About the indicator

When a country allows resident companies to deduct from their tax dues the royalty payments they pay to affiliates in other countries for the right to use intellectual property, this allows multinational corporations to abuse intra-group royalty payments to shift profit and underpay tax. They register their intellectual property in affiliates tax havens, then charge fees to use their own intellectual property, paying their profits into tax havens to avoid tax. This indicator assesses if the country restricts or disallows the deduction of royalties paid to non-resident group affiliates from the corporate income tax base.