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FOREWORD

We have published an annual report on businesscomplexity since 2013. Our 2020 report is overshadowedby the massive economic and social disruption caused by
COVID-19. It is above all a personal tragedy for those
directly affected and for the many who now face athreat not just to their health but also to their livelihood.
Businesses are having to navigate unchartered waters.
Many have had to abandon their investment plans,
withdraw guidance and cease paying dividends in theface of dramatic drops in demand. The crisis will also
likely affect all aspects of business from how and where
goods are sourced, to where they are bought and sold, towhere work gets done and to how it gets done.

We at TMF Group are just as caught up in these forces
as every other business. We have moved to remote
working in our 120 offices around the world; havenavigated the delicate balance between employee safety
and client service; and tried to anticipate the shiftingneeds of our clients, whether they are thriving or simply
surviving as a result of the effects of COVID-19. Our
purpose is to help clients invest and operate safely
around the world. As a small contribution in this momentof crisis, we are maintaining a list of government support
schemes around the world (available here) which now
number over a thousand, together with links to theapplication pages.

The consequences of COVID-19 for business rules andfor international trade are unclear. Many governments will
have to deal with heavy debt burdens and a reduced tax
income, even in the most optimistic V-shaped recovery
scenario. While some governments may seek to relax
rules to encourage inward investment and to reduce theburden on businesses, others may seek to tighten rules tomaximise income from tax and sanctions and to protect
domestic firms from competition. The backdrop of risingnationalism, US–China tensions, a no-deal Brexit and apotential Eurozone crisis does not make the future any
clearer.

Even before the crisis, businesses had their work cut
out to operate safely within increasingly complex local
financial, regulatory and employment rules for doing
business. Post crisis, it is likely only to get more complex
and with businesses having much lower resilience toabsorb the consequences of getting it wrong. We hope
the Global Business Complexity Index helps you tomanage that complexity and to stay safe in these difficult
times.

Mark Weil
Chief Executive, TMF GroupCONTENTS
Introduction

2

Global highlights

Highlights– Accounting and tax

18– Internationalisation versus localism

4– Rules, regulations and penalties

21– Modernity versus tradition

6– Human resources and payroll

23– Technology and simplification

8

Ten least complex jurisdictions

26

GBCI rankings 2020

10Conclusion

32

Ten most complex jurisdictions

12

Methodology

34

GlossaryIBCGLOBAL BUSINES S COMPLE XIT Y INDE X 2020

We make a complex world simple

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INTRODUCTION

GLO
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BUS
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SSC
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IND
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INTRODUCTION

The Global Business Complexity Index 2020 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.
Businesses must contend with both global andlocal forces while striving to be successful. Amongthe widespread and rapidly changing trends are theaccelerating growth of technology and the focus oncross-border compliance. Individual jurisdictions
have very particular ways of doing things that can be
confusing and potentially costly to outsiders.

GLOB

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GLOBAL
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LOCAL
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GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

Accordingly, the GBCI 2020 has examined the interaction between global
and local factors and their impact on businesses in terms of:

S

ES
US

IN

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GLOBA

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GLO

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Internationalisation
versuslocalism

How international trends are driving
global standardisation while local
practices persist and are evengrowing in some jurisdictions

Modernisation
versustradition

How global trends are
driving modern practice,
while local considerations
often reflect traditionalmodes of operation

As in last year’s report, the findings give rise to a global ranking of thesejurisdictions, based on the complexity of their business environments interms of legislation, compliance, accounting procedures, tax regimes,
human resources (HR) rules and payroll procedures.

Technology
and simplification

How technology fosters
a globalised businessenvironment and how
this is developing aroundthe world

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G L O B A L H I G H L I G H T S : I N T E R N AT I O N A L I S AT I O N V E R S U S L O C A L I S M

I N T E R N AT I O N A L I S AT I O N
VERSUS LOCALISM

Expanding operations into new territories aroundthe world offers huge commercial opportunities.
Governments are continuing to open up tointernational business by improving the processes
for assimilating them into their local economies,
sometimes through offering incentives. However,as the GBCI 2020 shows, jurisdictions vary in theirsuccess at creating an easier environment forforeign direct investment.

As in the GBCI 2019, most jurisdictions adhere tointernational regulations in some form or other,
particularly on transparency and reporting frameworks.
In 2020, 8 in 10 jurisdictions are committed to the
Common Reporting Standard (CRS), an OECD initiativethat makes sharing account data between financial
institutions across borders more transparent.
For all jurisdictions, regardless of their complexity,
committing to legislation such as CRS demonstrates
an international openness aimed at attracting overseas
investment. Jurisdictions at both ends of the complexity
spectrum are keen to adopt this standard. Jamaica is the
only one of the 10 least complex jurisdictions that has
not yet committed itself to CRS reporting, while Bolivia
is the only of the 10 most complex jurisdictions that has
not signed up.

Some national governments are following international
trends and adopting their versions of the legislation.
Transparency legislation in relation to ultimate beneficial
owner (UBO) registers, which indicate significant
ownership of corporate entities, looks set to be adopted
by most jurisdictions around the world. However,
the rules differ as to what counts as ownership. The
European Union defines an owner as an individual orcompany that controls more than 25% of the shares orvoting rights within an organisation. By 2020, 68% ofjurisdictions had introduced a UBO register, an increase
from 64% in 2019. Some 24% of all jurisdictions requirethem to be accessible to the public, an increase from
21% in 2019. UBO registers have been introduced in 79%
of jurisdictions in Europe, the Middle East and Africa(EMEA).

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

Ultimate beneficial owner (UBO) and/or
person with significant control (PSC) register
requirements– 2020 – 2019

Factors that affect the hiring of overseas workers

Country of origin

61%

Requirement toprovide UBO and/or
PSC information to acentral register

Overall

64%

77%

29% 33%
NA

SA

APAC

EMEA

64%
Skill level

68%
Requirement tomaintain UBO and/or PSC register at thecompany’s registeredaddress

68%

Overall48%

Information in UBO/
PSC central register
accessible to the
public

93%
50%

44%

NA

SA

APAC

72%

EMEA

45%
Current salary

21%
24%

71%
38%

Overall

There is a time lag between jurisdictions committing
themselves to producing these registers and its
implementation. In the European Union, which required
all member states to set up owner registers following
its Fourth Anti-Money Laundering Directive (AML4) of
2015, Denmark implemented the legislation in 2017,
while Greece is planning to roll out its UBO register only
this year.
Some transparency frameworks include highly localised
rules. Just under one third of jurisdictions require atleast one director of an incoming company to be a local
resident. The aim is to foster domestic accountability
and to provide a legal basis for pursuing directors in theevent of non-compliance. Requirements are even more
stringent in the Asia–Pacific (APAC) region and in SouthAmerica (SA), with 50% of jurisdictions requiring at least
one director to be locally resident. Some jurisdictions
may allow foreign directors in order to stimulate foreign
direct investment. In Indonesia, small and medium-

21%

33%

NA

SA

33%
APAC

EMEA

sized enterprises (SMEs), which are defined locally as
those with an initial investment of up to $600,000, are
not required to have locally resident directors. EMEA is
particularly relaxed, with 85% of jurisdictions allowing
companies to operate without local directors, in stepwith the European Union’s rules for the free movementof labour and capital.
Many jurisdictions have stringent laws and requirements
for hiring foreign workers. About 68% have rules onhiring workers from abroad that are based on skill levels.
Political considerations relating to borders can affect theability of companies to put together a workforce: 61%
of jurisdictions have rules about prospective workers’
countries of origin. In other cases, incentives are used toencourage the employment of local workers. Colombia isrelaxing employee contribution payments for companies
that agree to hire local workers who have neverpreviously had a job.

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G L O B A L H I G H L I G H T S : M O D E R N I S AT I O N V E R S U S T R A D I T I O N

M O D E R N I S AT I O N V E R S U S T R A D I T I O NModernisation is broadly about demonstrating
commitment to international standards andpractices, whereas tradition is reflected in localised
barriers to smooth operation. Governments may
hold on to many traditions, which may be written
into law or simply common practice. Such traditions
make it more difficult for companies to operatebecause:• they add to business complexity, as they areusually out of date and do not pertain to themodern world;• embody idiosyncrasies which can add to thecosts of getting to grips with what legislation
demands of companies.

The traditional requirement of an official stamp, chopor seal on documents to ensure legal probity remains
a hindrance in 43% of jurisdictions, although this has
decreased from 49% in 2019. This year Argentina,
Malaysia and Hong Kong have removed the requirementthat documents include official chops or seals. A small
number of jurisdictions introduced the requirementin 2019. Only 26% of EMEA jurisdictions require
such marks.
The traditional requirement of in-person filing is much
more complex in geographical and logistical terms. For
a business to be incorporated in Ecuador, documents
must be stamped at the Ecuadorian embassy in theincoming company’s own country, after which thepaperwork is sent to Ecuador for verification. In Greece,
a company hiring its first employees has to visit thelabour authorities on the same day and present online
documentation of it within three days.

Reporting that is regarded as traditional is notnecessarily paper based but is often required to bemade in the local language. Some 86% of jurisdictions– including Israel, Malta and the Netherlands –require official documentation to be submitted in thelocal language, compared to 74% in 2019. In 73% ofjurisdictions director and shareholder minutes must
be recorded in the local language, compared to 65% in
2019. In Switzerland and Belgium, payroll data must bereported in multiple languages because of the countries’
federal and multilingual character. Businesses that are
unaware of these requirements may face unexpectedobstacles and additional costs when interacting withthe state.
Benefits packages that are regarded as more progressive
are more prevalent in 2020 than in the previous year.
They reflect a commitment to protecting workers’
livelihoods and pay. A minimum wage is now mandated

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

Requirement of a stamp, chop or seal tolegalise documents

7

Jurisdictions requiring documentationin the local language
Are official documents for submission to the local government
authorities prepared and submitted in this jurisdiction’s local
language (other than English)? (YES)

Overall

43%

57%

49%

North
America

51%

43%

57%

86%

2020

2019

74%

2019

2020

50%

50%

2020

2019

South
America

80%

APAC

64%

36%

2020

64%

36%

2019

EMEA

20%

90%

2020

Does local legislation state that the director and shareholder
minutes should be created and maintained in this jurisdiction’s
local language (other than English)? (YES)
73%

2020

65%

2019

10% 2019

Legally mandated benefits forpermanent employees
Minimum wage
89%

26%
32%

74%
68%

2020
2019

91%

Paid vacation/time off
84%

88%

Paid maternity leave
87%

87%

Paid sick days
80%

84%

Severance/redundancy pay
87%
Overtime pay
80% Yes  No

by 91% of jurisdictions, compared to 89% in 2019. The
new jurisdictions now mandating a minimum wage areTurkey, the British Virgin Islands and Norway. Thereis provision for paid vacation or time off in 88% ofjurisdictions compared to 84% last year. Paid sick days,
paid paternity leave and health insurance have become
more widespread.

81%

Paid paternity leave
61%

64%

Pension fund
59%

58%

Health insurance
46%

84%

57%

Shared maternity/paternity leave
48%
53%
Compassionate leave
34%
46%
Personal leave
45%

45%

Paying a 13-month salary/bonus
34%
34%
Free/subsidised eye tests
12% 16%
Childcare assistance
17% 16%
Housing/social care contributions
21% 13%
Transportation allowance
16% 12%
Life insurance
11%12%

2019 % ‘legally required’2020 % ‘legally required’8

G L O B A L H I G H L I G H T S : T E C H N O L O G Y A N D S I M P L I F I C AT I O N

T E C H N O L O G Y A N D S I M P L I F I C AT I O N

For a modern jurisdiction to appeal to international
business, it has to adopt new technology. The least
complex jurisdictions usually have a good track recordof doing this. However, the most complex jurisdictions,as ranked by the GBCI 2020, have also often deployedtechnology to create a welcoming and straightforward
environment for business while trying to minimise thelocal factors that might dissuade multinationals fromsetting up. This can lead to an initial spike in complexity
as jurisdictions struggle to adapt to new digitalised
systems while trying to bridge the gap between paperand online solutions. International legislation has
become heavily reliant on communications technology.
The CRS requires online data submission in consistentformats across all participating countries.

The cornerstone of technological advance forjurisdictions is the online submission of official
documents across all the required areas, as thisdramatically reduces the bureaucratic and reporting
burden on companies. Encouragingly, official
submissions to authorities are made electronically in
71% of all jurisdictions, although this has remained
unchanged in the past year.
There is regional variation in the extent to whichbusinesses can communicate with the authorities
through electronic filing. EMEA leads the way, with 79%
of jurisdictions claiming that official submissions can bedone electronically. In North America (NA), the figure is57%, the lowest of any region. It is also the region that isfurthest behind in electronic tax filing: it is compulsory

to submit tax returns in electronic formats in just 14%
of its jurisdictions, compared to 39% worldwide. SouthAmerica is the most advanced region, with 9 out of 10
jurisdictions requiring tax invoices to be submitted in anelectronic format.
There is wide variation in the types of tax that must be
submitted electronically. Of the jurisdictions that impose
sales tax, 73% mandate electronic filing, while thecomparable requirement for property tax is 36%.
Jurisdictions are striving to consolidate and streamline
electronic reporting. Indonesia’s Online Single
Submission (OSS) platform aims to bring all interactions
with the authorities under a single portal. However, theportal concept requires licensing bodies, which have yet

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GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

Jurisdictions where official submissions
are made online

Requirement to upload tax invoices toauthority portal

Overall
Overall

27%

24%

15%

61%

71%
North America
North America

43%
57%

South America

30%
70%

14%

86%

South America
50%

40%

APAC
APAC

36%

EMEA

36%

14%

50%

18%
64%

79%

EMEA
16%

 Yes  No

to be brought into the system, and this has resulted in a
mixture of electronic and paper-based documentation.
The Republic of Ireland has ended the annual reportingof payroll data and opted instead for a system of
automatic electronic data reporting. Companies update
their records online when changes occur, and the central
government is automatically notified.

14%

70%

 Yes  Yes, depending on certain criteria  No

10%

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THE GLOBAL BUSINESS COMPLE XIT YINDEX RANKINGS 2020

1

Indonesia

2

Brazil3

Argentina

4

Bolivia5

Greece6Mainland China

7

Nicaragua

8

Colombia

9

Malaysia

10

Ecuador11

Turkey12France13

Mexico14

Croatia15

Panama16

Taiwan

17

Korea

18

India

19

Belgium

20

Serbia21

Slovakia

22

Russia

23

Peru

24

Vietnam

25

Kazakhstan

26

Costa Rica

PAGES

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GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

Hungary53

United Arab Emirates

28

Cyprus54

Canada

29

Spain

55

Norway30

Slovenia

56

Ukraine31

Portugal

57

Philippines

32

Guatemala58

Australia

33

Paraguay59

New Zealand

34

Poland60

Singapore

35

Romania

61

Malta

36

Italy

62

Switzerland

37

South Africa

63

Israel38

Sweden

64

Chile

39

Finland65

Jersey40

Germany

66

Hong Kong

41

Austria

67

Dominican Republic

42

Thailand

68

Mauritius

43

Uruguay69

Cayman Islands

44

United Kingdom

70

Republic of Ireland

45

Guernsey71

El Salvador

46

Japan

72

The Netherlands

47

Honduras48

Czech Republic

49

Qatar

50

Luxembourg

51

Bulgaria

52

Venezuela

TEN LEAST COMPLEX JURISDICTIONS

27

73

British Virgin Islands

74

Denmark

75

Jamaica76

United States

77

Curaçao

11

PAGES

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SECTION TITLE

TEN MOST COMPLEXJURISDICTIONS

5

Nicaragua

Ecuador8

7

Greece2

4Brazil93Mainland China

1

Indonesia

Colombia

10
Bolivia6

Argentina

Malaysia

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

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1

2

Indonesia

BrazilIndonesia’s position as the most complex market
globally is due partly to its traditional legislation.
Its labour laws, which are aimed at protecting theworkforce from exploitation, make it very difficult totake disciplinary action or to sack underperforming
employees. These regulations are regarded asarchaic by outsiders and remain one of the major
deterrents to foreign investment in Indonesia.

Complexity in Brazil’s business environment isdriven mainly by rules concerning accounting andtax. There are dozens of different tax regimes,
and businesses must comply with three levelsof tax regulations: municipal, state and federal.
Different regulations apply to international and local
businesses seeking to establish themselves and to
trade in Brazil.

The Negative Investment List, which restricts
the percentage of foreign ownership within eachindustry sector, is regarded as one of the primaryobstacles to business operations in Indonesia.
There are 22 industry sectors, which are subdivided
into approximately 200 subsectors.
There have, however, been moves to simplify
Indonesia’s business environment to attract
foreign businesses and workers. One of these is
the conversion of the Negative Investment List
into a Positive Investment List, which is expected
to be implemented over the next few years. Thisshould open up more sectors of the Indonesian
economy to foreign direct investment (FDI). The
current draft contains plans to open up 16 of the 20
hitherto closed sectors to varying degrees of foreign
ownership. This move should lower Indonesia’s
GBCI ranking in the years ahead.

“The president is very keen to boost
foreign investment and is looking
to ease things as far as possible.
Indonesia is already an attractive andlucrative market and, with increased
ease of doing business, it will become
even more attractive.”
Alvin Christian, TMF Group, Indonesia“In spite of progress made in recent
years towards digitalisation and more
simplified taxes, including the launchof the digital system eSocial, Brazil
remains a very complex businessenvironment, with dozens of different
tax regimes.”
Rodrigo Zambon, TMF Group, Brazil

The Brazilian government is trying to simplify thebusiness environment and to align it globally. In
contrast to the past, it is not currently applying
protectionist policies to imports or exports, and
it is modernising labour agreements. The Law of
Economic Freedom was introduced in September
2019 to give businesses greater flexibility inemploying workers for non-traditional working
hours. In addition, the tax authorities have launcheda digital reporting system known as eSocial todigitalise information exchange withthe government.

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TEN MOST COMPLE X JURISDICTIONS

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4Argentina

Bolivia

It is not surprising that foreign businesses findincorporation and business operations challenging
in Argentina. Since a change of government in
December 2019, some of the previous government’s
efforts to simplify incorporation and business
operations have been suspended. The new
government is renegotiating public debt, and its
sudden tax and regulatory changes have added tobusiness complexity.

Bolivia found itself in a political limbo as disputed
election results in late 2019 led to the resignationof the president, Evo Morales, after 14 years ofrelatively stable rule. New elections were scheduled
for May 2020 but have been postponed becauseof the COVID-19 pandemic. Under Morales policy
was inward facing, promoting economic selfreliance over international trade. This is reflected in
the jurisdiction’s lack of compliance: Bolivia is not
signed up to international initiatives such as the CRS
or OECD initiatives such as BEPS.

Foreign currency restrictions are perhaps the mostpressing problem. Businesses have to present
documentation to banks and submit to checks
before they can transfer and receive money
internationally, which slows down transactions andoperations for multinationals considerably. Someforeign businesses are trying to adapt to thesesudden changes, but others have been driven toliquidate and cease operation in the jurisdiction.
Argentina is aligned with international standards ontransfer pricing and money laundering, but not withother standards such as the OECD base erosion andprofit shifting (BEPS) standards.

“As one the largest economies in
Latin America, Argentina offers
great opportunities for investment.
Despite the complexity of operating
here, opportunities in various sectors,
including energy, agriculture andtechnology, should not be overlooked.”
Claudio Cirocco, TMF Group, Argentina“New entrants to the market may
be confused by some of the more
traditional practices in Bolivia, such as
the requirement for apostilles to legalisecertain documents.”
Luis María González, TMF Group, Bolivia

While this may ease the burden for multinationals,
there are a host of national bodies with which
companies seeking to set up have to register.
Incorporation involves registering with the Chamberof Commerce, the National Tax Service, theMinistry of Labour, pension fund administrators,
the Health Fund and financial institutions, andobtaining licences and permits from the relevant
industry authority. In addition, municipal registration
processes require further documentation.
When a company registers with the authorities,
however, all other relevant bodies are automaticallynotified. Bolivia is one of only 6% of jurisdictions inwhich this happens. The process started with thelinking up of the Chamber of Commerce with the
National Tax Service and the Ministry of Labour,
but the COVID-19 crisis accelerated the process of
automatic notification.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

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5

6

GreeceMainland China

Although this country was at the heart of Europe’s
sovereign debt crisis just over a decade ago, therecently elected New Democracy Party is keen
to demonstrate that Greece is as attractive tointernational business as other European nations.
To stimulate foreign investment, corporate income
tax was reduced from 28% to 24% in 2018, and afurther reduction to 20% is planned. A UBO register
will be introduced this year, reflecting the country’s
commitment to the European Union’s anti-money
laundering legislation.

China has hitherto been a labour superpower,
supplying multinationals with workers to
manufacture their goods, but a consumer economy
is rapidly developing in the country, which has aprofessional class of approximately 400 million.
There are ever more incentives for multinationals tomarket their products within China itself. The launchof the China International Import Expo, an annual
trade fair held in Shanghai, reflects the government’s
promotion of this shift.

Despite this, Greece has a long way to go in termsof modernisation, with most registration processes
still having to be done in person. Accounting andtax complexities are the main reason for Greece’s
high ranking in the GBCI. Tax legislation is daunting
for locals and foreign companies alike, with around70 new measures being introduced every year.
Companies struggle to find official advice on how
to interpret the tax laws, as the Minister of Financetypically takes six to eight months to respondto requests for advice. While some tax rates arecoming down, indirect taxes on goods and services
are much higher in Greece than in other European
countries.

“Whatever transaction you can thinkof, there is a specific tax for it. Thesetaxes also change very frequently, andit can be a challenge to keep on top of
everything.”
Yannis Goussiakis, TMF Group, Greece“Before entering the market, companies
need to understand how to avoid themost common pitfalls, especiallythose relating to the latest compliancerequirements and the relation between
national and local practices.”Thun Lee, TMF Group, China

The balance between Chinese imports and exports
has been subject to much scrutiny in the past two
years during its trade war with the United States.
Restrictions on trading with the United States may
be forcing some multinationals to look at alternative
markets within China.
Once they are up and running, multinationals
may well find Chinese legislation more layered
than in other jurisdictions. There are significant
regional variations in tax rates: corporate income
tax has been set at 25% nationally, but regions,provinces and cities may modify the tax rate to
attract foreign investment. Most jurisdictions havegeneral conditions with regard to the obligationsof employers and employees, but Chinese labour
contract law details the terms of labour contracts
extensively.

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TEN MOST COMPLE X JURISDICTIONS

7

8Nicaragua

Colombia

Nicaragua can be a challenging jurisdiction forinternational businesses to operate in. The country
went through a socio-political crisis in 2018 which
impacted government-related transactions andled to inflation and exchange rate problems. These
have had a huge impact on businesses, and havemade incorporation and operations much more
complex for international organisations. Generalelections scheduled for 2021 are giving rise tofurther uncertainty. Hopefully, the outcome will
make Nicaragua a more stable jurisdiction forinternational operations.

Like much of South America, Colombia functions througha highly regionalised structure of 1,100 municipalities, eachwith its own rules and practices, and variously subject toelectoral politics. Parts of Colombia are home to local
armed groups that control patches of territory. Businesses
should make sure that they avoid these ‘red zones’.

Despite the political uncertainty, aspects of businessincorporation and operation are quite progressive.
Nicaragua is an internationally aligned jurisdiction,complying with OECD BEPS, Foreign AccountTax Compliance Act (FATCA) and transfer pricing
regulations, thereby demonstrating a commitment
to transparency. The country has developed a web
portal for reporting salaries and payroll, a ‘one-stop
shop’ for submitting tax declarations and payments.

Despite its devolved politics, the Colombian government
has many policies to promote its national workforce overforeign labour. There is a national scheme to improveyouth employment whereby companies pay lower rates of
employee contributions if they hire and train Colombians
who have never worked before.

“Companies must take great care to calculate
their tax correctly. Failure to do so results infines and any underpayment to the treasuryis also subject to high levels of interest until
the error has been corrected.”
Daniela Diaz Quijano, TMF Group, Colombia“Nicaragua went through a sociopolitical crisis in 2018, which affected
investor confidence. The various
stakeholders must come together toagree on a solution to the crisis.”
Xilot Mejia, TMF Group, Nicaragua

Multinationals operating in Colombia have to pay close
attention to local policy to avoid high punitive fines. It iseasy to make a mistake in submitting tax returns, giventhat regulations are not always clear and open
to interpretation. Mistakes result in fines and any
underpayment is subject to an annual interest rate ofaround 28%.
There are stringent and detailed rules for receiving capitalfrom other countries. Entities have to declare currency
income and outflow in any case, using a system of codesand complying with certain requirements. If a company uses
a wrong code or does not comply with those requirements,
it will result in the company facing severe penalties.
Detailed records of all third-party transactions aremandatory in Colombia, including those with suppliers,
clients, banks and any other party. The Colombian
authorities verify and cross-check all such records toensure that entities pay the correct amount of tax andthat mistakes in these type of informative reports
result in penalties.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

17

9

10

Malaysia

Ecuador

Incorporation in Malaysia involves obtaining licences
for business premises, the industry sector and sharecapital. The incorporation process for a foreignbusiness can take up to a month.

A large driver of complexity in Ecuador is its
uncertain political situation. In October 2019 thejurisdiction spiralled into a political crisis which
paralysed the economy, business operations andproduction for almost two months. This uncertainty
has led to rapid changes to legislation, for example
a recent rise in withholding tax, which has increased
the complexity of the jurisdiction.

The official business language in Malaysia is
Malay, with English as the second language. Whilesome forms can be completed in English, mostcorrespondence with the government takes placein Malay. As it was once a British colony, Malaysia’s
legal system is based on UK law, and its accounting
practices are internationally aligned, including
adherence to International Financial ReportingStandards (IFRS).
Malaysia deploys a digital submission platform foraudits and financial statements. While its use is
not compulsory, the government encourages it bygiving companies an annual rebate of RM5,000 per
year. This is part of the Malaysian government’s
strategy of simplifying processes to attract FDI. The
jurisdiction is likely to move towards a lower ranking
in future GBCI reports.

“Investors in Malaysia must be able toevaluate its changing social, politicaland economic landscape, as thecountry’s legislation has a large impact
on day-to-day business operations.”
Sharon Yam, TMF Group, Malaysia“While doing business in Ecuador may becomplex, some factors make it simpler
than other jurisdictions. We adopted
the US dollar in 2000 and use theinternationally recognised IFRS.”
Diego Mantilla, TMF Group, Ecuador

Despite its complexity, Ecuador is an internationallyaligned jurisdiction, which increases its
attractiveness for FDI. Since 2000, the local
currency has been US dollars, which makes it
particularly appealing to US businesses as they
can use their home currency for operations. The
jurisdiction has adhered to IFRS regulations
since 2012.
As a result of technological advances and thedigitisation of many documents, the time taken
for incorporation in Ecuador has decreased fromaround six months in 2018 to three to four weeks
in 2020. However, incorporation time for foreignbusinesses can be doubled by the need for
documentation to be translated into Spanish, sent
to the Ecuadorian embassy of the home country,
stamped and returned to Ecuador.

18

H I G H L I G H T S : A C C O U N T I N G A N D TA X

CRO
SSB
ORD
ERC
OMP
LIA
NCE

ACCOUNTINGA N D TA X

Using taxation to attract investment
Across the globe, there is significant convergence on
the types of tax collected, with little regional variation.
However, each jurisdiction has its own complexities thatbusinesses must navigate. Some 98% of jurisdictions
levy corporation tax, while 9 in 10 have payroll, businesspremises, withholding, value-added and excise taxes.
Exceptionally, jurisdictions such as the Cayman
Islands and the British Virgin Islands do not impose a
corporation tax in a successful bid to appeal to foreignbusiness investment. This partly explains their position
as two of the least complex jurisdictions in the
GBCI 2020.
While taxes are often levied by the central government,
some regions or municipalities choose the specific rateof tax paid by companies in their territory. In China, someregions are allowed to deviate from national government
policy and to charge a lower corporation tax to attract
FDI. For example, the six provinces of the Western
Regions charge a corporation tax rate of 15% rather
than the fixed national rate of 25%.

Some 98% ofjurisdictions levy
corporation tax

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

Types of taxes levied on business Overall North America

 South America APAC

Corporation/income tax

 EMEA

Excise tax
98%

87%
77%

100%

80%

86%

93%
89%

100%
100%

Payroll taxes

Capital gains tax
78%
78%

92%
92%
100%
93%
89%

Value-added tax (VAT)/goods and services tax (GST)

90%
72%
76%

National insurance contributions

93%

76%
78%

79%
100%
93%
95%

Withholding tax

44%
71%
84%

Sales tax
60%
65%
70%
58%
56%

91%
78%
100%
100%
90%

Property tax on business premises
85%
86%
100%
78%
84%

Insurance premium tax
45%
31%
40%
23%

58%

19

20

H I G H L I G H T S : A C C O U N T I N G A N D TA X

Changes in tax legislation
Legislative change is a major cause of complexity,
particularly if it happens suddenly and requires a
substantial effort to adapt to new practices and rates. In
Ecuador, political instability has led to frequent changes
in tax legislation with almost immediate ramifications,such as the recent increase in the withholding tax rate. In
Greece, about 70 new tax laws are introduced every year,
typically in March or April, which are applied retroactively
to the start of the calendar year. Companies are forced
to retrofit their accounts and tax submissions to comply
with these changes.

States and businesses: from transactional
relationships to partnerships
Some state institutions around the world are attempting
to act more as a partner to businesses. The number ofjurisdictions that require mandatory audits of company
accounts has decreased. In 2020 12% of jurisdictions
require all companies to have their accounts audited,
compared to 17% the previous year. The jurisdictions
driving this trend are Bolivia, India, Luxembourg, Malaysia
and Ukraine. In the Republic of Ireland, a comprehensive
online taxation system allows authorities to choose toaudit a company if its submissions look suspicious orare clearly incorrect, cutting down on audits for their own
sake. Greater digitalisation of tax processes around theworld in the wake of the COVID-19 pandemic is likely.

12%

North America

7% 57%South America

90%

APAC

29%

EMEA

10%

Fines are a fact of life even in more business-friendly,
digitalised jurisdictions. In the Republic of Ireland,businesses have nine months to prepare their endof-year statutory accounts. If they do not meet thedeadline, a fine is automatically imposed. In Kazakhstan,tight deadlines for submitting electronic accounting
documents are accompanied by significant fines for
non-compliance.

27%

North America

15%

10%

South America

40%

7%

APAC

31%

EMEA

27%

36%

90%

Many jurisdictions still penalise non-compliant
organisations heavily. In Colombia, taxation legislation
is often difficult to understand and, in the case of theIndustry and Commerce Tax (ICA), varies across its 1,100
municipalities. Fines are not only commonplace but
high, and a staggering 28% interest is charged on poorly
calculated taxes – around seven times the inflation rate.

Overall

9%

79%

64%

However, the burden of tax auditing on companies
remains significant in many countries. In 27% ofjurisdictions, organisations that meet the criteria for a
tax audit are given no warning, while in 16% they are
given up to a week’s notice.

Notice period for tax audits

Requirement for account audits

OverallMore governments are allowing companies to correct
errors in their tax returns voluntarily without being fined.
This has risen from 32% in 2019 to 39% in 2020, andreflects changes in jurisdictions such as Italy, Bolivia andthe Netherlands. The majority (60%) of jurisdictions allow
tax errors to be corrected with a fine. Japan is the only
jurisdiction that does not allow corrections.

16%

25%

31%

29%
23%

31%
20%
15%
16%

3%

30%

10%

54%
24%

 Compulsory for all companies

 No notice 1 month Compulsory for some companies

 Up to 1 week

 2–3 months

 Never compulsory

 2–3 weeks

27%

5%

21

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

JUR
ISD
ICT
ION
ALC
OMP
LEX
ITI
ES

R U L E S , R E G U L AT I O N S
A N D P E N A LT I E STime taken for incorporation
In most jurisdictions, incorporation can take place withinweeks, but in others the process takes significantly longer.
In some South American jurisdictions, such as Argentina
and Venezuela, it takes more than three months on average.
In Brazil, the length of time it takes for incorporation varies
significantly between states. In São Paulo, businesses canbe incorporated within days, while in other states it cantake weeks. This variation contributes greatly to Brazil’s
overall complexity, placing it second in the GBCI 2020.
A lengthy period of incorporation reflects factors such as theneed to obtain wet signatures and to notify multiple bodies
and associations, and also a lack of technological fluency.
Many jurisdictions are addressing these factors to makeincorporation as simple and straightforward as possible.
The Irish government guarantees incorporation within fiveworking days. In Curaçao, businesses in some industries
can be incorporated within a day. Some 4% of jurisdictions– the Cayman Islands, the British Virgin Islands and theUnited Arab Emirates – allow operations to commence
before a business is tax registered.

Average incorporation time for private companies
3%
Overall

25%

29%

North America

36%South America

10% 50%

APAC

36%

EMEA

23%

29%
21%

21%
38%

 Up to 1 week

 2–3 months

 2–3 weeks

 4–6 months

 Around 1 month 7–12 months

14%

36%

7%

20%

10% 10%

21%

21%

23%

15%

1%

22

H I G H L I G H T S : R U L E S , R E G U L AT I O N S A N D P E N A LT I E S

From incorporation to full entity activation

Opening a bank accountIn most jurisdictions, the national government is thecommon point of authorisation for incorporation,
followed by city- or local-level requirements. In somejurisdictions the incorporation process involves 30
or more interactions with various bodies. In the mostcomplex of these, businesses have to register withmultiple authorities, depending on the industry in which
they are operating.

While South America includes some very complex
jurisdictions in which to incorporate a business, opening
a bank account takes on average less than a month in
80% of jurisdictions. Incorporation in EMEA jurisdictions
can be faster and simpler than in South America, but
it can be more complex and take far longer for aninternational business to open a bank account. It takes
over six months in Denmark, Finland, Greece, Honduras,
Qatar and Venezuela.

In Indonesia, entity activation involves obtaining up to
11 permits. There are 22 industry sectors and about
200 subsectors, each with different requirements for
notification. This legislative minefield for incorporationis reflected in Indonesia’s high ranking in the GBCI 2020.
However, the country is trying to streamline the process
in the coming years with legislation designed tosimplify incorporation.
There has been substantial progress across the globe:
in 71% of jurisdictions the relevant authorities areautomatically notified during the incorporation process.
This streamlining lessens complexity and saves
incorporation time.
The British Virgin Islands (BVI) operates a registeredagency model. Foreign businesses have a single pointof contact – their registered agent – who engages withand notifies all the relevant bodies and agencies on theirbehalf. This simplicity is reflected in the BVI’s GBCI 2020
ranking as one of the least complex jurisdictions.

Jurisdictions requiring interaction with30 or more bodies to incorporate

Indonesia
Qatar
United Arab Emirates

In Denmark, where incorporation is straightforward, thegovernment’s focus on stringent anti-money laundering(AML) legislation means that the onus is on banks toensure that foreign investors are legitimate and law
abiding, and this contributes to the length of time ittakes to open an account.

International alignment
Jurisdictions in EMEA are more internationally aligned
on supranational legislative initiatives than those in otherregions. Some of the least complex jurisdictions, such
as Mauritius, subscribe to a multitude of international
standards including IFRS and the European Union’s
General Data Protection Regulation (GDPR). Alignment
reduces complexity and increases investor confidence.
Conversely, more complex jurisdictions tend tohave more localised legislation that requires foreignbusinesses to align with unfamiliar, specialised local
processes.

Jurisdictions where it takes over a monthto open a corporate bank account35%

Overall

31%

North America
20%

BrazilSouth America

Costa Rica

APAC

38%

EMEA

38%

Slovakia
EcuadorGLOBAL BUSINES S COMPLE XIT Y INDE X 2020

WOR
KIN
GIN
UNF
AMI
LIA
RMA
RKE
TS

HUMAN RESOURCES
A N D PAY R O L L

Wages and benefits
Almost without exception, permanent workers worldwide
are entitled to a group of basic benefits, including• minimum wage (91%);• paid time off (88%);• paid maternity leave (87%).
Surprisingly, in Finland and Denmark – countries thatare regarded as having a great work–life balance andsolid industrial relations – there is no legal requirementfor organisations to pay workers a minimum wage or to
grant paid maternity leave.
South America, for the most part, leads the way inmandating a broad provision of employee benefits, which
are reinforced by progressive policies such as sharedparental leave. The region generally mandates otherbenefits such as a 13-month salary (an extra month’s
pay annually as a bonus). Ecuador has a profit-sharing
system whereby companies are mandated to distribute
15% of their profits to employees. The amount each
employee receives depends on the number of children
they have.
Unsurprisingly, temporary workers are legally entitled
to fewer benefits than permanent employees. These
differences are less pronounced in relation to nonwage compensations like health insurance or childcare
assistance, but greater in relation to monetary benefits
such as paid time off and sick leave, and redundancy pay.
The Netherlands has long been an attractive
environment for temporary workers. Recent legislation inthat country further reduced the gap in legal protection
and monetary differences between fixed- and indefiniteterm employees, leading to an influx of contractors. Withfewer full-time workers to choose from, it is more difficult
to make permanent appointments, while temporary
workers are more expensive.

23

24

H I G H L I G H T S : H U M A N R E S O U R C E S A N D PAY R O L L

Workplace pensions
APAC leads the way in mandating workplace pensions,with 86% of jurisdictions legally requiring them forpermanent workers, compared to 79% in 2019.
Australia and New Zealand are strong advocates ofprivate pensions, while Hong Kong and Singapore havecompulsory savings schemes for both private andpublic sector employees. In January 2020 China’s social
security system was extended to the neighbouring
jurisdictions of Hong Kong and Macau.

Jurisdictions with a legal requirement for
employees’ pension funds
Overall
58%
North America
43%

South America

North America and EMEA lag significantly in offering
workplace pensions, with jurisdictions rarely requiringthem. This is likely to change in the next couple ofyears as the United Arab Emirates and the Gulf region
introduce wider-reaching workplace savings regimes.
Caribbean jurisdictions rarely have pension funds inplace, while some more developed South American
jurisdictions are moving to introduce pension schemes.

70%
APAC
86%
EMEA
51%

Mandating pay increases
Globally, 32% of jurisdictions mandate pay increases. In
South America the figure is 70%.

Jurisdictions with a legal requirement for mandatory pay increases

North America

EMEA

Costa Rica

Austria

Dominican Republic
GuatemalaHonduras
MexicoNicaragua
PanamaJamaica

Belgium
Bulgaria
Hungary
Italy
Mauritius
RussiaSlovenia

South America

APAC

Argentina

VietnamBolivia
BrazilColombia
Ecuador
Uruguay
Venezuela

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

Firing employees

Reporting of data

The notice period required for firing underperforming
staff varies considerably between jurisdictions. Those in
North and South America require the least notice, witharound 40% of jurisdictions obliged to give only a day.
Paraguay is the only jurisdiction in South America wheremore than a month’s notice is generally required.

Overall, governments are requiring more data on
employees to be reported by businesses. Some 79% ofjurisdictions require all organisations to report payroll
data to government authorities. The reporting of
employee demographics and the gender pay gap
remains uncommon but has increased. In 2019 only
26% of jurisdictions required employee demographics tobe reported and only 7% of jurisdictions information on
the gender pay gap. These figures increased to 28%
and 9% respectively in 2020.

In EMEA and APAC, companies are required to give
workers on average one month’s notice. In Italy, Romania,
South Africa and Indonesia, companies must giveon average over 25 weeks’ notice. Indonesian labourlaws make it extremely difficult and expensive to fireunderperforming workers, and this is one of the factors
contributing to its high ranking in the GBCI. These laws
discourage foreign investment in Indonesia, although thegovernment is now seeking to reform them.

Notice period required to fire employees

Reporting requirements in APAC jurisdictions haveincreased significantly in the past year, and APAC now
leads the way in monitoring workforces. This trend is
set to continue.

Overall Under a month  Over a month

61%

39%

North America

86%

14%

South America

90%

10%

APAC

50%

50%

EMEA

49%

51%

Reporting requirements on human resources

 2019Individuals’ pay

Payroll data
67%

Overall
North America

43%

80%
80%

APAC

79%
79%
66%

Details on foreign
national employees

North America
South America
APAC
EMEA

36%

7%

42%

Gender pay gap
7%
9%
0%
0%

21%
40%
40%

60%

53%

50%

26%
28%

50%

57%

70%
70%

74%
77%

82%

71%
67%

29%
36%
22%
29%

50%

80%

79%
86%

Employeedemographics

50%

49%
58%
36%

70%

59%
54%

Overall

Employee bonuses

50%
57%

69%

EMEA

 2020

72%
74%

79%

South America

25

10%
0%

20%

7%
12%
11%

56%

79%

26

SECTION TITLE

TEN LEAST COMPLEXJURISDICTIONSThe Netherlands

72
74 Denmark

United States

Jamaica75

El Salvador

Curaçao

71

76

Republic of Ireland70

69 Cayman Islands

77
68 Mauritius
73 British Virgin Islands

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

27

68

69

Mauritius

Cayman Islands

Mauritius’ low ranking in the GBCI 2020 isunsurprising as the government has deliberately
simplified legislation to make the jurisdiction more
attractive to foreign businesses. The Business
Facilitation Act, implemented in 2019, sets limits
on the time taken to process work permits andlicences. This makes it quicker and easier forbusinesses to be incorporated in Mauritius. Recent
elections extended the government’s mandate fora further five years, which ensures stability in thejurisdiction and allows the programme to be fully
implemented.

“Despite the increased pressure by
the international community overAML (anti-money laundering), CFT(counter financing of terrorism) and PF(proliferation financing) regulations, theCayman Islands remain a politically,socially and economically stableenvironment with ready access tohigh-calibre and highly respected
professionals and service providers.”

Mauritius is aligned with European standards
established by the OECD, including FATCA.
Documents are usually submitted in English or
French rather than Creole, the local language, whichmakes it easier for foreign businesses. Online
submission has been in place in Mauritius forseven years, making it a pioneer of digitalisation.
No paper-based filing is accepted, and government
departments collaborate to ensure thatincorporation is as streamlined as possible.

“All the measures introduced by thegovernment have made it easier to dobusiness in Mauritius. The government’s
policy is to make Mauritius a businesshub that operates in line with the bestinternational practices.”
Naiken Veerasamy, TMF Group, Mauritius

Lesley den Exter, TMF Group, Cayman Islands

The Cayman Islands is a tax-neutral jurisdiction,with no income, payroll or capital gains taxes or
national insurance contributions. Further, there isno difference in the authorities’ requirements for
operating local or international businesses.
Over the past year, the Cayman Islands has comeunder significant pressure to become moreinternationally aligned. As a result, various changes,
including anti-money-laundering regulations, havebeen introduced. This has led to a short-term spikein complexity as businesses have adapted to them.
The Cayman Islands remains highly committed
to attracting overseas investment and will ensurethat the economic environment continues to bestable. The government is moving towards real-time
automated systems and introducing technologies
to streamline processes. Its beneficial ownership
regime means that files no longer have to bedelivered by hand to government offices.

28

TEN LE AST COMPLEX JURISDICTIONS

70

71

Republic of Ireland

El Salvador

The Republic of Ireland is very internationallyaligned, particularly with the United Kingdom. It
adheres to international standards, including KYC(know your customer), AML4 and OECD BEPS, andto EU requirements. This is attractive to foreignbusinesses that are already familiar with global
standards and legislation. Ireland is also a highly
digitalised jurisdiction, with an online system forincorporation and for reporting ongoing obligations
such as tax returns and payroll data.

Since the GANA party came to power in the 2019
elections, El Salvador has made a concerted effort
to attract FDI by simplifying business operations in
the jurisdiction and ensuring stability for investors
and businesses. The powers of some institutions
and authorities have been separated to make themmore secure and less vulnerable to criminal activity.

Digitalisation has streamlined business operations.
The Irish government assumes that tax returns
are submitted correctly. The tax authorities
review tax returns submitted through the online
system and audit businesses only where there
are inconsistencies or problems. This eliminates
unnecessary audits. Digitalisation has also led
to real-time reporting of payroll data. The Irish
government is automatically notified of any changes
to company payroll, which makes the day-to-day
management of payroll easier and more transparent
for both businesses and employees.

“The Republic of Ireland has a strong
history and culture of welcoming foreigncompanies. We are a jurisdiction thatis continually trying to balance therequirements of the OECD and the EU
while ensuring we remain competitive in
the international marketplace.”
Kevin Butler, TMF Group, Republic of Ireland“Macroeconomic and regulatory
stability, and access to important
markets in South America, are whatmake El Salvador attractive to foreignbusinesses and investment.”
Xilot Mejia, TMF Group, El Salvador

A digitalised and internationally aligned jurisdiction,
where the same laws and regulations apply toboth national and international businesses, El
Salvador is attractive to FDI. The country adheres
to IFRS, FATCA and transfer pricing regulations,and offers a transparent business environment for
the incorporation and operation of foreign entities.
There is a web portal for businesses to submit
all their tax documentation and reporting online,
removing the need to present documentation at a
local office and visit a bank to make tax payments.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

72
The Netherlands
Multinationals have long registered in the
Netherlands, which is a highly internationalised
jurisdiction, particularly because of its mature trust
industry. Shell companies in the jurisdiction mustensure that they are compliant and have enoughlocal economic substance. The country has adapted
well to the increase in international compliancelegislation in the past few years and maintained its
reputation. AML and KYC legislation were adopted
quickly and are now smoothly integrated into
operational procedures.
Given its substantial history in international
trade, the Netherlands is primed for incoming
multinationals. It is extremely easy to access advice
on setting up. The Netherlands Foreign Investment
Agency provides a website and help desk, andeven advocates on behalf of companies at national
and EU levels. Fluency in the English language isembedded in Dutch society, with English taught
from primary school onwards. All government
information is provided in both Dutch and English.
The capital city, Amsterdam, is a European transporthub, with Amsterdam Airport Schiphol at its heart.
These are some of the reasons why many large
multinationals have moved their headquartersfrom the United Kingdom to the Netherlands
following Brexit.

29

73
British Virgin Islands
There has been pressure on the British Virgin
Islands to prove it is being as transparent as
possible about the money flowing in and out of thejurisdiction. Consequently, the BVI is at the forefrontof AML, KYC and all other compliance regulations.
It has been ‘white-listed’ by the European Union as
satisfying all its tax compliance requirements.
The BVI operates a fundamentally different model
for setting up multinationals compared to mostjurisdictions, whereby companies are required
to use registered agents – government-licensed
companies that undertake all interaction with theauthorities on their behalf. There are around 100
registered agents operating in the jurisdiction– of which TMF Group is one of the largest –which essentially act as a privately outsourced
administrative facility.

“Doing business in the British Virgin
Islands is simple and straightforward
for foreign direct investment, as thejurisdiction is supported by a host ofregistered agents who will cater toyour needs.”
Charlotte Bailey, TMF Group, British Virgin Islands“The Dutch business approach is openminded and internationally oriented. We
speak your language and will translate
any documents or instructions to makeprocesses easier for you.”

Registered agents themselves are closely monitored
and must comply with a host of regulations tomaintain their licences, so they bear much of thecompliance burden for companies. Companies
communicate with agents using email and phone
calls, leaving them to complete the technicaldocumentation to be submitted to the authorities.

Ron Arendsen, TMF Group, The Netherlands

This system does mean that the authorities are notas technologically advanced as in other jurisdictions.
Agents operating in the BVI use digital tools, butmuch of the communication from the authorities
remains paper based and personal. TMF Group’s
BVI offices receive information from the Financial
Services Commission on paper.

30

TEN LE AST COMPLEX JURISDICTIONS

74

75

Denmark

Jamaica

Denmark has been ahead of the curve in adoptinginternationally recognised compliance standards,
which makes it quite a strict jurisdiction. Yet it
has become one of the most straightforwardjurisdictions in terms of rules, regulations andpenalties.

Starting a business in Jamaica is a relatively
straightforward and quick process, but ongoing
business operations can be more complex.

Denmark was one of the first countries in theEuropean Union to introduce a UBO register in2017. The required UBO information must be
submitted annually, together with other required
reports. Danish authorities have clamped down on
the use of shell companies to lighten the burdenof compliance. All companies with a physicalpresence within the jurisdiction are now registeredas ‘permanent establishments’.
Hiring and managing employees is relatively
straightforward in Denmark. This simplicity may,
however, be offset by the introduction of the Danish
Holiday Act, which shifts employees from an
accrued to a concurrent holiday regime, whereby
holiday entitlement no longer has to be delayed but
can be taken after just one month of employment.
Short-term complexity may result from the switch insystems, with some employees getting twice theirentitlement as the country transitions.

“Compliance is becoming more
complicated and is being monitored
more closely as the government tries
to close the loopholes for companies
to avoid paying tax. Denmark has
implemented such measures earlier
than other jurisdictions and theprocesses are smoother.”Dannie Wai, TMG Group, Denmark“Maintaining tax obligations without alocal representative continues to be a
hurdle for companies planning remote
operations.”
Juan Carlos Rubio, TMF Group, Jamaica

The government is keen for Jamaica to become alogistics hub between North and South America,and so grants incentives to attract foreign
investment in some sectors, such as call centres,
which benefit from its time zone and Jamaicans’fluency in English.
The government is also working to draw up more
free trade agreements with other jurisdictions in theregion, again to attract more FDI.
Many of the regulatory processes for businesses
now take place online.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

76

77

United States

Curaçao

Under Donald Trump’s presidency, the United States
has leaned towards less international alignment
and the protection of national industry over foreign
trade. This has so far not translated into very muchchange in terms of legislation, and the United Statesremains very much open for business.
Registering an entity with the federal government isvery straightforward, involving online incorporation
documents and an application for a tax identification
number. Companies must also register at statelevel. This can be advantageous since individualstates offer incentives to businesses to attract
foreign investment. Delaware is a popular choice forinternational investors as it does not require local
directors’ and directors’ names to be disclosed onformal incorporation documents.
There are few US employment regulations. Although
workers can be fired with a day’s notice, businesses
have to reckon with a culture of litigation. It is
common for former employees to sue for unfair
dismissal, which means that companies need tohave a robust legal framework. They should also bewary of high legal fees.

“While the United States has becomeless internationally aligned in politicalterms – walking away from international
bodies, for example – we haven’t seenmuch change in business legislation on
the ground.”Ernesto Guzman, TMF Group, United States

31

Curaçao, part of the Kingdom of the Netherlands,is the most straightforward jurisdiction of all thosesurveyed. This island state is very internationallyaligned, which enables decisions to be made andimplemented very quickly.

“The government’s moves to increase
the use of technology should make lifeeasier for investors.”
Evert Rakers, TMF Group, Curaçao

Most companies in Curaçao do not have to
be audited unless they exceed thresholds for
employees and revenues or operate in a regulatedindustry such as banking.
The government is using technology to become
more customer-centred on multinationals.
Tax returns are filed electronically, and there
is a move away from cheque and cash tocard payments.
Political stability and a strong tourism industry haveincreased Curaçao’s attraction for investors.

32

CONCLUSIONCONCLUSION

In a constantly changing commercial environment,
there is an underlying momentum for business that is
unparalleled in this globally connected world.
The GBCI 2020 has found that a global outlook,alignment of international laws and regulations, andincreasing deployment of technology have given rise
to a greater synergy in international business. Overall,these factors have combined to make jurisdictions lesscomplicated for multinational businesses.
The COVID-19 pandemic should be seen as a big blip,
slowing economic growth substantially, particularly as aresult of the closing of international borders. The effects
will last for years, and may be enhanced or mitigated bymeasures brought in by individual jurisdictions.
Global businesses will always have to reckon on
individual jurisdictions promoting their attractiveness andnational interests and insisting on protecting establishedpractices and processes. The use of local languages in
official communication and documentation will persist.
The GBCI 2020 has again revealed significant variations
in business complexity between jurisdictions, as a resultof their specific rules and regulations. The least complex
jurisdictions have used information and communications
technology to enhance communication and contract
mechanisms so that setting up and operating a businessbecomes much easier.

Other jurisdictions will want to ensure that they are
not left behind. Given that 3 in 10 jurisdictions do notcurrently make official submissions to the government
electronically, many of them may not have the tools
to adapt to an environment that increasingly relies on
the latest technology. Such tools are a fundamental
requirement for operating at full throttle in the global
economy. The successful jurisdictions will be those thatoffer the common international practices preferred byoverseas companies.
Following the COVID-19 pandemic, we are likely to
see a continued impetus towards a global businessenvironment, with international bodies stepping up
measures to coordinate and regulate trade acrossborders to benefit all stakeholders. With 8 in 10
jurisdictions already signed up to the OECD’s CRS,
there is a clearly a desire to continue participating ininternational regulatory alignment. It is likely that further
global governance initiatives will follow in its wake.

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Internationalisation
is more crucial than ever.
Unification, technology,
modernisation and simplification
will surely be the drivers toplace the post-pandemic global
economy back on its feet.
Businesses need to be awareof and to act in response
to complexity intheir markets.

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UNIFICATGLOBAL BUSINES S COMPLE XIT Y INDE X 2020

33

34

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 2020 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,1 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;
rules, regulations and penalties;
HR and payroll.

The data for each jurisdiction were statistically weighted
and combined to produce an overall complexity score, as
well as a score in each of the three areas.

To gain a better appreciation of trends anddevelopments, the initial quantitative fieldwork was
supplemented by a qualitative stage after the index was
created. This consisted of:•a survey asking each TMF Group to respond to trends
in complexity within their jurisdiction;•a series of in-depth interviews with TMF Group
specialists from the 10 highest- and 10 lowest-ranking
jurisdictions.

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

Visuals are based on survey results across 2019 and2020. Those who answered ‘don’t know’ in the survey
have been excluded from the analysis.

1

A jurisdiction is a specific territory governed by a set of laws. A country can consist of several jurisdictions. Curaçao is partof the Kingdom of the Netherlands but it is a separate jurisdiction from the Netherlands. Businesses have to take accountof the fact that nation-states will adhere to supranational and international laws and regulations to varying extents, while
continuing to promulgate their own laws and regulations and, in some cases, to delegate or allow sub-jurisdictions in theirregion and localities to impose their own requirements on businesses, particularly those based overseas.

GLOBAL BUSINES S COMPLE XIT Y INDE X 2020

35

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 2020, TMF Group B.V.

ABOUT TMF GROUPWE MAKE A COMPLEXWORLD SIMPLE

One world of local service
TMF Group is an independent global multinational withsome 7,800 in-house experts across 120 offices covering
80-plus jurisdictions. Together we deliver a broad portfolioof consistent, integrated but localised services covering thebusiness administrative essentials of accountancy and tax;
HR administration, global payroll and employee benefits;
and global entity management, corporate secretarial andregulatory compliance.
Rapid response consultancy solutions support cross-borderprojects large and small, at every stage, across all our
disciplines, and in every market.
Specialised teams support fund and capital markets
administration and private wealth and family offices.
Because we know how to unlock access to some of theworld’s most attractive markets – no matter how complex –swiftly, safely and efficiently, over 60% of the Fortune Global
500 and FTSE 100, and almost half the top 300 private equity
firms, use us.
So, whether you are operating across one border or many,with a handful of staff or several thousand, we have all theflexible, coordinated, business-critical support needed to open
up in new markets, build strong businesses and stay nimble,
efficient and in good standing everywhere.

www.tmf-group.com