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4. Tax base

a. Income During Each Business Year

The income of a domestic corporation during each business year is the amount

remaining after deducting the gross amount of losses from the gross amount of gains in

the same business year.

b. Calculation of Tax Base

(1) The basis for corporation tax on the income of a domestic corporation for each

business year shall be the income for each business year remaining after the

successive deductions of the following items.

(a) Amount of deficits carried forward for the previous 5 years which were not

previously deducted (Note: it shall not be deductible in cases where the tax authority

determines that a corporation unreasonably reduces its tax burden through mergers

or consolidations)

(b) Non-taxable income in accordance with the Corporation Tax Law and other

relevant laws

(c) Deductible income in accordance with the Corporation Tax Law and other related laws

(2)   However, the deductible amount specified in Paragraph (1) shall not exceed the

amount of income for each business year.  In the case of a corporation in deficit, the

said amount of deduction shall not apply.

(3)   Provisions concerning the calculation of taxable amount of income for the purpose

of corporation tax shall be applicable in accordance with the actual details of the

transactions.

c. Business Year for Gains and Losses

A business year for gains and losses of a domestic corporation is the business year in

which the date of finalization of the said gains and losses occur. Specific dates are

shown below.

(1) Sale of merchandise or products:

the date of delivery of said merchandise or products

(2) Transfer of other assets:

the date of receiving consideration, or the earliest date among registration,

delivery, or utilization of the assets

(3) Sale of assets through consignment:

the date of sale by the consignee

(4) Sale or transfer of assets on a long-term installment payment basis:

the amount collectible according to the terms of the payment for the business

year and the expenses attributable thereto

(5) Long-term contract concerning construction or manufacturing for one or more business years:

the completion percentage of the construction or manufacturing of the items

(6) Interest, insurance premiums, or installment payments receivable by banking

institutes, insurance companies, securities companies, mutual saving and finance

companies:

the date that the said gains have actually been received

(7) Losses or gains of revaluation of foreign currency credits and liabilities due to a

change in the exchange rate:

include or deduct from gross income for the respective business year the gains

or losses on the translation of foreign currency receivables or payables

(8) Deemed dividends and distribution:

(a) In the case of effacement of stocks, decrease of capital:

the date of decision of effacement, or decision thereof by a general

stockholders meeting, etc.

(b) In the case of transfer of surplus and reserves into capital except for capital

reserve and assets revaluation reserve into capital:

the date of decision of transfer thereof by the general stockholders meeting, etc.

(c) In the case of dissolution of a corporation:

the date of final determination of the residual value of assets

(d) In the case of merger or consolidation:

the date of registration of the merger or consolidation

(e) In the case of corporate division:

the date of the registration of the division