In accordance with Article 57-3, paragraph 1 of the Income Tax Act (Conversion of Transactions on a Foreign Currency Denominated Basis), conversion into yen (excluding the conversion into yen where Article 57-3, paragraph 2 of the said Act is applicable) is performed based on the middle (TTM) rate of the telegraphic transfer selling (TTS) rate and the telegraphic transfer buying (TTB) rate on the day on which the transaction should be accounted for (hereinafter referred to as "transaction date").
However, in the calculation of the amount of income arising from operations that yield real estate income, business income, timber income or miscellaneous income (hereinafter, referred to as the "the amount of real estate income, etc."), the amounts of sales and other income or assets may be converted by the TTB rate on the transaction date, while purchases and other expenses (including the cost and loss) or liabilities may be converted by the TTS rate, provided that the same calculation is applied continuously.
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1 In principle, the TTS, TTB or TTM rate that was published by the taxpayer's main financial institution is used, but other reasonable market rate may also be used if it is applied continuously.
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2 In the calculation of the amount of real estate income, etc., any of the following foreign exchange buying and selling rates (hereinafter referred to as "exchange rate") that are deemed reasonable according to the nature of the foreign currency transaction may be used, provided that the same calculation is applied continuously:
(1) The TTB, TTS or TTM rate on the last day of the month/week preceding the month/week to which the transaction date belongs, or on the first day of the current month/week. (2) The TTM rate or the average value of TTB or TTS rate during a certain period within one month, such as the average rate for the month/week preceding the month/week to which the transaction date belongs. |
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3 The exchange rate on the day for conversion into yen (representing the date to be used as the basis for calculating the exchange rate, the same shall apply throughout this Note 3) shall be as follows:
(1) If there is no exchange rate available on that day, the exchange rate on the day that is closest to and preceding that day will be used. (2) If there is more than one exchange rate available on that day, the closing market rate of that day (the market rate at the time of transaction if it is a trading day) will be used. However, if it is a trading day, the closing market price on the trading day may also be used. |
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4 With respect to assets that are immediately acquired or generated upon purchasing foreign currency using Japanese currency, or the borrowings denominated in a foreign currency in the case of selling foreign currency and immediately receiving Japanese currency, the actual amount of Japanese currency paid or received may be used as the amount converted into yen.
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5 With respect to transactions denominated in a foreign currency but paid in yen, the amount in yen shall be estimated according to examples of yen conversion of foreign currency transactions. In this case, when a difference arises between the estimated amount and the actual amount of payables and receivables pertaining to the transaction, the difference shall be included in the total earnings or necessary expenses when calculating the amount of various income for the year in which the settlement of said payables and receivables was made.
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