GLOBAL BUSINESSCOMPLEXITY INDEX
2021

Bringing clarity to the complexitiesof doing business across borders

CONTENTS

Introduction

2

Global highlights– The growth of responsible governance4– Simplification through digitalisation

10– International vs local complexity

12

GBCI rankings 2021

16

Ten most complex jurisdictions

18

Highlights– Accounting and tax

24– Global entity management28– Human resources and payroll

32

Ten least complex jurisdictions

36

Conclusion

42

Methodology

44

Glossary

45

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

FOREWORD

I’m delighted to be able to bring to you our 2021 Global
Business Complexity Index, looking at differences in
the rules and requirements for doing business in 77
jurisdictions around the world. Those jurisdictions
cover just 32% of the total country count, but capture
the world’s largest economies and investment hubs,
representing 71% of world population, 92% of world
GDP and 95% of net FDI inflow.
As was the case in 2020, our 2021 report is written in the
shadow of Covid-19 and the disruptions to travel, tradeand health that it has brought. One small action on ourpart to help our clients was to list government support
schemes, covering more than 1,300 such schemesaround the world. Against that difficult backdrop,
attracting and encouraging business investment
remains a critical driver of the world economy and local
prosperity, and we at TMF Group are pleased to play ourpart in encouraging simplification by regulatorsand governments.
One such simplification in discussion as we go to print
are the G7/OECD minimum corporate tax proposals.
While our assessment of fiscal complexity is about tax
rules rather than rates, we have taken a brief look at thecorrelation between corporate tax, complexity and theinvestment different jurisdictions attract. A number ofoffshore locations (or ‘tax havens’, in G7 parlance) are
low in complexity and high on corporate tax rate. Tax is
a complex subject, and there are often big differences
between headline and effective rates. It neverthelesssuggests that other factors, like ease of doing business,underline their appeal often to funds rather than tocorporates and that their predicted demise as a resultof the G7 proposals may well be overstated. Seen purely
as a simplifying device, we also note that other global
standards like IFRS tend to have partial adoption and end
up adding a patchwork layer to local rules for firms toobey, rather than creating a net simplification.

Looking ahead, we see no shortage of geopoliticaltensions for firms to factor into their investment andoperating decisions. There is continued debate over
the UK/EU trade agreement, focusing primarily on the
Irish border, and economic nationalism prevails in many
parts of the world. The big topic is relations between
US and China, the world’s two largest economies andsources of FDI. A tense relationship is likely to worsen
given the US government review of the origins of
Covid-19. Indeed, the investigation may act as a catalyst
for a much more overtly bipolar world economy, withcountries and companies having to pick sides in termsof rules, infrastructure and markets. Firms required tostraddle that potential divide may well need to consider
permanent establishment as a protection against
barriers ahead.

Regardless of those macro considerations, many of ourclients operate in multiple jurisdictions, enjoying theaccess it brings them to markets for their goods andfor talent. A continuing observation, from our now eight
years of reporting on complexity, is that some of themost attractive markets to operate in are both the mostcomplex and the most punitive for getting things wrong.
Firms typically have a small number of large bases,
often in relatively simple locations in which to operate.
They then have a long tail of offices at lower scale inmore complex locations. That exposure caused by their‘complex tail’ is where risk concentrates. I hope that
the TMF Group Global Business Complexity Index, andunderlying insights into the rules and requirements fordoing business in those locations, helps you stay safe.

Mark Weil
Chief Executive, TMF Group1

2

INTRODUCTION

The Global Business Complexity Index 2021 provides
an authoritative overview of the complexity of
establishing and operating businesses around theworld. It explores factors that drive the success or
failure of international business, with a focus on
operating in foreign markets, and outlines key themes
emerging on the global scene and their associatedlocal intricacies across 77 jurisdictions.
While 77 jurisdictions may not be geographicallyexhaustive, the locations included in this report are
where most business is done. Besides representing
71% of the world’s population, they account for a verylarge majority of global economic activity. Between
them, they produce 92% of the world’s total GDP,and are linked to 95% of net global Foreign Direct
Investment (FDI) flows.
The GBCI 2021 takes into account 292 different
indicators relating to business complexity, to provide
an analysis of the global and local challenges that
impact on the ease of doing business across theworld. These data points are used to compile a
global ranking of the 77 jurisdictions, based on thecomplexity of their business environments in termsof legislation, compliance, accounting procedures,tax regimes, human resources (HR) rules andpayroll procedures.

Through analysis of both the quantitative
statistics and the qualitative in-depth
examples within each jurisdiction, our study
has revealed three global trends at play in2021. For each, we have shown how theCovid-19 pandemic has impacted on thetrend, at some times accelerating them andat others temporarily reversing them.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

3

3

GL BAL TRENDS

1

2

3

The growthof responsible
governance

Simplification
through
digitalisation

International
vs localcomplexity

Businesses across the globe are
increasingly being encouraged
to behave in a responsible,
transparent and more sociallyminded manner.

Governments across the globe
are turning to digitalisation asa way to simultaneously adjust
to the remote working worldthat Covid-19 has created andremove or improve the traditional
processes that have long been asource of complexity.

The drive towards internationalalignment and cooperation
between jurisdictions has clashedwith local, often idiosyncratic,
complexities. While the push forstandardisation continues, via
regulation such as CRS, UBO andFATCA, uptake varies globally.

At a time when the global economy is seeking to recoverfrom the challenges it has faced in the past year, having
a thorough understanding of global and local businesscomplexity can help multinational organisations to mitigate
further risk and manage their existing operational footprintcompliantly. For those seeking to expand internationally,
the rewards can be considerable if the challenges
associated with complexity can be overcome.

However, the consequences for underestimatingthese challenges can be severe. Not complying withregulations can expose companies to penalties andsanctions, with individuals facing imprisonment in the mostextreme cases.
We hope that the Global Business Complexity Index 2021
serves to inform you and help you stay compliant,wherever you do business.

4

THE GROW TH OF RESPONSIBLE GOVERNANCE

Transparency requirements such as
UBO and PSC steady since 2020

#1

Operating with transparency is a cornerstone of
responsible governance. Since 2020, the percentage ofjurisdictions adopting ownership records remains stable,
demonstrating that these transparency processes are
consistent year on year.

THE GROWTH OFRESPONSIBLE
GOVERNANCE

2021 has seen a renewed focus on ensuring
companies are behaving responsibly with global
operations. This extends across all businessactivities, from employing workers, to paying
appropriate levels of tax, and ensuring
their structure and behaviours are transparent.

The requirement to provide UBO and/or PSC information
to a central register is highest in EMEA, where it ismandatory in 82% of jurisdictions compared to only
43% of jurisdictions in APAC. We see regional differences
when it comes to maintaining a UBO and/or PSC registerat the company’s registered address, with 64% ofNorth American jurisdictions requiring it, compared toonly 30% of jurisdictions in South America.
Similar nuances are found with the accessibility of
the UBO/PSC central register. In 41% of jurisdictionsin EMEA, information in the UBO/PSC central register
is accessible to the general public, compared to zero
jurisdictions in South America.

The shift away from traditional offshoring
In 2021, there has been a shift away from traditional’offshoring’ in some jurisdictions and an increasing global
need for transparency among multinationals, which arebeing encouraged to pay tax in the jurisdictions where
they conduct business.
In Curaçao, for example, economic substance legislationmeans that offshoring for tax benefit is no longer
possible without a physical operation on the ground.
In January 2021, economic substance rules wereintroduced for Curaçao Investment Companies (CICs)
meaning that such companies must demonstratethat they are conducting core operations within thejurisdiction, such as having an adequate number of
employees. This has impacted Curaçao in terms of
attracting organisations wishing to offshore there.

Responsible
governanceHowever, moving wealth offshore to this jurisdiction isstill popular for private individuals due to concerns about
security in their home countries, such as those in SouthAmerica that are experiencing issues with inflation andfinancial instability.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

Percentage of jurisdictions where different
requirements around UBO and PSC registers apply

Requirement toprovide UBO and/or
PSC information to acentral register

2021 |
2020 |

71%
68%

Requirement tomaintain UBO and/or PSC register at thecompany’s registeredaddress2021 |
2020 |

45%
48%

Information in UBO/
PSC central register
accessible to the
public2021 |
2020 |

23%
24%

The Philippines has seen similar changes with theintroduction of the CREATE Act in March 2020. The
CREATE Act subjects offshore units of foreign banks
to a 25% corporate income tax rate, an increase on
the previous rate of 10%. Such an increase could be
off-putting for foreign banks looking to offshore in
the jurisdiction.
Consequently, certain jurisdictions are making changes
to take this offshore share from traditional ‘major players’
in the space. For instance, the Government of Hong Kongis working to create a leading funds industry and wishes
to profit from the increasing legislation in traditional
offshore markets, such as the Cayman Islands. Hong
Kong therefore introduced a limited partnership fundregime in 2020, creating a quicker and simpler solution
for offshore funding in the jurisdiction. The introductionof such incentives could mean that, in the coming
years, we may see a shift in offshoring away from thetraditional jurisdictions such as Curaçao and the Cayman
Islands to emerging players such as Hong Kong.

TRANSPARENCY

56

THE GROW TH OF RESPONSIBLE GOVERNANCE

Increasing mandated use of third-parties
Since 2020, the mandated involvement of a third party in
a company’s operations has become more common. For
instance, in 2020 only 17% of jurisdictions required thatan entity appoint a certified accountant and register themwith the authorities, compared to 27% in 2021. A certified
accountant should aim to reduce errors and mistakes
related to tax returns and necessary documentation,
meaning that entities are better supported and operate ina more responsible manner.
Local specialists are often available in-market to assist
firms in complying with this local legislation. In the British
Virgin Islands, for example, the use of a registered agent
model in order to incorporate is mandated. Companies
can rely on these agents to ensure they are complying withregulations and meeting standards within the jurisdiction.
This support can also be less formalised, for instance

Percentage of jurisdictions where accounting
standards and tax requirements apply

An entity needs toappoint a certified
accountant andregister him/her withthe authorities

14%
2020 | 8%
2021 |Tax returns need
to be prepared /reviewed by acertified tax advisor/
consultant

2021 |
2020 |

27%
17%

An entity need toappoint a certified
accountant andregister him/herwith the Chamber ofCommerce

17%
2020 | 12%
2021 |

in Guatemala, where helplines and support are available
to aid accounting and tax compliance. This ensures thatlarge multinationals comply with often complex local
regulations.

Penalties for non-compliance are getting
stricter, especially in more complex
jurisdictions
Alongside the more frequent requirement to work withthird parties to ensure compliance is a global increase in
the strictness of penalties for non-compliant businesses.
Fines are the most common penalty imposed foraccounting and tax misdemeanours, and in the case of
doing business without being tax registered, the frequency
of issuing fines has increased since 2020, with 93% ofjurisdictions now imposing a fine for this, compared with
84% previously.
We have seen a link between complexity and stringency
of penalties. In our top ten most complex jurisdictionsorganisations are significantly more likely to face the moststringent penalties. For example, in the case of doing
business without being tax registered, 45% of jurisdictions
globally would suspend an organisation’s licence. Thisjumps to 60% of the most complex jurisdictions. Thisposes problems for those seeking to operate in more
complex environments, as not only can it be morechallenging to meet the varying legislation and regulatory
criteria in place, but organisations are more likely to facepenalties for wrongdoing.
Since 2020, there has also been an increase in fines
when tax errors are identified on tax returns or in tax
payments. In 2020, 39% of jurisdictions reported that
if an organisation voluntarily corrected its tax return or
payments, it would not be fined. This has decreased to
27% of jurisdictions in 2021, showing that globally the
response to inaccuracies is getting stricter.
While we have observed this global trend, it should be
noted that the Covid-19 pandemic has resulted in somejurisdictions temporarily relaxing some deadlines andpenalties. This was the case in New Zealand, Singapore
and Bulgaria, where certain deadlines were extended andsome penalties relaxed during the pandemic. In most
instances, however, our experts predict that penalties for
non-compliance will continue to become more severe.

7

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

Penalties imposed in the case of…

Fines

Suspension

Imprisonmentof activity

LicencePrevention fromsuspension

doing further

Other

None ofthe above

business

Doing businesswithout being
tax registered

2021

93%

68%

39%

45%

47%

8%

3%

2020

84%

57%

43%

36%

34%

12%

5%

Missed deadlines
for tax filings

2021

97%

19%

10%

14%

13%

10%

0%

2020

97%

20%

16%

14%

13%

13%

1%

2021

95%

25%

22%

14%

18%

13%

1%

2020

93%

13%

24%

9%

8%

16%

3%

Fines

Suspension

Imprisonment

LicencePrevention from

Other

None ofsuspension

doing further

Inaccurate
calculations for
tax filings

Penalties imposed in the case of…
(10 most complex jurisdictions only)of activity

the above

business

Doing businesswithout being
tax registered

2021

100%

80%

60%

60%

70%

10%

0%

Missed deadlines
for tax filings

2021

100%

30%

10%

30%

20%

10%

0%

Inaccurate
calculations for
tax filings

2021

100%

10%

20%

0%

10%

20%

0%

8

THE GROW TH OF RESPONSIBLE GOVERNANCE

Percentage of jurisdictions in which certain
conditions apply to correcting tax returns

2021*
27%

Yes, they canvoluntarily correct
their tax return/tax
payment and will notreceive a fine

39%

71%

Yes, they canvoluntarily correct
their tax return/tax
payment but will be
fined anyway

60%

1%

No, they cannot
voluntarily correct
their tax return/tax payment

1%

2020
* Total is not 100 because individual percentages are rounded to the nearest whole number.

Non-compliance can have personalconsequences for directors
Furthermore, the sanctions for misdemeanours or
for failing to remain compliant can extend beyond
punishments issued to organisations. The likelihood ofindividuals, most frequently company directors, being
held liable is high globally. 89% of jurisdictions overall
report that directors can be held personally liable forwrongdoing by their own company, but there is someregional variation. Whereas directors are always held
personally liable by companies in EMEA, this is only thecase in 69% of jurisdictions in North America.
As for directors being held personally liable byauthorities, the percentage is consistent at 88% overall;
North America and APAC are the regions where this isless likely to be the case (79%). The penalties handed out
to individuals vary between individual jurisdictions, but
in the most extreme cases, directors can be punished by
imprisonment.

Employees have gained more protection
as businesses are encouraged to be
responsible employers
There has been a shift as industrial relations are now
becoming more employee focused than ever before.
This is, in part, related to the Covid-19 pandemic leading
to huge uncertainty for businesses and authorities. Somejurisdictions responded to meet the needs of employees
and offer them protection during this challenging time.
For example, in Denmark the government recently
revised the Working Environment Act (updated May2020) which ensures that the physical and psychologicalenvironment for employees is both safe and suitable.
In line with this shift toward a more employee-focused
workplace, since 2020 it has become more difficult
to dismiss employees without citing a reason. It was
permitted in 29% of jurisdictions in 2020, dropping to
20% in 2021.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

Ability to dismiss an employee without citing a reason– shown globally and regionally for 2020 and 2021

23%
2020 | 64%

North
America

2021 |South
America

2021 |
2020 |

70%
80%

Looking at this shift at a regional level, we see that thechange is driven by both North and South America. In
2020, 64% of 14 jurisdictions in North America permitted
the dismissal of employees without a reason, dropping to
23% in 2021. In South American jurisdictions that figure
decreased from 80% to 70% .
In Argentina, this has been taken a step further. Due tothe Covid-19 pandemic, the Argentinian government has
made it illegal to dismiss employees, for any reason.
This means that, throughout the period of economic
uncertainty following the pandemic, Argentinian
employees have had total job security, regardless of
their individual performance or the performance of
their organisation. While this is clearly a pandemicdriven outlier, our experts predict that employers willcontinue to see the rise of pro-employee legislation,
which simultaneously encourages companies to act
responsibly in their local communities and increases thelevel of complexity that they must navigate.

0%
2020 | 0%

APAC

2021 |

EMEA

2021 |
2020 |

Since 2020 it has become
more difficult to dismiss
employees without
citing a reason.
It was permitted in 29%
of jurisdictions in 2020,

dropping to 20% in 2021.

13%
13%

9

10

S I M P L I F I C AT I O N T H R O U G H D I G I TA L I S AT I O NDigitalising the relationshipbetween businesses and the state#2This year, the requirement of a physical stamp, chop or seal
for legal entity documents has substantially declined, with
only 38% of jurisdictions globally now necessitating this inperson officiation (vs 43% in 2020). In South America, where
the requirement of physical processes is higher, Covid-19
has caused significant delays and highlighted the antiquatednature of such requirements. For example, the timeframes
for incorporating businesses in Colombia, Guatemala, andArgentina have increased, as certain documentation can only
be approved during in-person appointments.

S I M P L I F I C AT I O N
THROUGHD I G I TA L I S AT I O N

Elsewhere, Covid-19 has sped up the process of digitalisation,with authorities in Portugal, Paraguay, India and theDominican Republic temporarily permitting digital signatures.
In Portugal, at least, it is predicted that this step towards
digitalisation will be a long-term change which will last
beyond the pandemic.

Jurisdictions where official entity documents
require an official stamp, chop or seal to belegally effective.

In 2021, we’ve continued to observe the trend of
simplification through digitalisation on a global
scale. This has, in part, been accelerated by the
Covid-19 pandemic, which has rendered physicalprocedures impractical. We have seen the dual
forces of a decline in the requirement of in-person
processes, combined with the rise of technologies
and automation as enablers of simplicity.

% requiring an
official stamp,
chop or seal

38%
2020 | 43%2021 |

State investment in digitalisation

rise of technologies
and automation as
enablers of simplicity

decline in therequirement of
in-person processes

2021 has also seen an increase in the automatic notificationof relevant state authorities when incorporating a company,
rising to 14% of jurisdictions globally where all authorities
are notified. EMEA and APAC lead the way in this transition.
One good example is Mauritius, where an online platform has
been introduced to ensure smoother coordination between
various government bodies and to reduce processing
downtime during incorporation.
Meanwhile, we’ve seen a growth in online portals being
introduced for the electronic submission of documents. It is
now compulsory for tax invoices to be uploaded via an online
system in 27% of jurisdictions globally (vs 24% in 2020).
South America leads the way in this respect, with seven outof ten jurisdictions already having an online portal in place.

11

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

Percentage of jurisdictions where other relevant
authorities (eg tax, payroll, industry-specificbodies) are notified automatically as part ofincorporation

Percentage of jurisdictions where it’s compulsory
for tax invoices to be issued in an electronic
formatOverall
17%

2021
14%

24%

47%

12%

North America*
51%

35%

14%

21%

50%

14%

South America
All relevantbodies notified
automaticallySome relevantbodies are notified
automatically

Relevant authorities
are not notified
automatically

40%

65%

29%

2020

30%

APAC
14%

6%

30%

29%

43%

14%

EMEA
13%

21%

53%

13%

 Compulsory for all  Compulsory for some
 Not compulsory  N/A* Total is not 100 because individual percentages are rounded to
the nearest whole number.

While online systems are intended to simplify processes,
it is common that they will lead to an initial short-term
increase in complexity, especially if authorities lackalignment. In Turkey, for example, each authority is using
a different technology platform, resulting in an increased
demand on businesses to familiarise themselves with avariety of separate portals. Elsewhere, jurisdictions suchas Poland and Hungary require that all businesses must
submit documents in their local language. This adds tocomplexity for foreign businesses.

Differing approaches to digitalisation
Most jurisdictions can be mapped onto a trajectoryof a gradual, lengthy and incremental process ofdigitalisation. The introduction of technological systems
and phasing out of physical processes is rarely a smoothprocess, and businesses need time to adjust to theserequirements.
In stark contrast, we’ve seen a minority of jurisdictions
championing a rapid digitalisation strategy. By way ofan example, Indonesia has undergone the huge task ofcreating an Online Single Submission system (OSS).
This all-at-once strategy has been highly problematic– a contributing factor to Indonesia placing 6th in the
GBCI – and regular changes to legislation (eg the new
Omnibus Law) must be updated in the system too. Yet
this strategy does highlight that a gradual step-by-stepprocess isn’t the only possible route to digitalisation.
And as jurisdictions compete globally for foreign
investment through simplification, we may well see
more governments following Indonesia’s lead inembracing rapid digitalisation.
Whether embarking on a gradual or rapid digitalisation
strategy, one thing is clear: the process will be arduous.
Yet we’re seeing mounting evidence that the results areworthwhile. Some of the most digitalised jurisdictions
globally are proving highly attractive to foreign
investment, and Covid-19 has further widened thecomplexities of operating in jurisdictions at extreme
ends of the digitalisation spectrum.

12

I N T E R N AT I O N A L V E R S U S L O C A L C O M P L E X I T Y

The benefits of a digitalisation programme
The Netherlands has a digital incorporation system inplace, meaning UBOs of companies can be identified
digitally via scanned passports and aren’t required
to physically verify themselves in this jurisdiction. Its
sophisticated digital infrastructure has allowed thejurisdiction to operate as normally as possible forincorporation processes throughout the pandemic.
The Republic of Ireland can also be looked to asa jurisdiction which has undergone an effective
digitalisation process. The international investment
has naturally followed, with Dublin being home to theEuropean headquarters of Google. Interestingly, theRepublic of Ireland is also in the process of implementing
a broadband plan to establish a nationwide fibre optic
network. This will ensure that the country can support ahighly productive home-based workforce.
While technology is a tool to overcome physicalboundaries, for island states or other geographicallysmall jurisdictions, it is questionable whether full
digitalisation is as much of a necessity. The Caribbean
island of Curaçao, with a total area of 444km², is sosmall that visiting the offices of various authorities is astraightforward task. Similarly, the compact footprint of
Luxembourg makes maintaining physical links between
businesses and regulators or authorities simple.
Our expectation is that we will continue to see
jurisdictions take steps to digitalise in the years to come.
Covid-19 has highlighted the necessity of moving to alargely online infrastructure and will likely accelerate
this global trend. As the pressure mounts to swiftly
digitalise to compete for foreign investment, will moregovernments follow Indonesia’s lead with a highly
disruptive, yet rapid, digitalisation strategy?

#3
I N T E R N AT I O N A L
VERSUS LOCALCOMPLEXITY

As we have seen in previous years of the GBCI,
regulations developed by international bodies
continue to be followed by jurisdictions globally.
The Organisation for Economic Co-Operation andDevelopment (OECD) and the European Union (EU)are two such transnational bodies that coordinate
international legislation, though national governments
may sometimes dictate international practices.
International legislation is typically a result of theeconomic globalisation that has seen international
trade expand rapidly in the past 50 years. As trading
relationships have become internationalised, legislation
has had to scale beyond national borders in order toregulate and govern those relationships. International
legislation, therefore, often overlaps with the themes of
responsible governance already covered in the report.

OECD

EU

National
Governments

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

International reporting
The OECD’s Common Reporting Standard (CRS) is a primeexample of international legislation that aims to regulateinternational trading arrangements. The standard requires
governments to share details of the accounts individuals
hold in their jurisdiction with other participating jurisdictions,
including information such as name, account number andbalance. This communication between jurisdictions promotes
transparency, making it more difficult for individuals andcompanies to hide undeclared wealth in jurisdictions beyond
where they are based.
Our data shows that 83% of jurisdictions have now committed
to the exchange of information under CRS, a slight increaseon 82% last year. The uptake of CRS varies significantly byregion, with the highest being in EMEA and APAC.
International laws introduce legislative complexity forbusinesses – in the case of CRS companies will be required
to submit their account information to the authorities.
However, complying with international legislation can also
have a reputational element for jurisdictions – Costa Rica, forexample, complies with international laws (including the CRS)
that many countries in Central America do not, resulting in amore robust reputation as a jurisdiction open to international
business within the region. This has knock-on benefits forcorporations looking to set up there, through a greater influxof international capital and trade.
Despite international customs making the global regulatory
landscape more uniform, it’s worth noting that many
jurisdictions have ‘specialisms’. Despite the Netherlands
being a less favourable location for ‘tax aggressive’ structures
than it was in the past, it is still a hotspot for setting up
joint ventures due to the historic legislative infrastructure.
As another example that geography is still important in aninternationalised world, Curaçao is often the favoured location
for wealthy South American individuals looking to holdinvestments abroad due to its proximity to the continent.

Dismantling complex local systems toopen up jurisdictions
In addition to international legislation having further reach,individual jurisdictions are attempting to dismantle localised
laws and decrease friction for international businesses
looking to invest there. In some cases, this might be alarge-scale, systematic restructuring, specifically with theaim of creating a simpler business environment for foreign
investment, as is the case with Indonesia’s Omnibus law

13

The percentage of jurisdictions that havecommitted to the exchange of information
under CRS
Overall 2021

Overall 2020

83%

82%

North America 2021

South America 2021

71%

APAC 2021

86%

50%

EMEA 2021

95%

reforms. In previous years, many sectors of Indonesia’s
economy had been closed off to foreign investment, while
sectors that were open were categorised as part of anincredibly complex tax code system. The Omnibus reform has
opened up sectors that were previously nationally regulated,and has reduced the number of regulated sector codes from
515 to 356. However, incorporating under the wrong code
will still have tax consequences and may leave businesses
liable to penalties. A similar ‘ease of doing business’ reformin the Philippines aims to reduce the administrative burden
for entities – for example, even for minor processes suchas obtaining a VAT refund, the number of documentary
requirements was reduced from 65 to 41.
Efforts to improve the ease of doing business may be muchnarrower and more targeted in scope – for example, aroundlanguage requirements for official documents. Data fromthe GBCI shows that jurisdictional governments are relaxing
requirements around submitting documents in their local
language, a process which adds complexity for foreign

14

I N T E R N AT I O N A L V E R S U S L O C A L C O M P L E X I T Y

businesses. While a majority of jurisdictions still require
official documents for submission to local governmentand director/shareholder minutes to be submitted in theirlocal language, the percentage of both requirements has
decreased significantly since 2020.

Percentage of jurisdictions where accounting
standards are applied: IFRS, US GAAP, local GAAP
 This standard is not applied within the jurisdiction
 Companies may have to adhere to this standard,depending on certain criteria
 All companies must adhere to this standard

Percentage of jurisdictions where the following
documents must be submitted in the local language.

2021
IFRS*

10%

78%
2020 | 86%2021 |

Official documents
for submission to
local government

70%

19%

US GAAP

83%

17%

Local GAAP

13%

30%

57%

2020

59%
2020 | 73%2021 |

Director andshareholder
minutes

IFRS

25%
US GAAP0%
Local GAAP

42%

Local legislation dominates insome business areas
While progress towards a more internationalised businesslandscape is being made, there are certain areas of business
management where international practices are very muchsecondary to local customs. For example, our analysisof accounting practices suggests that local accounting
regulations are much more dominant than internationallyaligned processes. In 57% of jurisdictions, all companies
must adhere to a set of local Generally Accepted Accounting
Practices (local GAAP). In contrast, the International Financial
Reporting Standard (IFRS) is only required by all companies
in 19% of jurisdictions. Furthermore, the percentage of* Total is not 100 because individual percentages are rounded
to the nearest whole number.

jurisdictions where all companies are required to adhere
to some form of local standard has increased since2020, suggesting accounting practices are becoming
even more localised.
Nevertheless, there may be opportunities for furtheralignment in the area of accounting and tax. The OECDis currently considering a requirement for jurisdictions tocommit to a minimum corporation tax threshold, which
would challenge and standardise the fiscal models of
many jurisdictions.

0%GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

Even within a jurisdiction, there
is often legislative variation

The international and local complexities
of assembling a workforce

Differences at the sub-national level can cause asignificant amount of complexity for corporations. For
example, during the incorporation process, while thenational government is the most common authoritythat entities must notify in order to register, 27% ofjurisdictions require notification at the provincial orstate level, while 42% require notification at the city or
local level. In some instances, jurisdictions may require
notification at all three levels, essentially tripling theadministrative burden of the incorporation process.

In many ways, the pandemic has made the workforce
less internationally mobile, notably by closing borders as
national governments have attempted to keep Covid-19
at bay. At the same time, remote working has become
embedded in corporate culture, meaning workers caneasily log in from any location with just a laptop and aninternet connection. However, current payroll legislationis very much set up for a pre-Covid world, meaning thatany companies looking to take advantage of a moreglobalised workforce will also need to understand theadministrative complexities of hiring overseas.

Jurisdictions where
notification ofincorporation isrequired at national,
state and city level

Indonesia
BrazilArgentina
Nicaragua
MexicoPeru
Japan
Venezuela
Philippines
El Salvador

Sub-national complexity also varies between
jurisdictions, as some have far more regionalised
structures than others. Colombia has more than 1,000
municipalities, meaning it is difficult to avoid crossing
municipal boundaries with the operations of a single
business. As an example of the complexity that
this causes, tax filings must be completed for eachmunicipality in turn, meaning companies must keep adetailed, regionalised ledger of their transactions so thattaxes are paid correctly in each municipality.
Regional complexity can also create opportunity forcorporations, particularly in cases where some regions
have preferential business environments. For example,
the UK is rolling out freeports – regional trade hubs –where international businesses will be able to trade withmore favourable tax rates on imported goods than in therest of the UK.

The size of a jurisdiction can also have a big impact on
the hiring processes a company is likely to have to go
through. In smaller jurisdictions, such as small islands,
the local talent pool is often fairly limited, meaning that
corporations may need to consider making foreignhires. In some cases, however, jurisdictions may recruit
workers who have particular skills – despite being small,Curaçao has a highly specialised workforce made up ofindividuals with financial and legal backgrounds, due tothe nature of business that takes place on the island.
In larger jurisdictions, cross-border difficulties may occur
even within national boundaries. In the US, for example,
income tax is filed state-by-state. Consequently, during
the pandemic, many companies sought to hire workers
from other parts of the country due to rising popularityof remote working, which led to more complex situations
arising when calculating and reporting payroll.

15

16

TEN MOST COMPLEX JURISDICTIONS

2021

2020

1

Brazil

		

(2)

2

France		(12)3

Mexico		(13)4Colombia		

(8)

5

Turkey		(11)6

Indonesia		

(1)

7

Argentina		

(3)

8

Bolivia		(4)9

Costa Rica

(26)

10 

Poland		

(34)

11 

South Korea

(17)

12 

China		

(6)

13 

Greece		

(5)

14 

Nicaragua

(7)

15 

Italy		

(36)

16 

Kazakhstan

(25)

17 

Belgium		

(19)

18 

Ecuador		

(10)

19 

Portugal		

(31)

20 

India		

(18)

21 

Vietnam		

(24)

22 

Malaysia		

(9)

23 

Slovenia		

(30)

24 

Peru		

(23)

25 Panama		

(15)

26 

Russia		

(22)

PAGES

18–23

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

2021

2020

2021

2020

27 

Germany		

(40)

53 

United Kingdom

(44)

28 

Croatia		

(14)

54 

Cyprus		

(28)

29 

Romania		

(35)

55 

Guernsey		

(45)

30 

Jamaica		

(75)

56 

Switzerland

(62)

31 

Honduras		

(47)

57 

Canada		

(54)

32 

Taiwan		

(16)

58 

Paraguay		

(33)

33 

Venezuela

(52)

59 

Japan		

(46)

34 

Spain		

(29)

60 

United Arab Emirates

(53)

35 

Ukraine		

(56)

61 

Czech Republic

(48)

36 

Guatemala

(32)

62 

Australia		

(58)

37 

Philippines

(57)

63 –

Israel		

(63)

38 

Austria		

(41)

64 

Malta		

(61)

39 

Uruguay		

(43)

65 

Luxembourg

(50)

40 

Chile		

(64)

66 

Qatar		

(49)

41 

Dominican Republic

(67)

67 

New Zealand

(59)

42 

Finland		

(39)

68 –

Mauritius		

(68)

43 

Hungary		

(27)

69 

El Salvador

(71)

44 

Thailand		

(42)

70 

The Netherlands

(72)

45 

Jersey		

(65)

71 

United States

(76)

46 

Slovakia		

(21)

72 

British Virgin Islands

(73)

47 

South Africa

(37)

73 

Curaçao		

(77)

48 

Serbia		

(20)

74 

Republic of Ireland

(70)

49 

Bulgaria		

(51)

75 

Cayman Islands

(69)

50 

Singapore

(60)

76 

Hong Kong

(66)

51 

Norway		

(55)

77 

Denmark		

(74)

52 

Sweden		

(38)

TEN LEAST COMPLEX JURISDICTIONS

17

PAGES

36–41

18

TEN MOST COMPLEXJURISDICTIONS

2

3
Costa Rica

Colombia

FranceMexico5

Turkey6Indonesia

94
Bolivia1

8

7BrazilArgentina

10 Poland

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

1 Brazil

While Brazil is the most complex jurisdiction in the GBCI 2021,
it is also an attractive destination for investment given that it isranked as the 13th largest economy in the world and has grown
rapidly in recent years.
Complexity in Brazil is driven by a multi-layered system ofgovernance, where federal, state-level and city-level authorities
all have significant legislative power. Brazil is one of the few
jurisdictions where incorporating companies must register withall three of these levels of government. Various taxes are also
levied at each level of government, meaning that tax rates differ
from city to city and state to state.
There are significant tax reforms taking place, but these arecomplex due to the tensions between the multiple levels ofgovernment. For example, the federal government is looking
to increase VAT across the jurisdiction, but such sweepingchanges can affect areas very differently, as economic wealthis concentrated in some of the more affluent cities and states.
The devolved structure is therefore very difficult to navigate or
unify, leading to complexity for multinationals.
Much of the labour law in Brazil dates from the 1940s, thoughreforms in the last five years have given employers more
flexibility and seen some relaxation of strict unionisation
requirements. These reforms allowed companies to hire
contract workers without the same responsibilities as fulltime workers, at a time when many jurisdictions are looking
to restrict the use of contract workers. In addition, while all
employees in Brazil were required to be members of a labour
union, this rule has been relaxed in recent years.
While the country has been hit hard by Covid-19, the pandemic
has modernised many business practices, such as allowing
electronic documents for a variety of business activities.
However, many businesses were slow to take up support
packages provided by the authorities because they were often
unclear, and companies were reluctant to commit to schemesthat could potentially leave them with unknown liabilities infuture.

“ The Brazilian Government
has a comprehensive listof reforms that, once
implemented, should
facilitate doing businessand attract international
investors. ”

19

2 France

France’s place as the second most complex jurisdiction isdriven by complexities in accounting and tax processes, andheavily employee-centric HR regulations.
All accounting in France is subject to local language
requirements, which can prove challenging to non-French
speaking businesses. In addition, France has been one of
the first jurisdictions to put the EU regulation of SAF-T (anelectronic exchange for accounting data) into place. The Frenchgovernment has strongly endorsed a process of digitalisation,with all tax audits expected to be completed digitally in the near
future.

“ Even though France stillrequires much administrative
work to comply with requirements,
the country is also encouraging
investors through various schemes,such as temporary exemption
arrangements for innovative
start-ups and new businesses. ”
The French government is proposing more services in English
to foreign investors on its institutional websites and has
introduced the initiative of ‘Business France’ – a website toassist foreign companies in navigating the complexities ofFrench accounting standards. Yet these standards are subject
to constant change, with new financial laws being enacted eachyear. Moreover, the presidential election is scheduled for April
2022, with all tax audits expected to be completed digitally inthe near future.
As a very employee-focused jurisdiction, France is also highly
complex when it comes to HR and payroll. The conseil deprud’hommes – a specific court for employment litigation –rules in favour of the employee in more than three out of fourcases. The government, however, has introduced a scale whichallows companies to anticipate the amount they are likely tohave to pay. Employees have a high holiday allowance, andstaff benefits, including mandatory health and life insurance,
must be paid monthly.
Covid-19 has further added to complexity with the introductionof chômage partiel (France’s equivalent of the furlough
scheme) which has been very generous to employees. Yet froman employer standpoint, this scheme has added complexity,
necessitating updates to payroll software and the addition oftax credits or postponed payments.

20

TEN MOST COMPLEX JURISDICTIONS

3 Mexico

4 Colombia

Mexico moves up ten places in this year’s rankings to number
three. Major drivers of this increase in complexity are the needfor in-person interactions with the state, and a reliance on hard
copy documents in order to incorporate. These factors havebeen compounded by the Covid-19 pandemic.

Colombia is currently going through its eighth tax reform in
the last ten years – which is indicative of the pace of changethat companies must adapt to keep up with local legislation.
Although there were no tax increases in 2020, the latest projectof reform has currently been withdrawn for review, and will
likely be submitted again.

However, it is worth noting that the need for in-person
interactions is more limited when it comes to accounting andtax, hiring or dismissing employees and payroll. Furthermore,with the effects of the pandemic beginning to ease in thejurisdiction, these processes should become simpler over the
next year.
In order for foreign businesses to incorporate, Mexico requiresthat documents are provided in hard copy and need to benotarised in their country of origin. This means, for instance,that businesses coming from the US must send the required
documentation back to the US to be notarised, before being
returned to Mexico. Prior to the pandemic, this process would
take around a week. However, in light of the crisis, this can now
take over a month.

“ Regulations and processes
in Mexico may seem excessive
and lengthy at first glance.
Tradition and different
interpretations of how toapply regulations are common.
But with the right knowledge andunderstanding, investors cannavigate complexity and realise
the benefits. ”
Furthermore, in Mexico in-person interactions are required
to register with the authorities. During the pandemic,
appointments have been hugely limited in order to meet
Covid-19 regulations, meaning that waiting times for certain
interactions can now be over two months. Businesses mustalso demonstrate that they have a physical company address
in Mexico, in order to operate legally. It is not enough to simply
have a virtual Mexican address.
Another factor that adds to complexity in the jurisdiction is
the need to have a Mexican legal representative in order toincorporate. While foreign businesses do not need to have
locally resident directors, they must have a locally resident legal
representative. In the case of tax misdemeanours, this legal
representative will be easily traced, providing a form of security
for the Mexican authorities.

“ Colombia is a growing economy
and is emerging as a strategic
point for the regional supply of
reliable and quality goods andservices, thanks to its strategic
location. Colombia can takeadvantage of its extensive
network of trade agreements,
which allow it preferential accessto more than 60 countries and1.5 billion consumers around theworld. Despite the complexity intaxes or regulated laws, Colombia
is a great place to invest. ”
The key changes in the most recent tax reform project involvea requirement for certain sectors to pay more of certain typesof tax. For example, the standard Value Added Tax (VAT) ratein Colombia is 19%, though some industries are on a lower tierof 5% VAT. Tax codes can also be quite granular – medicine
systems providers have just been added as a sector where the
5% VAT rate applies in the latest reforms.
Colombia has become more digitalised in recent years.
Following a process spanning the last two years, electronic
invoicing has now been made mandatory for all companies.
Sharing payroll information with the DIAN (tax and customs
national authority) will also be electronic as of autumn 2021.
Furthermore, the DIAN has also been increasing the useof technology in different processes, for instance, in thelast few months the process of electronic notification has
been regulated.
Following the Covid-19 pandemic, many banks in Colombia
mandated electronic pension payments from corporate bankaccounts to pension funds. This digitalisation was in place
before the pandemic but was optional, whereas now it isfully mandated. Before digitalisation, employees had tomanually ask for a cheque from the bank and present it totheir pension provider.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

5 Turkey

6 Indonesia

Turkey has moved into the top ten in 2021, up from number 11
in 2020. Compared to other jurisdictions, its accounting and tax
regulations are particularly complex.

Indonesia is a rapidly growing market that is demonstrating acommitment to opening up to foreign direct investment. The
jurisdiction is currently undergoing a great deal of change
due to the introduction of the ‘Omnibus law’, a sweeping setof reforms that aims to make the jurisdiction much more
attractive to Foreign Direct Investment (FDI).

Turkey supports a highly localised regulatory system andenforces local language requirements – both of which provechallenging to foreign investors. Moreover, the government
passes frequent legislative changes (most recently passing
new legislation to restrict the finance cost relief that can be
deducted from taxable income) and companies often must
adapt within very short timeframes.
It is positive to see that Turkish authorities are engaging in aprocess of digitalisation, yet the absence of a collaborative
cross-government approach is increasing complexity in the
short term. Each authority has adopted a different technology
platform, meaning businesses must learn to use and submit
documents via multiple portals. It is hoped that this increased
complexity is only a temporary uptick as businesses adjust
and, in time, Turkey’s digitalisation strategy will work to simplify
the process of doing business within the jurisdiction.

21

As part of the reform, one of the key changes is to open up
various sectors of the economy that have previously beenclosed to foreign companies. However, even within the sectorsthat are open for business, there is a huge deal of complexity
in terms of the filing structure in Indonesia: despite the tally
decreasing from 515, there are still 386 regulated sectors
into which businesses must be categorised. Businesses
must identify their sector correctly in order to comply withthe maximum foreign share ownership regulation. This
also impacts whether a business can enjoy certain fiscal
incentives, such as tax holidays, tax allowances and importduty exemptions, or non-fiscal incentives, including support
in obtaining business licenses, work permits, energy, rawmaterials, labour and infrastructure. This task is not easy,
given that the definition of many sectors is open to legal
interpretation.
Furthermore, the Omnibus law is largely principle based,
meaning that much of the detail of the law has not yet been
worked out in practice. For example, there have been updates
to labour law legislation affecting disciplinary action, temporary
contract employees, working hours, overtime and rest periods,
but these laws sit on top of the previous labour law reform
introduced in 2003. Understanding how these regulations
interact will be determined by official guidance, as well as
precedents set by future court cases.
Many laws have been applied retrospectively. For example, the
new law stipulates that contracted employees are also eligible
for compensation payments from their latest employment
term, leaving many employers with unexpected costs fromhiring temporary labour.

“ The government is fully aware that in orderto realise its vision of ‘Indonesia 2045’,
there is an absolute need to significantly
change the country’s regulatory landscape.
Through the issuance of the Omnibus Law,
the government has demonstrated its
commitment to creating an open andtransparent business atmosphere, tomake Indonesia an attractive and soundinvestment destination. ”

22

TEN MOST COMPLEX JURISDICTIONS

7 Argentina

8 Bolivia

The key drivers of complexity in Argentina are constantlegislative changes, difficulty sending and receiving foreign
currency and high levels of inflation.

Complexity in Bolivia has been driven by a long process thatbegan with a civic strike against electoral fraud in October 2019and reached its peak with the Covid-19 pandemic, along withthe assumption of a new government through elections, after aperiod of governmental transition.

In December 2019, president Alberto Fernández was elected.
From that point onward, there have been a series of rapid,
and sometimes unpredictable, legislative changes in the
country. One such change, brought about in response to the
Covid-19 pandemic, is the inability to dismiss underperforming
employees, meaning that Argentinians have had total job
security throughout the pandemic. However, this adds
significant complexity for businesses operating in thejurisdiction, as employees must leave a company of their own
volition, or else the business can face massive penalties.

“ The key thing that foreign
direct investors need to know
about Argentina, is that it is ajurisdiction with a high numberof constantly changing rules
and regulations. TMF Groupcan help companies toremain compliant with these. ”
For those operating in Argentina, it can be challenging to send
and receive money to or from abroad, as there are regulations
in place that severely limit the international transfer of money.
Any money that can be transferred, for example, to pay off
import invoices, requires rigorous documentation, adding
significant complexity for foreign businesses looking toincorporate and operate there.
Argentina is also facing issues with inflation, with the current
rate sitting at over 50%. This is an important risk factor causing
uncertainty for foreign businesses considering incorporating
and operating in the country.

Both the Covid-19 pandemic and the inauguration of a new
government have accentuated complexities surrounding thefunctional immobility of workers. These factors compoundeda workforce mobility situation which was already tricky. Dueto the Bolivian Constitution and the existing labour legislation,
employees who face a situation of dismissal can appeal to the
Ministry of Labour to reinstate the position.
On the other hand, in some sectors, such as finance, theBolivian government has begun to introduce measures tocombat money laundering and tax evasion. These measures
aim to instil best practices within the sector, in a bid to increasetransparency.
Looking ahead, our experts predict that similar regulation will
be introduced in other sectors of the economy, increasing the
likelihood of Bolivia becoming a more complex place to dobusiness in the coming years.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

23

9 Costa Rica

10 Poland

Complexity in this jurisdiction is primarily driven by a needfor businesses to demonstrate high levels of transparency.
Costa Rica has seen significant fiscal reform, aimed atincreasing transparency to combat tax evasion. It is also thefirst Central American country to become a member of theOECD. It is inevitable that these reform efforts will bring about
additional requirements that increase the complexity for foreigncompanies seeking to operate in Costa Rica.

Legislation in Poland often changes quickly, leaving businesses
little time to react and implement changes in accordance withnew laws. This has been exacerbated during the pandemic,
which has brought about quick responses on the government’s
part to a fast-moving situation. For example, lockdown
restrictions have been introduced and removed at short notice,
while longer term law changes in response to the pandemic
have stayed in place (eg economic relief packages), resulting in
confusion about which laws apply at any given time.

Another of the reforms adding complexity in this jurisdictionis the implementation of UBO legislation, enacted in 2019.
Compliance with these regulations can entail a lengthy
administrative process, which often requires local support.
However, despite the complexity in the jurisdiction, it is still an
attractive destination for FDI. Amazon and Microsoft have large
operations in Costa Rica and given their educated workforce,increasingly we see companies selecting Costa Rica fornearshoring operations. Although the need for transparency
adds complexity, it also adds security, making it an attractive
location for foreign business to establish operations.
Costa Rica has a free trade zone regime that has existed formore than two decades. Although the application process iscomplex, it has allowed the country to successfully attract
foreign investors.

“ While the country offers highly
qualified labour, it is important
to note that Costa Rica is one of
the most expensive countries
in the region, in terms of
production. Investors should
carry out feasibility studies, incollaboration with professionals
familiar with the current
situation in Costa Rica. ”“ All official documentation in
Poland has to be submitted in thelocal language, sworn translated,or accompanied by an apostillecertificate. Foreign investors shouldmake sure they consult withprofessional legal and tax advisors
to make sure they are aware of all
requirements and obligations. ”
Some recently introduced laws have also lacked clarity in
specific cases, such as the recent roll out of the Employee
Capital Plans, a scheme that allows employees to invest partof their salary in shares and bonds. Employees of foreigncompanies should currently be covered by the plans but, as yet,there is no clear way for foreign companies to manage this fortheir employees.
The government is currently undergoing a process ofdigitalisation and has adopted electronic signatures. This isparticularly noteworthy in accounting and tax, as companies
are now required to submit financial statements electronically.
However, Polish authorities currently don’t accept many
internationally accepted signature providers such as DocuSign,
and instead require signatures from specific local providers,
adding to complexity in the jurisdiction.

24

ACCOUNTINGA N D TA X

In many ways, 2020 was a year of unprecedented
support for businesses, with governments making
efforts to stabilise their economy. During 2021, support
has gradually been phased out, with variation between
jurisdictions depending on the local prevalence ofCovid-19, as well as each government’s approach.
Challenging times lie ahead as businesses must
learn to revert to a more ‘business as usual’ scenario
without this support. In the area of accounting andtax, government support has focused on making
tax administration simpler, while creating short-term
relief via tax incentives, in order to help companies
through the crisis. These measures do mean that
there is likely to be an increased tax burden, or bettertax enforcement, in the future to compensate for theincrease in government spending.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

Which of the following types of guidance can be obtained from local
authorities about how to abide by local rules and regulations?
87% 87%

Onlineguidance

79% 83%

Telephonehelpline

35% 30%Consultative
advice on how
to manage
an entity

25– 2021 – 202030% 27%

Advancetransfer pricing
agreement(APA)

25% 14%Complianceassurance
programmes

Tax administration
Governments have made an effort to simplify the processesof tax administration throughout the pandemic, particularly
by offering companies advice and information in order to help
them manage processes more smoothly. Around nine out often jurisdictions (87%) offer online guidance to companies
in 2021, which is consistent with last year’s findings. At thesame time, eight out of ten (79%) offer a telephone helpline.
This has slightly decreased from 83% in 2020, suggestingthat some governments are phasing out these additional
measures that were introduced during the height of thepandemic. Nevertheless, there is also evidence that someforms of support are now more widely available than a year
ago, such as compliance assurance programmes, which are
currently offered in a quarter of jurisdictions.
In a bid to attract foreign direct investment and reduce thefriction that business may face, authorities are offering
guidance through multiple channels. Many jurisdictions
have services in place where advice is offered by phone,
mail, or email, with some jurisdictions (such as Guatemala)offering webchat services. Other jurisdictions, including
Spain and Australia, use artificial intelligence as part of thesecommunication systems to more efficiently answer questions
that prospective companies may have.
Improved access to guidance is not, however, always asolution to the underlying issue of complex and sometimes
ambiguous legislation. In some jurisdictions, legislation canbe unclear and open to interpretation, which is particularlycommon where new laws have been introduced but
precedents have not yet been set. In the Philippines, it isdifficult to understand the official interpretation of accounting
and tax laws, as government officers themselves can havediffering viewpoints, a situation that creates confusion andpotentially deters foreign investors.

In markets with frequent revisions to the tax legislation, suchas Chile, it is therefore advisable for businesses to consult
with local advisors who can assist in interpreting new laws.
In fact, a growing minority of jurisdictions are mandating thatfirms’ tax returns need to be prepared by a certified advisor(17% vs 12% in 2020).
A key element of simplifying tax administration is digitalisingtax processes, in order to make filings and payments morestraightforward. This is not a new trend and is an area where
we have seen continual progress over the last few years.
Instead, Covid-19 has accelerated the existing tendency tosimplify and digitalise processes and interactions between
businesses and the state apparatus. As demonstrated in thechart below, companies are now able to pay nearly all taxes
digitally. While electronic payment was common before thepandemic, the percentage of jurisdictions where taxes can’t
be paid electronically has fallen across many different typesof tax.
In the last year, some governments have looked to eliminate
redundant, duplicated or antiquated processes to reduce
the time and effort involved on the part of businesses. For
example, in Thailand, the Revenue Department and Ministry ofCommerce now work using a single, unified VAT registration
number, whereas they previously each had their own distinct
systems and identifiers. Similarly, in Mexico, the submissionof a Foreign Investment Report quarterly and annually is
now by email instead of a physical submission directly to the
Economy Secretary offices.
Other jurisdictions have fully embraced the use of digital
portals through which businesses can interact with the local
tax authorities. In Chile, the Internal Revenue Service, the local
tax authority, has facilitated the payment of taxes and thepresentation of documentation via its website.

26

A C C O U N T I N G A N D TA X

Which of the following best describes how
the following types of tax can be paid?

 It is mandatory to pay electronicallyCorporation / income tax*

Payroll taxes

64%

36%

 It can be paid electronically It cannot be paid electronically1%

Value-added Tax (VAT) / Goods and Services Tax (GST)
64%

36%

56%

37%

55%

41%

3%

42%

4%

44%

3%

Excise tax
40%

53%

National insurance contributions
62%

3%

Withholding tax*

Capital gains tax*
62%

36%

Insurance Premium Tax (IPT)

Sales tax
63%

61%

Property tax on business premises
35%

3%

37%

51%

12%

* Total is not 100 because individual percentages are rounded to the nearest whole number.

Digitalisation can substantially simplify the process thatbusinesses are required to go through with tax authorities.
However, in some instances it can actually have the opposite
effect in the short term, introducing change and complexity.
In Turkey, the Ministry of Finance has been working todigitalise most of its tax compliance processes, in order toimprove the business environment for both local and foreign
investors. This is making it more difficult to navigate in the
short term, but it is believed this will be justified by thelong-term benefits.

Tax incentives and relief
In response to the combined effects of the economic
shock and social upheaval of the Covid-19 pandemic, tax
authorities across the globe introduced short-term measures
to ease the tax burden on companies. As well as making
the administrative duties of accounting and tax simpler,authorities have simply waived certain tax payments, or
extended deadlines in order to help businesses stay afloat
during difficult times economically. Our experts expect these
to be temporary changes to enable businesses to weather
the storm, and do not foresee them remaining in place for the
medium to long term. These changes do, however, indicate
an agility and flexibility that was not previously associatedwith tax regimes, showing that there is an ability to rise to
emerging challenges in an ever-changing world.

For example, in jurisdictions as widespread as Canada,
Germany and Singapore, authorities introduced extensions
to the deadlines for the submission of tax filings. Other
jurisdictions took a different approach, with Switzerland
opting to suspend penalties for the late filing of tax returns.
However, it should be noted that this short-term approachto reduce the tax administration burden on firms was notuniversal: in Russia no extensions to tax filings were applied,so there is significant local variation.

Tax enforcement
Given the recent rounds of economic stimulus and relief
across the world, our experts predict that there will be anincreased tax burden for companies in the coming years, as
governments look to reduce their budget deficits. This is likely
to make the tax landscape more complex for multinational
businesses to operate in, as the various markets in which they
operate see changes to legislation to increase tax revenue,
alongside greater scrutiny from authorities to enforce thepayment of taxes.
Due to growing government deficits, many jurisdictions are
putting additional pressure on transfer pricing in order tosecure a larger portion of entities’ profits for their tax bases.
This is an important consideration, as taxpayers will need toevaluate the impact this will have on their businesses. Thiscan result in the risk of ‘double’ taxation of the same income

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

27

Is it compulsory to upload the tax invoices
on a tax authority’s system/portal?

27%

12%

61%

2021

 Yes - for all companies
 Yes, depending on certain criteria
 No

2020
24%

15%

61%

by two jurisdictions, or penalties for failing to properly allocate
income among two or more jurisdictions.
In addition, increasing international alignment between
jurisdictions could result in a global minimal standardof corporation tax: the OECD is currently considering arequirement for jurisdictions to commit to a minimum
corporation tax threshold. As jurisdictions across the globe
look to increase their tax revenues and historical ‘tax havens’
are encouraged to raise rates in line with their neighbours,
multinationals should plan for a greater tax burden in
the future.

With greater levels of government spending and reduced tax
revenues resulting from the pandemic, authorities are placing
greater emphasis on tax enforcement. In jurisdictions as
varied as Sweden, Nicaragua and South Africa, our experts
have observed a marked increase in the focus on auditing by
tax authorities. In Thailand, to cite a specific example, a tax
audit will be performed for every tax refund applied for by
a company.
We have, however, seen a change in the notice period that tax
authorities give to businesses: only 22% of tax authorities canconduct an audit with no notice, compared to 27% in 2020.

What is the notice period given by local
authorities when performing a tax audit?

2021

22%

18%

33%

 No notice period is required 1 month Up to a week

 2-3 months

 2-3 weeks

 More than 3 months

19%

8%

0%

28

GLOBAL ENTIT Y
MANAGE ME NT

Global entity management (GEM)
involves anything related to thecreation and ongoing managementof corporate structures. In an ideal
world, local rules would be identical,
allowing corporations to manage theirportfolio of entities as part of a single
cohort. In reality, processes for entity
management vary hugely between
different jurisdictions. The challenge
for businesses is to be able to manage
this local complexity while maintaining
a strategic global view of entity
management.

29

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

Incorporating companies and other entities

Other types of entities

The first step in managing an entity is to set one up. Businessthrives on fast-paced decision making – but the processof establishing a company, or other entity, varies massively
between jurisdictions. This means that companies mustplan ahead in order to get up and running within a viable
timeframe.

Compared to private companies, other types of entities
typically take longer to establish globally. For example, publiccompanies (those listed on some form of public exchange)take longer on average due to the additional complianceburden of establishing a company that is in public hands – in
87% of jurisdictions private companies can be establishedin a month or less, while the same is true of only 61% ofjurisdictions when it comes to public companies. Funds also
typically take longer to set up than either public or privatecompanies, regardless of whether those funds are regulatedor unregulated.

Average incorporation time - private companies

29%

8%

1%

Average time needed to establish public companies,
regulated funds and unregulated funds
27%

31%

4%

 Up to a week

 4 – 6 months

 2 – 3 weeks

 7 – 12 months

 Up to a week

 2 – 3 months

 Around a month Over a year 2 – 3 weeks

 4 – 6 months

 2 – 3 months

 Not applicable Around a month 7 – 12 months

Public Companies
15%

In the majority of jurisdictions, a private company can be
set up within a month. However, there are some notable
examples where incorporation takes far longer.

5%

11%

31%

15%

5%

13%

5%

Regulated funds*
Jurisdictions whereincorporation
takes 3 months
or longer

Argentina
Honduras
Venezuela
Taiwan

2%

5%

11%

19%

21%

21%

16%

6%

Unregulated funds*
In contrast, some jurisdictions have very fast incorporation
times, with some boasting the ability to set up an entity
in 24 hours or less. However, even in these jurisdictions,this quick turnaround is often dependent on the specificrequirements of the registering entities. In the Netherlands,
while incorporation within a day is possible, the process isoften drawn out longer than this, as entities usually require
amendments to the articles of association, which specify theactivities of the company, the responsibilities of directors andinformation on other internal affairs.

11%

6%

5%

20%

15%

12%

32%

0%

* Total is not 100 because individual percentages are rounded
to the nearest whole number.

30

GLOBAL ENTIT Y MANAGEMENT

Processes requiring registration with two or more bodies
Establish a regulated fundObtaining operating
permits/licenses

Recruit employees

71%

54%

44%

Incorporating the business

Register the premises

Register with relevantsocial authorities

65%

49%

34%

Open a bank account28%
Register with tax
authorities

35%

From incorporation to full operation

Private sector complexity

Another aspect which influences the time taken to become
operational is the number of authorities or other bodies thatcompanies must notify. For example, many jurisdictions
require specific authorities to be informed for particularareas of business operation. New entities may have to notify
different bodies to recruit employees, obtain particularlicences in order to operate in a certain sector, register theirbusiness premises, and so on. In the majority of cases,
incorporation itself actually requires the notification of at least
two authorities – ie there is not a single central authority formatters of incorporation.

In some cases, delays to setting up may not come from thejurisdictional government, but private sector bodies suchas banks. In many jurisdictions, banks are highly regulated,
and undertake substantial checks before setting up entities
with corporate bank accounts, particularly when accounts
are opened from abroad. On average globally, setting up abank account from abroad actually takes longer than theincorporation process.

Other activities also frequently require notification with two or
more authorities, meaning the total number of notifications
that companies must make can quickly add up. Interestingly,
establishing a regulated fund is the area where the mostjurisdictions require more than two bodies to be notified,perhaps explaining why the time to incorporate a fund isoften lengthy.
There is also significant regional variation in the requirements
around these processes. For example, for the process ofincorporation, in South America an average of four to fivebodies are required to be notified. In contrast, the average forall other regions is just two to three.

In some jurisdictions, there are vastly different timeframes
for incorporation and opening a bank account. For example,in Malta, Hong Kong and the Netherlands, incorporation
typically takes place in a week or less, while opening a bankaccount from abroad takes more than six months.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

31

Average time needed to incorporate and set up a bank account
29%

8%

4%

Incorporate a private company
27%

16%

31%

1%

28%

8%

Set up a bank account0%41%

 Up to a week Around a month 4 – 6 months

 2 – 3 weeks

 2 – 3 months

 Over 6 months

Personnel requirements for GEM
Many companies have a dedicated company secretary, aspecific position for entity management within a particularjurisdiction. However, data from the GBCI 2021 shows that
only 25% of jurisdictions globally require a company secretaryby law, with 3% requiring a company secretary in some partsof their territory (eg particular states). But while the official
position may not often be required, there is evidence thatthe responsibilities of entity management are becoming
more professionalised. In 45% of jurisdictions, a qualificationis required to prepare corporate changes or statutory
submissions on behalf of a legal entity – rising from 37%
last year.

7%

In addition, it is not just internal staff that are required forentity management, as many jurisdictions require otherprofessional parties or individuals to participate in orprocess procedures related to GEM. For example, as partof incorporation, notaries, attorneys, lawyers and banks are
frequently required.
Four in five jurisdictions require some kind of third party to
be present as part of the incorporation process, and this hasremained stable since 2020. However, the percentage ofjurisdictions that require notaries and attorneys has increased
since last year. It’s also worth noting that these third parties
may themselves be subject to particular restrictions. In
Mexico, for example, a legal representative is required who
must also be a local resident of the country.

Percentage of jurisdictions requiring each type of
professional party as part of the incorporation process 2021  2020

Notaries

Other

Lawyers
74%
66%

Banks

29%
34%

Attorneys
43%
42%

30%
26%

None of these
22%
14%

17%
16%

32

HUMAN RESOURCES
A N D PAY R O L L

33

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

Minimum wage, paid time off and paid sickdays top three mandated benefits globally

Benefits legally required to beoffered to permanent employees

The requirements for the provision of employee benefits havelargely remained consistent since 2020, particularly more
standardised benefits such as minimum wage, paid sickdays, and paid maternity leave. There has been an increasein the requirement for paid time off, which is now mandated
in almost all jurisdictions.

 2021

 2020

Paid vacation/time off

Compassionate leave
94%
88%

Looking at more progressive benefits such as childcare
assistance and housing or social care contributions,
there have been increases to the legal requirement ofthese benefits for permanent employees since 2020. This
shift has been driven by jurisdictions in APAC and EMEA,
demonstrating some regional changes since last year, andrepresents a trend towards a more employee-driven andsupportive working culture.

Minimum wage/
minimum hourly ratePension fund
92%
91%

48%
58%

87%
84%

Shared maternity/
paternity leave
43%
48%

Paid sick days

There are also some interesting regional differences whenit comes to certain benefits. For example, South American
jurisdictions lead the way in mandating 13-month salaries
and paid paternity leave or shared maternity andpaternity leave.

Paid maternity leave

Paying a 13-monthsalary or bonus
86%
87%

Severance/redundancy pay

There are also some interesting jurisdictional nuances
when it comes to maternity leave. In Bulgaria, for instance,maternity leave is 12 months long for all employees.
In Mexico, the process of applying for maternity leave isdigitalised, with employers and legal representatives able
to submit approval for maternity leave online.

North
America31%45%Childcare assistance

78%
81%

30%
16%

61%
64%

Housing/social care
contributions
25%
13%

Paid paternity leave

Health insurance
58%
57%

Are non-wage compensations taxable? (% answering yes)

Overall

Personal leave

Overtime pay

When looking at non-wage compensations, we see that these
are increasingly subject to taxation, particularly in APAC. In
2019, 43% of jurisdictions mandated the taxation of nonwage compensations, rising to 51% in 2021.

29% 36%

34%
34%

83%
84%

In Greece, there is a requirement to pay the equivalent of
a 14-month salary in 15 unequal instalments, adding tocomplexity in this jurisdiction, which is ranked 13th in the
GBCI 2021.

42% 36% 51%

51%
46%

20% 50%South
America

 2019

 202043% 50% 71%

APAC 2021

53% 38% 49%

EMEA

34

H U M A N R E S O U R C E S A N D PAY R O L L% of jurisdictions where regular
pay increases are mandatory

Overall

North America
 Change since 2020
South America

APAC

EMEA

There is a global shift away from mandating
regular pay increases, although it remains
common in South America
In North America, 50% of jurisdictions mandate regular
pay increases. This is also the case in 70% of jurisdictions
in South America. No APAC jurisdictions and only a small
percentage in EMEA mandate increases, demonstrating real
regional differences in this area.
Since 2020, the frequency of jurisdictions in which regular pay
increases are mandatory has decreased by 5%. The greatest
change in this respect can be found in North America and
APAC, where mandated regular pay increases have dropped
by 14%.
However, a considerable number of jurisdictions are still
mandating pay increases, in some cases to address issues
caused by inflation, which has potentially worsened due to theimpact of Covid-19. Luxembourg is an example where salary
indexation is mandatory and based on inflation ratios.

Companies are increasingly required to provide
employee reports to their governments
The percentage of jurisdictions where employee reports
are required for all organisations has steadily increased for
payroll data, individual pay, employee bonuses, details on
foreign national employees and employee demographics.
This demonstrates a move towards greater transparency.
By monitoring this information, organisations are held
accountable for how they support their employees andnational governments can build reliable datasets on which tobase policies.
While many of these types of reporting are now becoming
commonplace globally, mandating the measurement of the

–5%

27%

–7%

50%

No change

70%

0%

18%

–14%

–3%

gender pay gap remains a rare move by governments. In
Switzerland, for example, the government has taken steps
to more closely monitor the pay gap by mandating thatcompanies with more than 100 employees now need tocomplete regular pay equity checks.
In the UK, however, where gender pay gap reporting isenshrined in law, reporting has been put on hold until
October 2021, to ease the workload for businesses and HR
professionals during to the Covid-19 pandemic. Our experts
believe this is only a short-term setback to what will gradually
become more commonplace across the globe.
Looking at the frequency with which these reports are
required to be submitted, we see that the more commonly
required employee reports such as payroll data and individual
pay are also the most frequently reported.
This frequent need for reporting can add to complexity due
to the requirement for physical documentation in somejurisdictions. For example, companies in Honduras must
present four-monthly reports that include pay reports that
include salary information to different institutions, andthey are generally presented as a hard copy, adding to theadministrative compliance burden for companies operating
within this jurisdiction.

The most frequently considered parameters
for gross-to-net payroll calculations
When it comes to parameters considered for the calculationof gross-to-net payroll, the most common is legal and
HR-related updates, with 71% of jurisdictions reportingthat this parameter is considered. The least common aresocioeconomic factors, with only 13% of jurisdictions
considering this.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

Percentage of jurisdictions where companies must provide
reports on the following to government authorities.

 2019Payroll data

Employee bonuses

Individual’s pay
86%
79%
67%

Details on foreign
national employees 2020 2021

82%
74%
72%

Employeedemographics

75%
58%
49%

Gender pay gap

41%
28%
26%

68%
54%
59%

8%
9%
7%

Frequency of submission of employee reports
where they are required in a jurisdiction in 2021
Individual’s pay

90%

10%

Payroll data

84%

16%

Employee bonuses

72%

28%

Details on foreign-national employees

66%

34%

Employee demographics

50%

50%

Gender pay gap

31%

69%

 At least once every 3 months
 Less frequent than every 3 months

Parameters considered for the calculation of the gross-to-net payroll in 2021

Legal and HR-related updates

71%
Retro-calculations

65%

Type of employee (eg gender, income)49%
Number of payroll runs per month48%

Region or city

23%
Socio-economic factors

13%

35

36

TEN LEAST COMPLEXJURISDICTIONSThe Netherlands

70
77 Denmark

United States

El Salvador

Curaçao69

71

Republic of Ireland

74

75 Cayman Islands

76 Hong Kong

73
68 Mauritius
72 British Virgin Islands

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

37

68 Mauritius

69 El Salvador

Mauritius is a very attractive jurisdiction for foreign investment.
The island is strategically placed as the ‘gateway to Africa’and has strong trade links with India. Mauritius boasts a welleducated and bilingual workforce, and its political status makes
it a highly stable and appealing environment for businesses.

El Salvador has increased efforts to attract foreign investors
and one of the elements driving simplicity in this jurisdiction
are the less burdensome rules and regulations for foreign
investors. For instance, the country has not implemented UBO
legislation – something that can entail a lengthy process inneighbouring jurisdictions. This makes it simpler for foreignbusiness to start up, but the jurisdiction is less aligned tointernational efforts in implementing legislation aimed atproviding transparency in beneficial ownership.

However, Mauritius is currently on the FATF ‘grey list’ andhas been identified as a ‘high risk third country’ by the EU.
As such, transactions going through the jurisdiction are
currently considered at increased risk of involvement in money
laundering and are subject to extra scrutiny. In order to be
removed from these lists, efforts are being made to bring
Mauritius in line with international regulations. One example of
Mauritius becoming more internationalised is its decision toalign with the EU GDPR framework, despite not being locatedin Europe.

“ The legal and regulatory
framework in place in Mauritius
helps to secure the interests offoreign investors. Government
institutions and highly qualified
service providers can support
the establishment and conductof business activities here. ”

Other drivers of simplicity are the ability to use US dollars as
currency in the jurisdiction, and its solid banking sector. These
make it more attractive to those coming from the US to operate
in El Salvador.
Furthermore, the measures implemented in late 2020 andduring 2021 in response to the Covid-19 pandemic, and thevaccination efforts being made, meant that business did not
suffer additional lockdowns that were put in place in otherjurisdictions in the region.

38

TEN LE AST COMPLEX JURISDICTIONS

70 The Netherlands

71 United States

While the Netherlands has traditionally been a haven fororganisations looking for an advantageous tax regime, there
are fewer entities setting up purely with this goal in mind,
as global tax legislation has become less favourable. As
an example, the jurisdiction keeps abreast with trends incompliance legislation – it has recently implemented an
Ultimate Beneficial Owner (UBO) register, which came into force
in 2020. Nonetheless, based on its legacy, the jurisdiction isconsidered a business-friendly environment, offering openness
to international trade and a highly service-oriented culture.

The USA has a very simple legislative environment, particularly
at the federal level, though differences between states
can add to complexity for businesses. The accounting
system in particular is predominantly trust based, as there
are no requirements to submit accounts, contrasting withother locations in the Americas where monthly reporting
requirements are often incredibly detailed.

The Netherlands is a highly digitalised environment. The
recently introduced UBO register is already digitalised, with
relevant individuals only having to submit a scanned passport
copy in order to be identified – a process which can also bedone from abroad. Board meetings are permitted digitally aswell as physically. This digital ecosystem meant that the Dutch
authorities coped well throughout the pandemic, with entities
incorporated and operating in ‘business as usual’ mode.
The Netherlands is also an educated and highly skilledjurisdiction. There are a significant number of providers forany corporate service that new or expanding entities mightneed. Furthermore, much of the population is extremely
proficient in non-native languages, particularly English, but also
other European and global languages. This enables smoothinteractions with authorities, but also gives companies a large
and able workforce to draw on.

“ The Netherlands offers a very
stable business environment
and internationally focused
infrastructure for investors. ”

The incorporation process is simple and sequential, despite
requiring communication with multiple levels of government.
Companies are required to notify the local state government of
their wish to incorporate, before requesting a tax ID from thefederal government, which is usually returned in two days if theprocess is done online. The tax ID then enables a corporatebank account to be set up, meaning the entire process ofgetting a business up and running often takes around two to
three weeks.

“ The USA has a set of federal
regulations applicable to all
entities, however investors
need to remember that state
legal, commerce, and tax
regulations could varysignificantly by state. A clear
scenario analysis upfront,
during legal and tax planning,
is imperative to avoid
unpleasant surprises. ”
However, regional complexity can come into play when it
comes to ongoing entity management. Taxes are decided atstate level, so there are different taxes paid in different states,
as well as different thresholds for those same taxes. Income
taxes are also levied at state level, so companies that employ
workers across various states will have to keep track of local
payroll practices – something that has become more common
as remote working has become more prevalent throughout
Covid-19.
There are possible distant changes to the tax system, withnew president Joe Biden setting out an agenda of corporation
tax increases, with the most business friendly states such as
Delaware in his sights. However, any changes will take time to
implement as they will have to be debated and ratified, giving
corporations enough time to act.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

39

72 British Virgin Islands

73 Curaçao

As with other island jurisdictions that appear at the least
complex end of the GBCI, much of the business in BVI is
focused around holding assets for businesspeople and wealthyfamilies. Setting up a business for many different purposesis straightforward, and there is a great deal of flexibility in thelegal structure of companies, allowing investors to tailor theirinvestment vehicle to their own purposes.

Curaçao has traditionally been used as a financial centre forcorporate entities with their operations predominantly based
elsewhere. Global economic substance regulations mean
this practice is fiscally almost impossible without moving
the headquarters to Curaçao, but the jurisdiction remains
an attractive destination for private individuals looking tomanage their wealth offshore in purpose-built entities. Many ofthese individuals are from South America, for whom Curaçao
offers a nearby and safe place to hold large investments. The
jurisdiction also hasn’t yet adopted a central UBO register,
meaning that individuals aren’t required to identify themselves
as owners of the investment vehicles, which many prefer froma privacy and security perspective.

“ The BVI offers quick and easy
ways to set up structures,
both for operational businesses
and for holding assets. The
flexibility offered here is idealfor demanding clients who work
across borders. ”
Accounting and tax is a very simple area, with no corporate
income tax, which simplifies accounts. There are no
obligations for filing accounts, unless the business is in a
regulated industry, which rarely applies to individuals looking
to hold assets.
The legal infrastructure on the island is incredibly wellestablished, with talented lawyers present and a range offirms to choose from, as the nature of business on the islandoften requires legal expertise (eg IPOs are frequently set up
in the BVI).
Corporate processes are not fully digitalised – document
seals are automated, but stamps are not. However, this is nota barrier to trading due to the size of the island. Much of theservice-based and legal infrastructure is clustered around asmall commercial centre, and the authorities are quick to turnaround any physical documentation required.

The island has a simple incorporation process, which typicallytakes around two days, and within the last four years tax
filings have been digitalised. While not all aspects of entity
management are digitalised, the small size of the island meansthat manual, in-person processes, such as delivering letters, are
not arduous. The government also works collaboratively withindustry leading companies to make changes to legislation,such as the recent discussions about reducing certain licensing
requirements that have been in place since the 1970s, such as
the requirement for a foreign exchange licence when opening abank account in a foreign currency.

“ Curaçao is open to foreign
investors and is one of themost developed islands in
the Caribbean. We still advise
using professional service
providers when setting up
your business, to makesure your business isfully compliant. ”
Compared to similar island jurisdictions, such as the Cayman
Islands and the British Virgin Islands, Curaçao is slightly more
complex in terms of HR and payroll. For example, individuals
are required to pay income tax and various types of social
security contributions in Curaçao, which they are not on
the other two islands, meaning that companies will have toadminister this as part of salary processing. Deregistering
employees is also complex at the moment, as this is difficult
to do before a company itself is dissolved and involves
submitting complex administrative documentation to thelabour authorities.

40

TEN LE AST COMPLEX JURISDICTIONS

74 Republic of Ireland

75 Cayman Islands

The Republic of Ireland is known for being an attractive
location for investing in capital markets. The industry is longestablished, meaning that there is a wealth of local knowledge
and talent, and regulators are keen to work with businesses
to resolve issues. As a result of being in the EU, the Republicof Ireland has adopted many compliance initiatives including
Anti-Money Laundering (AML) legislation and base erosion
and profit shifting rules, which prevent companies routing
their capital through the Republic of Ireland while being based
elsewhere. It’s also worth noting that capital markets investors
often get ‘caught’ in these rules, despite them being aimed
more towards traditional corporations.

As a tax neutral jurisdiction, the Cayman Islands are extremely
simple from the point of view of complying with accounting
and tax regulations. Looking back at the 2020 GBCI, Cayman
Islands had risen slightly to 69th position due to new legislation
around local substance requirements which came into force
at the start of 2020. Businesses are now familiar with these
updates, and the Cayman Islands has returned to being one of
the three simplest jurisdictions in the world.

Due to the UK leaving the EU, the Republic of Ireland is now the
predominant English-speaking nation within the bloc, meaning
it’s an increasingly popular trade hub for those looking foraccess to the single market. Given that the legal structure isrelatively similar to the UK, the Republic of Ireland is also a
popular choice for UK-based businesses that are looking to
set up ancillary offices in order to retain access to the single
market.
Covid-19 has ushered in the rollout of electronic
filing across the Republic of Ireland. The jurisdiction is also
currently in the middle of implanting a national broadband
plan, the aim of which is to ensure that all properties in thejurisdiction have access to high-speed fibre optic broadband.
This plan is likely to be a great asset in the transition towards
more home working, as businesses will be able guarantee that
employees have access to high quality broadband connections
within the next few years.

“ The Republic of Ireland continues
to attract investment, whether thatbe in funds and capital markets
or through the establishment ofregional headquarters. Factorsthat make it so attractive include
a stable and fair regulatoryenvironment, competitive tax
regime and a deep talent pool withlanguage skills. ”“ The Cayman Islands remains
very positive about foreign
direct investment. It boasts
a well-established legal andregulatory framework, tax
neutrality and offers highquality service providers. ”
The process of incorporating a company in the Cayman Islands
is extremely quick and straightforward. The process typicallytakes two to three days, with an ‘express option’ of 24 hours
available. Covid-19 has led to a slight extension of processing
times within government departments, but overall the impact
has been minimal.
A new parliament has recently been sworn into the Cayman
Islands, and high on the priority list will be to get the jurisdiction
removed from the Financial Action Task Force (FATF) ‘grey
list’, which flags jurisdictions in which money laundering is not
sufficiently legislated against. Compliance with all aspects of
the FATF (focused on areas such as rule enforcement) will be
reviewed in July 2021, and it is hoped that the jurisdiction will
be removed from the grey list and avoid being added to theEU’s own grey list.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

76 Hong Kong

77 Denmark

Considered the ‘financial hub of Asia Pacific’, Hong Kongis ranked as the second simplest jurisdiction to operate
in globally.

Denmark’s position as the simplest jurisdiction for doing
business in 2021’s GBCI is driven by a straightforward
incorporation process, high levels of anglicisation and acommitment to digitalisation.

A major factor behind this prestigious position is the highly
structured and clear nature of HR and employment laws. For
example, pension funds are mandated at a monthly saving of
5% of an employee’s salary, capped at HK$1,500/month. This
single rule makes it a very straightforward calculation
for companies.
Hong Kong is a jurisdiction which has fully embraced
globalisation and international alignment. In the area of
accounting, for example, the jurisdiction follows the Hong Kong
accounting principle, but this is closely aligned with IFRS.

“ Hong Kong has one of themost attractive tax systems
globally: there’s no VAT, nor
is there capital gains tax ordividend tax. Setting up acompany here is relatively
simple and quick, especially
if done electronically. ”
While politically Hong Kong is part of China, the ‘one country,
two systems’ policy has allowed Hong Kong to historicallyfollow a separate legal system. There are mounting concerns
that, as the US-China trade war increases, political tension with
China and other countries around the world could also impact
Hong Kong. It is a rapidly changing political landscape, andthere is a risk that Hong Kong may be required to align moreclosely with China’s regulations, which could add significant
complexity to the jurisdiction in the future, potentially deterring
foreign investment.

41

In Denmark, you can incorporate a company within a day,due to the fact that there is one single entry point for all
registrations, and all necessary bodies and organisations areautomatically notified. This means that there is no need to
conduct manual filings with the business authority and tax
administration. The rapid incorporation process is facilitated by
exceptional digital fluency in the jurisdiction.
The other key driver of simplicity in the jurisdiction is the factthat crucial documentation can be accessed and submitted
in English. The Danish government is continuing to translate
more and more aspects of their online services related toincorporation and operation, to ease processes for those more
comfortable with the English language.
Denmark has also offered support packages to businesses
struggling during the Covid-19 pandemic. However, it should
be noted that applications to this support could be complex,
showing the challenge that the pandemic represented to eventhe most simple of jurisdictions.

42

CONCLUSIONCONCLUSION

While Covid-19 has been the hot topic of recent months,
the GBCI 2021 demonstrates that the world was alreadya very complex place outside of the pandemic. Muchof the content covered in this report will remain salient
after the pandemic has abated, though its significance isundeniable.
In some areas the pandemic has increased complexity,with closed borders creating barriers to trade andthe movement of workers, and lockdown restrictions
causing economies to shrink. At the same time, it
has accelerated many processes, particularly thepath to digital interaction between governments andbusinesses, the benefits of which should be felt for years
to come. Digitalisation allows faster and more seamless
communication for administrative essentials suchas incorporating and filing, and an easy-to-use digital
infrastructure also makes a jurisdiction much more
attractive to prospective businesses.

National governments may not always have complete
control over the legislative environment within theirjurisdiction, as they enact laws devised by international
bodies or to bring their country in line with global
standards and best practices. Organisations such as theOECD and the EU are playing an increasingly prominentrole in regulating the business environment, particularly
in areas of international trade related to combating tax
evasion, money laundering and financing terrorism.
Alongside these complexities, governments are trying toensure that corporates are acting responsibly, resulting
in increased filing and reporting obligations and moreobligations to employees. This will rightly penalise
companies who are acting irresponsibly, but will also
leave many companies with a greater administrative
burden than before. They may additionally findthemselves paying higher tax rates and spending moreon payroll and staff benefits as a consequence of theshift towards responsible governance.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

Looking ahead to 2022, there are clearly uncertainties in the shortand medium term for businesses to navigate. Key factors include:

How quickly the global
economy recovers fromthe effects of Covid-19.

The extent to which
employees will want towork in physical offices.

While considering these, it is vital that companies also rememberthat the global and local legislative environments in which they
operate will likely change too, and even jurisdictions that are
pushing to simplify cannot do so overnight.

How much support thebusiness world receives
from governments as
it emerges from thepandemic.

43

44

ME THODOLOGYME THODOLOGYThe Global Business Complexity Index was created by
TMF Group, the experts on global and local businesscomplexity, and Savanta, a specialist market research
agency. Combining subject-specific knowledge with asolid grounding in data and analysis, the GBCI 2021 isbuilt on robust multi-method research.
The index is generated from an in-depth survey of TMF
Group’s in-market experts in 77 jurisdictions, and thedata is also compared to the survey results used in lastyear’s GBCI report. The survey covers three areas ofbusiness operations:•••

Accounting and tax;
Global entity management;
HR and payroll.

The data for each jurisdiction was statistically weighted
and combined to produce an overall complexity score, as
well as a score in each of the above three areas. Visuals
are based on survey results across 2020 and 2021.
Those that answered ‘don’t know’ in the survey havebeen excluded from the analysis.

About Savanta Group
Savanta is a fast-growing data, research andconsultancy firm. We inform and inspire change
through cutting-edge data collection and analysis
across a wide range of sectors.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2021

45

GLOSSARY

AML

Anti-money laundering refers to a suite of laws
and regulations that aim to stop criminals fromclaiming illicit funds as legitimate income.

GDPR

The General Data Protection Regulation is a
European Union law that sets out rules forprotecting the personal data of EU individuals.

BEPS

Base erosion and profit shifting refers to tax
avoidance strategies used by multinationals,
and the OECD regulations used to combat
them.

Globalisation

Globalisation is a process of global
convergence whereby economies and cultures
become increasingly interconnected andaligned around the world.

CRS

The Common Reporting Standard is an OECDinitiative to combat tax evasion. Participating
jurisdictions have to require financial
institutions in their jurisdictions to disclose
information annually on financial accounts
held with them by foreign residents, and torequire the local assigned regulatory authority
to exchange relevant information with theaccount holder’s country of residence.

IFRS

International Financial Reporting Standards area set of global standards issued by the IFRS
foundation and the International AccountingStandards Board.

Incorporation

Incorporation refers to the process ofestablishing a new legal entity.

OECD

The Organisation for Economic Co-operation
and Development is an internationalorganisation that aims to promote global trade.

PSC

A ‘person with significant control’ is a term
used in various global regulations to refer to aperson who has a significant level of control or
influence over the actions of a legal entity. The
exact definition varies according to the laws ofdifferent jurisdictions.

UBO

The ‘ultimate beneficial owner’ refers to anatural person who directly or indirectly owns
or controls a significant interest in an entity
or arrangement. The exact definition of UBO
and what constitutes significant interest varies
according to the laws of different jurisdictions.

Economic substance

FATCA

Economic substance is a principle ininternational tax that determines that areasonable level of local economic activity
must exist for an enterprise to claim tax
residence in a specific jurisdiction, and that theestablishment should exist in that jurisdiction
for a more significant purpose than only the
reduction of tax liability.
The Foreign Account Tax Compliance Act is
a US federal law requiring foreign financial
institutions to disclose the financial accountsof their customers who are US persons or
entities that are controlled by US persons,under penalty of substantial withholding tax on
all US source income.

While we have taken reasonable steps to provide accurate and up-to-date information in this publication, we do not give any warranties orrepresentations, whether express or implied, in this respect. The information is subject to change without notice. The information contained in thispublication is subject to changes in (tax) laws in different jurisdictions worldwide.
None of the information contained in this publication constitutes an offer or solicitation for business, a recommendation with respect to our services,a recommendation to engage in any transaction or to engage us as a legal, tax, financial, investment or accounting advisor. No action should be taken
based on this information without first seeking independent professional advice. We shall not be liable for any loss or damage whatsoever arising as aresult of your use of or reliance on the information contained herein.
This is a publication of TMF Group B.V., P.O. Box 23393, 1100 DW Amsterdam, The Netherlands (contact@tmf-group.com). TMF Group B.V. is part of TMF
Group, consisting of a number of companies worldwide. Any group company is not a registered agent of another group company. A full list of the names,
addresses and details of the regulatory status of the companies is available on our website: tmf-group.com© June 2021, TMF Group B.V.

ABOUT TMF GROUPWE MAKE A COMPLEXWORLD SIMPLE

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