Do46014-12438 (No. 28, 2001)

special provisions

It should be applicable to conversion of fixed assets for business into a corporation engaged in manufacturing business, etc. by investing in kind or transferring business for at least one year.

In order to be subject to the application of the carryover taxation of the income tax on the transfer of corporation pursuant to Article 32 of the Restriction of Special Taxation Act, it should be applicable to the case where the resident engaged in the manufacturing business, etc. is converted into a corporation engaged in the manufacturing business, etc. by investing in kind the fixed assets for business or operating the business for not less than one year, which is determined by the place of business

Article 32 of the Restriction of Special Taxation Act 【Carryover Taxation of Transfer Income Tax for Conversion into Corporation】

1. A summary of the contents of inquiry;

Whether the carryover taxation of transfer income tax pursuant to Article 32 of the Restriction of Special Taxation Act may be applied in case where a resident who has newly established a new factory (B) in a separate place in March 2001, who has operated a manufacturing business (A) since 1994, has moved into a corporation by means of investment in kind or transfer of business only after closing a A place of business.

2. Materials on the contents of questioning;

(a) relevant tax laws and regulations (law, enforcement decree, enforcement rule, basic rules);

【Carryover Taxation on Transfer Income Tax for Conversion into Corporation】 Article 32 of the Restriction of Special Taxation Act

(1) Where a resident engaged in a manufacturing business, mining, construction business, or any other business prescribed by Presidential Decree (hereafter referred to as "manufacturing business, etc." in this Article) is converted into a corporation engaged in the manufacturing business, etc. by investing in kind fixed assets for business or by taking over the business prescribed by Presidential Decree, he/she may be subject to the application of taxation carried forward to the relevant fixed assets for business.

(2) The provisions of paragraph (1) shall apply only where the capital of a corporation to be newly established is not less than the amount as determined by the Presidential Decree.

Not more than 10

【Carryover Taxation of Transfer Income Tax for Conversion into Corporation】 Article 29 of the Enforcement Decree of the Restriction of Special Taxation Act

(1) omitted.

(2) For the purpose of Article 32 (1) of the Act, the term “business transfer method as prescribed by the Presidential Decree” means that a person who has been engaged in the relevant business for not less than one year retroactively from the date of incorporation establishes a corporation by investing not less than the amount pursuant to paragraph (4) and comprehensively transferring all rights and obligations concerning the business of the relevant corporation within three months from the date of incorporation (amended on December 31, 1998).

Not more than 10

(b) Similar cases (judicial precedents, judicial precedents, review precedents, and established rules);

○ Japan 46014-1141 ( October 23, 1998)

Where a resident engaged in manufacturing business, mining business, construction business, etc. is converted into a corporation by the method of business transfer after the relocation of the place of business, even if he/she was not engaged in the business for not less than one year prior to the date of incorporation due to the relocation of the place of business, if he/she conducts the relevant business for not less than one year retroactively from the date of establishment of the same type of business, he/she may be subject to the carried-over taxation of capital gains tax pursuant to Article 32 of the Regulation of Tax Reduction and Exemption Act. Where a resident transfers fixed assets for business to a corporation by investing in kind after the relocation of the place of business, he/she may be subject to the carried-over taxation of capital gains

○ Japan 46014-2094, 1996.12

1. Omitted;

2. In such cases, the issue of whether a person has engaged in the manufacturing business for not less than one year is determined by the place of business converted into a corporation;