Article 37Special Provisions on Deduction of Consumption Tax on Purchases for Small and Medium-Sized Business Operators

①Where a business operator (excluding a business operator exempted from the obligation to pay consumption tax under the main clause of Article 9, paragraph (1), and a foreign business operator that does not have, on the first day of the taxable period, a permanent establishment prescribed in Article 2, paragraph (1), item (viii)-4 (Definitions) of the Income Tax Act or Article 2, item (xii)-19 (Definitions) of the Corporation Tax Act) files with the district director having jurisdiction over its place for tax payment a written notification stating that it will be subject to the application of this paragraph for a taxable period in which the taxable sales in the base period (meaning the taxable sales in the base period prescribed in Article 9, paragraph (1); the same applies hereinafter in this paragraph and in paragraph (1) of the following Article) are 50 million yen or less (excluding the taxable period specified by Cabinet Order of a split-off parent corporation or split-off subsidiary corporation prescribed in Article 12, paragraph (1) relating to a corporate split, etc. prescribed in that paragraph (hereinafter in this paragraph and paragraph (1) of the following Article referred to as a "taxable period connected with a split, etc.")), then for the taxable periods (excluding taxable periods in which the taxable sales in the base period exceed 50 million yen and taxable periods connected with a split, etc.) on or after the taxable period following the taxable period that includes the day on which that written notification was filed (or, where the taxable period that includes the day on which that written notification was filed is the taxable period that includes the day on which the business was commenced or any other taxable period specified by Cabinet Order, that taxable period), the total amount of tax on taxable purchases, etc. that may be deducted from the consumption tax on the tax base amount under the provisions of Articles 30 through the preceding Article is, notwithstanding those provisions, the total of the following amounts. In this case, that total of the amounts is deemed to be the consumption tax on purchases for that taxable period.

②Where, under item (ii) of the preceding paragraph, there is an amount that cannot be fully deducted after deducting, from the consumption tax on the total of the amounts of the tax base for specified taxable purchases for that taxable period, the total amount of consumption tax relating to the amount for which a refund, etc. of consideration for specified taxable purchases prescribed in Article 38-2, paragraph (1) was received in that taxable period, and there is an amount that still cannot be fully deducted after deducting the amount that cannot be fully deducted from the amount set forth in item (i) of the preceding paragraph (hereinafter in this paragraph referred to as the "undeducted amount"), that undeducted amount is deemed to be consumption tax on a taxable transfer, etc. of assets and is added to the amount of consumption tax on the tax base amount for that taxable period.

③A business operator that intends to be subject to the application of paragraph (1) may not file the written notification under that paragraph, in a case listed in any of the following items, during the period specified in that item; provided, however, that this does not apply where the business operator files the written notification in order to be subject to the application of that paragraph from the taxable period that includes the day on which it commenced business or any other taxable period specified by Cabinet Order.

④Where a business operator prescribed in the items of the preceding paragraph has come to fall under a case listed in those items, and has filed the written notification under paragraph (1) with the district director having jurisdiction over its place for tax payment during the period from the first day of the taxable period that includes the day of the purchase, etc. of an adjustment-target fixed asset prescribed in item (i) or (ii) of the preceding paragraph, the day of the purchase, etc. of a high-value specified asset prescribed in item (iii) of that paragraph, or the adjustment application date prescribed in item (iv) of that paragraph, or from the first day of the taxable period that falls under the case prescribed in item (v) of that paragraph, to the day on which it came to fall under the case listed in the items of that paragraph, the filing of that written notification is deemed not to have been made for the purpose of applying the provisions of paragraph (1).

⑤A business operator that has filed the written notification under the provisions of paragraph (1) must, when it intends to cease to be subject to the application of that paragraph or when it has discontinued its business, file a written notification to that effect with the district director having jurisdiction over its place for tax payment.

⑦When a written notification under the provisions of paragraph (5) has been filed, the notification under the provisions of paragraph (1) ceases to be effective on and after the day following the last day of the taxable period that includes the day on which that filing was made.

⑧Special provisions on the application of paragraph (1) or the preceding paragraph in the case where, owing to unavoidable circumstances, the written notification under the provisions of paragraph (1) or (5) could not be filed by the day preceding the first day of the taxable period for which the business operator intends to become subject to, or to cease to be subject to, the application of paragraph (1) are specified by Cabinet Order.