Tax Code Complexity
This describes the complexity inherent in the different regulations of the tax code.
Taxes that are levied on MNCs' taxable income in addition to corporate income taxes (commonly referred to as "local" or industry-specific taxes).
(Alternative) Minimum Tax
Separate income tax regulations to ensure that an MNC has to pay at least a minimum amount of taxes.
Capital gains realized by an MNC on the disposal of non-inventory assets (e.g., property, shares and bonds). Excluding special group treatment and corporate reorganization regulations.
Regulations to combat the shifting of profits to companies, usually located in low- or no-tax jurisdictions that are controlled by a resident MNC.
Change in the structure or ownership of an MNC through a merger, division, transfer of assets, share exchange or other form of reorganization.
Deductions for allocating the costs of tangible and intangible assets over their useful lives. Excluding special incentive schemes for investment.
Cash dividends received from or paid to another resident or foreign (non-resident) corporation. Excluding special group treatment regulations.
Broad and general regulations denying the benefit of a transaction which has been designed or executed wholly or substantially to avoid taxes.
Regime under which profits and losses of associated companies may be grouped together and treated as aggregated profits or losses of a single enterprise.
Payments received from or paid to another resident or foreign (non-resident) corporation as a consideration for lending or borrowing money. If an MNC’s capital is made up of a much greater proportion of debt than equity, it is said to be thinly capitalized. Excluding special group treatment regulations.
Measures designed to encourage (re-)investment and promote innovation through research and development (including special incentives relating to depreciation and amortization).
Form of relief for ordinary losses incurred. Excluding special group treatment regulations. Can losses be offset against other income in the year in which the loss was incurred?
Payments of any kind received from or paid to another resident or foreign (non-resident) corporation as consideration for the use of, or the right to use, intellectual property (e.g., copyrights, patents or trademarks). Excluding special group treatment regulations and incentive schemes for investment.
Statutory Tax Rate
Tax rate that applies to MNCs' determined taxable income. Excluding special local taxes on this income and rate reliefs for certain industries.
Regulations to prevent prices from being charged to a subsidiary or other related party in order to excessively reduce taxable income.
Tax Framework Complexity
This describes the complexity that arises from the features and processes of a tax system.
Guidance provided by the tax authority or any other law to resolve uncertain tax issues.
Formal process of how a tax proposal becomes law. It begins with the discussion of a proposed change in the tax law and ends with the tax regulation becoming effective.
Payment & Filing
Process of preparing and filing a tax return as well as paying taxes.
Examination and verification of a tax return carried out by the tax authority.
Process of challenging a tax assessment. It begins with the filing of a tax appeal and ends with its resolution at the administrative or judicial appeal level.
Higher values indicate a higher degree of complexity.
Theoretically, values can range between 0 and 1. However, the real values do not necessarily have to cover the full value range.
Overall Tax Complexity
Funded by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) – Project-ID 403041268 – TRR 266
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Paderborn University & LMU Munich
Paderborn University & LMU Munich
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