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Tax Code Complexity
This describes the complexity inherent in the different regulations of the tax code.
Additional Taxes
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
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.
CFC-Rules
Regulations to combat the shifting of profits to companies, usually located in low- or no-tax jurisdictions that are controlled by a resident MNC.
Corporate Reorganization
Change in the structure or ownership of an MNC through a merger, division, transfer of assets, share exchange or other form of reorganization.
Depreciation
Deductions for allocating the costs of tangible and intangible assets over their useful lives. Excluding special incentive schemes for investment.
Dividends
Cash dividends received from or paid to another resident or foreign (non-resident) corporation. Excluding special group treatment regulations.
General Anti-Avoidance
Broad and general regulations denying the benefit of a transaction which has been designed or executed wholly or substantially to avoid taxes.
Group Treatment
Regime under which profits and losses of associated companies may be grouped together and treated as aggregated profits or losses of a single enterprise.
Interest
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.
Investment Incentives
Measures designed to encourage (re-)investment and promote innovation through research and development (including special incentives relating to depreciation and amortization).
Loss Offset
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?
Royalties
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.
Transfer Pricing
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
Guidance provided by the tax authority or any other law to resolve uncertain tax issues.
Enactment
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.
Audits
Examination and verification of a tax return carried out by the tax authority.
Appeals
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.
Complexity (Quintiles)
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
Very low
Complexity (Quintiles)
Very high
Funded by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) – Project-ID 403041268 – TRR 266
Overall Tax Complexity
weight
Tax Code Complexity
10 %
Additional Taxes
10 %
(Alternative) Minimum Tax
10 %
Capital Gains
10 %
CFC-Rules
10 %
Corporate Reorganization
10 %
Depreciation
10 %
Dividends
10 %
General Anti-Avoidance
10 %
Group Treatment
10 %
Interest
10 %
Investment Incentives
10 %
Loss Offset
10 %
Royalties
10 %
Statutory Tax Rate
10 %
Transfer Pricing
Tax Framework Complexity
10 %
Guidance
10 %
Enactment
10 %
Payment & Filing
10 %
Audits
10 %
Appeals
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Paderborn University & LMU Munich
Paderborn University & LMU Munich
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