this Article), the allocated expenses for which those documents were not retained are not included in necessary expenses or the amount expended in calculating the Nonresident's real property income, business income, timber income, or miscellaneous income, or occasional income for each year, calculated in accordance with Article 165, paragraph (1) with regard to the Nonresident's income attributable to a permanent establishment for that year.

②Even if the documents referred to in the preceding paragraph have not been retained with regard to all or part of the allocated expenses, the district director may decide not to apply the provisions of that paragraph to the allocated expenses for which those documents were not retained, if the district director finds that there were unavoidable circumstances for the failure to retain them, but only if those documents are submitted.