The Edinburgh firm – best known for the Grand Theft Auto series – is said to have benefited from £42.3 million over the past three years.
An investigation by the think tank TaxWatch has revealed Rockstar North, which was formed in Dundee in 1984 as DMA Design and released the first Grand Theft Auto game in 1998, has not paid any corporation tax in the UK for a decade.
Sales of Grand Theft Auto are believed to have surpassed more than 280 million, making it the most popular video game of all time, although it has proved hugely controversial since its first instalment due to the graphic nature of some scenes.
The company, which more than doubled its profits last year to £8.3m, has benefited from a cultural test introduced for video games by the British Film Institute five years ago that allows their developers to claim tax relief.
The Taxwatch report states: “Video games tax relief was introduced by the UK Government in 2014 to provide targeted support for games that were ‘culturally British’, with a particular focus on support for small and medium sized businesses.
“Our analysis shows the amount claimed by Rockstar North is the equivalent of 19 per cent of the total relief paid to the entire video games industry in the UK since the programme came into effect.
“This raises serious questions as to whether the relief is being properly targeted, at a time when the industry is lobbying for the relief to be expanded and made more generous.”
TaxWatch director George Turner said: “It is outrageous that the UK taxpayer is being asked to shell out tens of millions of pounds in subsidy to the developers of Grand Theft Auto, when at the time that the game’s developers put in their tax credit application Grand Theft Auto V had already generated several billion dollars in sales and profits.
“The video games tax relief was designed to help developers of games with a cultural content that would struggle to sell in the international market. That such a large amount of that relief is going to the developers of Grand Theft Auto clearly shows that it is not working as intended.”
A UK Government spokesman said claims for tax relief were “carefully scrutinised”.
No one from Rockstar North was available to comment.