Article 57Carryover of Losses

①In the case where a domestic corporation shows any net operating loss that arose in a business year starting within ten years prior to the first day of each of its business years (such amount excludes the amount that was included in deductible expenses in the calculation of the amount of income for the business year prior to each relevant business year under this paragraph and the amount that was used as the basis of the calculation of the amount to be refunded under Article 80 (Refund by Carryback of Loss)), the amount equivalent to the net operating loss is included in deductible expenses, when calculating the amount of income for each relevant business year; provided, however, that in the case where the amount equivalent to the net operating loss exceeds the amount that remains after deducting, from the limit on inclusion in deductible expenses (meaning the amount equivalent to 50 percent of the amount of income for each relevant business year calculated without applying the provisions of the main clause and without applying the provisions of Article 59, paragraphs (3) and (4) (Inclusion in Deductible Expenses of the Net Operating Loss Where Corporate Reorganization Caused a Release from Obligation) and Article 62-5, paragraph (5) (Transfer of Assets by Distribution in Kind)), the amount which is equivalent to any net operating loss that had arisen in a business year prior to the business year when the net operating loss arose and which is to be included in deductible expenses when calculating the amount of income for each relevant business year under the main clause, the provisions of the main clause do not apply to the amount of the excess.

②In the case where a qualified merger with the domestic corporation set forth in the preceding paragraph as the acquiring corporation has been effected, or in the case where the residual assets of another domestic corporation with which the domestic corporation has a full controlling interest (limited to a full controlling interest held by the domestic corporation or the mutual relationship prescribed in Article 2, item (xii)-7-6 (Definitions)) and of which the domestic corporation holds the whole or a part of the issued shares or capital contributions have been determined, when the acquired corporation involved in the qualified merger or that other domestic corporation (hereinafter referred to as an "acquired corporation, etc." in this paragraph) shows any net operating loss that arose in each of the business years starting within ten years prior to the date of the qualified merger, or starting within ten years prior to the day following the date of determination of residual assets (hereinafter referred to as a "business year within preceding ten years" in this paragraph, the following paragraph and paragraph (7), item (i)) (such net operating loss is limited to the net operating loss in the case where the acquired corporation, etc. has filed a Final Return for the business year within preceding ten years in which the net operating loss (including a net operating loss which was deemed to be that of the acquired corporation, etc. under this paragraph and excluding a net operating loss which was deemed not to exist under paragraphs (4) through (6), paragraph (8) or paragraph (9) or Article 58, paragraph (1) (Special Provisions for Losses in the Business Year When a Blue Return Has Not Been Filed); the same applies in the following paragraph) arose, or meets any other requirements as specified by Cabinet Order, and excludes the amount included in deductible expenses when calculating the amount of income for a business year within preceding ten years of the acquired corporation, etc. under the preceding paragraph and the amount used as the basis of the calculation of the amount to be refunded under Article 80; hereinafter referred to as the "amount of unappropriated loss" in this paragraph), with regard to the application of the provisions of the preceding paragraph in each business year on or after the business year of the domestic corporation containing the date of the qualified merger or the business year containing the day following the date of determination of residual assets (hereinafter referred to as the "business year of the merger, etc." in this paragraph), the amount of unappropriated loss that arose in the business year within preceding ten years (in the case where that other domestic corporation has two or more shareholders, etc., the amount calculated by dividing the amount of unappropriated loss by the total number or the total amount of the issued shares or capital contributions of that other domestic corporation (excluding the shares that that other domestic corporation holds in itself and the capital contributions made thereby) and multiplying the result by the number or the amount of the shares of or capital contributions to that other domestic corporation held by the domestic corporation) is deemed to be the net operating loss that arose in each business year of the domestic corporation containing the first day of the business year within preceding ten years in which the respective amount of unappropriated loss arose (or, for the amount of unappropriated loss that arose in the business year within preceding ten years of the acquired corporation, etc. starting on or after the first day of the business year of the merger, etc. of the domestic corporation, in the previous business year of the business year of the merger, etc.).

③The amount of unappropriated loss prescribed in the preceding paragraph of an acquired corporation involved in the qualified merger set forth in the preceding paragraph (limited to one that has a controlling interest with the domestic corporation set forth in that paragraph (or, in the case where the domestic corporation is a corporation established through the qualified merger, with another acquired corporation involved in the qualified merger; hereinafter the same applies in this paragraph)) or of another domestic corporation whose residual assets have been determined as set forth in the preceding paragraph (hereinafter referred to as an "acquired corporation, etc." in this paragraph) is not to include the following net operating loss, in the case where the qualified merger does not fall under what is specified by Cabinet Order as a merger for conducting business jointly, nor does the case fall under the case specified by Cabinet Order as a case where a controlling interest has continuously existed between the acquired corporation, etc. and the domestic corporation set forth in that paragraph since the latest of the day five years prior to the first day of the business year of the domestic corporation containing the date of the qualified merger (or, in the case where the qualified merger establishes a corporation, the date of the qualified merger) or the day five years prior to the first day of the business year containing the day following the date of determination of residual assets, the date of establishment of the acquired corporation, etc., or the date of establishment of the domestic corporation:

④In the case where a qualified merger, or a merger that does not fall under a qualified merger and to which the provisions of Article 61-11, paragraph (1) (Profit or Loss from Transactions between Corporations with a Full Controlling Interest) apply, a qualified company split, a qualified capital contribution in kind or a qualified in-kind distribution (hereinafter referred to as a "qualified organizational restructuring, etc." in this paragraph) has been effected between a domestic corporation set forth in paragraph (1) and a corporation in a controlling interest (meaning a corporation that has a controlling interest with the domestic corporation; hereinafter the same applies in this paragraph), with the domestic corporation as an acquiring corporation, succeeding corporation in a company split, corporation receiving a capital contribution in kind or corporation receiving a distribution in kind (excluding the case specified by Cabinet Order as a case where a controlling interest has continuously existed between the domestic corporation and the corporation in a controlling interest since the latest of the day five years prior to the first day of the business year containing the date of the qualified organizational restructuring, etc. (or, in the case where the qualified organizational restructuring, etc. is a distribution of all residual assets, the day following the date of determination of residual assets) (hereinafter referred to as the "business year of an organizational restructuring" in this paragraph) of the domestic corporation, the date of establishment of the domestic corporation, or the date of establishment of the corporation in a controlling interest), when the qualified organizational restructuring, etc. does not fall under the category that is specified by Cabinet Order as a qualified organizational restructuring, etc. for the purpose of conducting business jointly, with regard to the application of the provisions of paragraph (1) in each business year of the domestic corporation on or after the business year of an organizational restructuring, the following net operating loss out of the domestic corporation's net operating loss prescribed in that paragraph (including the amount deemed to be the domestic corporation's net operating loss under paragraph (2) and excluding the amount deemed not to exist under this paragraph through paragraph (6), paragraph (8) or paragraph (9) or Article 58, paragraph (1); hereinafter the same applies in this paragraph and the following paragraph) is deemed not to exist:

⑤In the case where a domestic corporation set forth in paragraph (1) is subject to the application of the provisions of Article 59, paragraph (1), (2) or (4), with regard to the application of the provisions of paragraph (1) in each business year of the domestic corporation on or after the applicable year prescribed in those provisions (hereinafter referred to as the "applicable year" in this paragraph) (or, in the case where it is subject to the application of the provisions of paragraph (4) of that Article, each business year after the applicable year), the amount specified by Cabinet Order as the amount of the portion of the net operating loss prescribed in paragraph (1) that consists of the amount to be included in deductible expenses when calculating the amount of income for the applicable year under the provisions of paragraph (1), (2) or (4) of that Article is deemed not to exist.

⑥In the case where a group tax sharing corporation does not fall under any of the corporations listed in the items of Article 64-11, paragraph (1) (Gains or Losses on the Fair Valuation of Assets upon the Start of the Group Tax Sharing System) or the items of Article 64-12, paragraph (1) (Gains or Losses on the Fair Valuation of Assets upon Joining the Group Tax Sharing System) (referred to as a "corporation excluded from fair valuation" in item (i) of the following paragraph and paragraph (8)) (excluding the case where the group tax sharing corporation is a group tax sharing subsidiary corporation and, during the period from the day on which the approval under the provisions of Article 64-9, paragraph (1) (Group Tax Sharing Approval) (hereinafter referred to as "group tax sharing approval" in this Article) became effective with regard to the group tax sharing corporation until the end of the business year of the group tax sharing parent corporation of the group tax sharing corporation that contains that day, the group tax sharing approval has ceased to be effective under the provisions of Article 64-10, paragraph (5) or (6) (Withdrawal from the Group Tax Sharing System, etc.) (excluding the case where it has ceased to be effective due to a merger with the group tax sharing corporation as the acquired corporation and another group tax sharing corporation as the acquiring corporation having been effected, or due to the residual assets of the group tax sharing corporation having been determined)), with regard to the application of the provisions of paragraph (1) in each business year of the group tax sharing corporation (including a domestic corporation that was the group tax sharing corporation) starting on or after the day on which the group tax sharing approval became effective, the net operating loss that arose in each business year that started before that day (including the amount deemed under the provisions of paragraph (2), in each business year that started before that day, to be the net operating loss that arose in a business year prior to each relevant business year) is deemed not to exist.

⑦In the case where a merger with a group tax sharing corporation as the acquiring corporation and another domestic corporation that has a group tax sharing full controlling interest (including a relationship specified by Cabinet Order as being equivalent thereto; hereinafter the same applies in this paragraph) with the group tax sharing corporation as the acquired corporation has been effected, or in the case where the residual assets of another domestic corporation that has a group tax sharing full controlling interest (limited to a full controlling interest held by the group tax sharing corporation or the mutual relationship prescribed in Article 2, item (xii)-7-6) with a group tax sharing corporation and of which the group tax sharing corporation holds the whole or a part of the issued shares or capital contributions have been determined, the provisions of paragraph (2) do not apply to the following net operating loss:

⑧In the case where a group tax sharing corporation that falls under a corporation excluded from fair valuation does not fall under the case specified by Cabinet Order as a case where a controlling interest has continuously existed between the group tax sharing corporation and the group tax sharing parent corporation of the group tax sharing corporation (or, in the case where the group tax sharing corporation is a group tax sharing parent corporation, any of the other group tax sharing corporations) from the later of the day five years prior to the day on which the group tax sharing approval became effective or the date of establishment of the group tax sharing corporation until the day on which the group tax sharing approval became effective (excluding the case where the group tax sharing corporation is a group tax sharing subsidiary corporation and, during the period from that day until the end of the business year of the group tax sharing parent corporation of the group tax sharing corporation that contains that day, the group tax sharing approval has ceased to be effective under the provisions of Article 64-10, paragraph (5) or (6) (excluding the case where it has ceased to be effective due to a merger with the group tax sharing corporation as the acquired corporation and another group tax sharing corporation as the acquiring corporation having been effected, or due to the residual assets of the group tax sharing corporation having been determined)), and does not fall under the case specified by Cabinet Order as a case where the group tax sharing corporation and another group tax sharing corporation conduct business jointly after the group tax sharing approval has become effective with regard to the group tax sharing corporation, when the group tax sharing corporation has commenced a new business on or after the day on which it last came to have a controlling interest with the group tax sharing parent corporation of the group tax sharing corporation (or, in the case where the group tax sharing corporation is a group tax sharing parent corporation, the day on which it last came to have a controlling interest with the one of the other group tax sharing corporations whose day of last coming to have a controlling interest with the group tax sharing corporation is the earliest; referred to as the "date the controlling interest arose" in item (i)), with regard to the application of the provisions of paragraph (1) in each business year of the group tax sharing corporation (including a domestic corporation that was the group tax sharing corporation) starting on or after the day on which the group tax sharing approval became effective (or, in the case where it commenced the business after the end of the business year containing that day, each business year ending on or after the day on which it commenced the business), the following net operating loss is deemed not to exist:

⑨In the case where the group tax sharing approval ceases to be effective with regard to a group tax sharing corporation under the provisions of Article 64-10, paragraph (5), with regard to the application of the provisions of paragraph (1) in each business year of the domestic corporation that was the group tax sharing corporation starting on or after the day on which the approval ceases to be effective, the net operating loss that arose in each business year that started before that day (including the amount deemed under the provisions of paragraph (2), in each business year that started before that day, to be the net operating loss that arose in a business year prior to each relevant business year) is deemed not to exist.

⑩The provisions of paragraph (1) apply only in the case where the domestic corporation set forth in that paragraph filed a Final Return for the business year in which the net operating loss (excluding the amount deemed to be the net operating loss of the domestic corporation under paragraph (2)) arose and filed a Final Return thereafter on a continuous basis (in the case of applying the provisions of paragraph (1) to the amount deemed to be the net operating loss of the domestic corporation under paragraph (2), in the case where the domestic corporation filed a Final Return for the business year of the merger, etc. set forth in paragraph (2) and filed a Final Return thereafter on a continuous basis), and preserves the books and documents pertaining to the business year in which the net operating loss arose as specified by Ministry of Finance Order.

⑪With regard to the application of the provisions of the proviso to paragraph (1) to the income for each business year specified in the following items of the domestic corporation listed in the respective items, the phrase "the amount equivalent to 50 percent of the amount of income" in the proviso to that paragraph is deemed to be replaced with "the amount of income".

⑫The provisions of the preceding paragraph (limited to the part pertaining to item (ii)) apply only in the case where there is the attachment of documents certifying that the fact prescribed in that item has occurred to the Final Return, amended return or written request for reassessment.

⑬Even in the case where a Final Return, amended return or written request for reassessment without the attachment of the documents set forth in the preceding paragraph has been filed, the district director may apply the provisions of paragraph (11) (limited to the part pertaining to item (ii)), when the district director finds that there are unavoidable circumstances for the failure to attach them.

⑭In the case where the acquiring corporation set forth in paragraph (2) is a corporation that was established as a result of a qualified merger, necessary matters concerning the application of the provisions of paragraph (1), and other necessary matters concerning the application of the provisions of paragraphs (1) through (9) and paragraph (11), are specified by Cabinet Order.