①The income taxes imposed on a Nonresident are calculated by applying the provisions of Subsection 1 of the following Section (Taxing Nonresidents on Aggregate Income) to the domestic source income that is specified in each of the following items for the category of Nonresident set forth in the item:

②If a Nonresident set forth in either of the following items has domestic source income as specified in that item, the income taxes imposed on the Nonresident are calculated by applying the provisions of Section 3 (Separate Assessment of Income Tax for Nonresidents) to the domestic source income specified in the relevant item, in addition to what is imposed pursuant to the preceding paragraph:

①The tax base and the amount of income taxes imposed on the domestic source income, as specified in the relevant of the items of paragraph (1) of the preceding Article, of the Nonresident set forth in the relevant item (hereinafter referred to as "Income Taxes Imposed on Aggregate Income" in this Section) are the amounts calculated against the domestic source income specified in the relevant item, unless otherwise provided, in accordance with the provisions of Part II, Chapter I through Chapter IV (Calculation of the Tax Base and Amount of Income Taxes for Residents) (excluding Article 44-3 (Exclusion of Reduced Foreign Income Taxes from Gross Revenue), Article 46 (Exclusion of Foreign Taxes Credited against Income Taxes from Necessary Expenses), Article 60-4 (Special Provisions on Capital Gains upon Application of the Provisions on foreign exit tax), Article 73 through 77 (Medical Expense Deduction), Article 79 through 85 (Disability Deduction), Article 93 (Credit for the Amount Equivalent to the Foreign Tax Adjusted at Distribution), Article 95 (Foreign Tax Credit), and Article 95-2 (Special Provisions on Foreign Tax Credit Related to Special Provisions on Capital Gains upon Departure from Japan)).

②If Income in Each Class related to the domestic source income set forth in item (i), (a) of paragraph (1) of the preceding Article of the Nonresident set forth in that item (hereinafter referred to as "income attributable to a permanent establishment" in this Subsection) is calculated in accordance with the provisions of Part II, Chapter II, Section 2, Subsection 1 and Subsection 2 (Calculation of Income in Each Class) pursuant to the preceding paragraph, the following applies:

③Beyond what is prescribed in the preceding paragraph, Cabinet Order provides for the necessary particulars concerning the application of the provisions of paragraph (1).

If a reduction is made to the amount of foreign income taxes as prescribed in Article 165-6, paragraph (1) which is used as the basis for calculating the amount to be credited pursuant to the provisions of Article 165-6, paragraphs (1) through (3) (Foreign Tax Credit for Nonresidents) in any of the seven years beginning in the year after that in which a Nonresident is subject to the provisions of those paragraphs, the amount that Cabinet Order prescribes as corresponding to the part of the reduction to foreign income taxes which is pertinent to the application of the credit under paragraphs (1) through (3) of that Article in the year in which the date of the decision to reduce those taxes falls is not included in gross revenue that is used to calculate the Nonresident's real property income, business income, timber income, occasional income, or miscellaneous income for the year, calculated in accordance with paragraph (1) of the preceding Article with regard to the Nonresident's income attributable to a permanent establishment. In such a case, the amount arrived at when the amount specified by that Cabinet Order is deducted from the amount of the reduction is included in the gross revenue that is used to calculate the Nonresident's miscellaneous income for the year, calculated in accordance with that paragraph.

①If the amount calculated pursuant to Cabinet Order as the amount of net assets pertaining to the permanent establishment of a Nonresident for each year is less than the amount calculated pursuant to Cabinet Order as the amount that should be attributed to the permanent establishment out of the amount equivalent to the amount of net assets of the Nonresident, the amount calculated pursuant to Cabinet Order as the part corresponding to the shortfall, out of the amount prescribed by Cabinet Order as the amount of interest on liabilities (including anything prescribed by Cabinet Order as equivalent thereto) related to the business conducted by the Nonresident through the permanent establishment in that year, is 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 that year, calculated in accordance with Article 165, paragraph (1) (Calculation of the Tax Base and Amount of Income Taxes Imposed on Aggregate Income) with regard to the Nonresident's income attributable to a permanent establishment for that year.

②Cabinet Order provides for the necessary particulars concerning the application of the provisions of the preceding paragraph.

If, with regard to the amount of credit-eligible foreign income tax prescribed in Article 165-6, paragraph (1) (Foreign Tax Credit for Nonresidents), a Nonresident is subject to the provisions of that Article or of Article 138, paragraph (1) (Refunding Tax Withheld) as applied mutatis mutandis pursuant to Article 166 (Filing of Returns, Payment of Taxes, and Issuance of Refunds), that amount of credit-eligible foreign income tax is not included in necessary expenses or the amount spent in calculating the Nonresident's real property income, business income, timber income, or miscellaneous income, or occasional income, calculated in accordance with Article 165, paragraph (1) (Calculation of the Tax Base and Amount of Income Taxes Imposed on Aggregate Income) with regard to the Nonresident's income attributable to a permanent establishment.

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.

①If there has been, between the permanent establishment of a Nonresident and a place of business or similar place as prescribed in Article 161, paragraph (1), item (i) (Domestic Source Income), an internal dealing (meaning an internal dealing as prescribed in item (i) of that paragraph; hereinafter the same applies in this paragraph) equivalent to the acquisition or transfer by the permanent establishment of assets that would generate domestic source income set forth in item (iii), item (v), or item (vii) of that paragraph (other than that prescribed by Cabinet Order), the internal dealing is deemed to have been conducted at the amount prescribed by Cabinet Order as the value of those assets immediately before the internal dealing, and the Nonresident's real property income, business income, timber income, capital gains, or miscellaneous income is calculated in accordance with the provisions of Part II, Chapter I and Chapter II (Calculation of the Tax Base for Income Taxes for Residents) pursuant to Article 165, paragraph (1) (Calculation of the Tax Base and Amount of Income Taxes Imposed on Aggregate Income) with regard to the Nonresident's income attributable to a permanent establishment for each year.

②Cabinet Order provides for the acquisition cost of assets at the permanent establishment of a Nonresident if the provisions of the preceding paragraph apply, and for other necessary particulars concerning the application of the provisions of that paragraph.

①If a Nonresident with a permanent establishment is paid a distribution of proceeds from a group investment trust as prescribed in Article 176, paragraph (3) (Special Provisions on Taxation of Interest and Similar Income from Trust Property) in any year (limited to where the Nonresident is paid a distribution that falls under income attributable to a permanent establishment), the amount equivalent to the amount prescribed by Cabinet Order as the part corresponding to the distribution of proceeds that the Nonresident is paid, out of the amount of foreign tax adjusted at distribution related to that distribution of proceeds (meaning a tax prescribed by Cabinet Order which is equivalent to income tax imposed pursuant to foreign laws or orders as prescribed in that paragraph) which has been credited against the income tax on that distribution of proceeds pursuant to that paragraph or Article 180-2, paragraph (3) (Special Provisions on Taxation of Interest and Similar Income from Trust Property) (referred to as the "amount equivalent to the foreign tax adjusted at distribution" in the following paragraph), is credited against the income tax for that year, up to the maximum credit (meaning the amount prescribed by Cabinet Order as the amount equivalent to the income tax for that year calculated in accordance with the provisions of Article 89 through Article 92 (Tax Rates and Dividend Tax Credits) pursuant to Article 165, paragraph (1) (Calculation of the Tax Base and Amount of Income Taxes Imposed on Aggregate Income) with regard to the income related to income attributable to a permanent establishment).

②The provisions of Article 93, paragraph (2) (Credit for the amount equivalent to the foreign tax adjusted at distribution) apply mutatis mutandis where a credit is made under the preceding paragraph with regard to the amount equivalent to the foreign tax adjusted at distribution.

③The amount to be credited pursuant to paragraph (1) is credited against the income tax on taxable total income, the income tax on taxable timber income, and the income tax on taxable retirement income calculated in accordance with Article 165, paragraph (1), in that order. In such a case, if the amount to be credited exceeds the income tax for the year, the amount to be credited is the amount equivalent to that income tax.

④Beyond what is prescribed in the preceding two paragraphs, Cabinet Order provides for the necessary particulars concerning the application of the provisions of paragraph (1).