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GLOBAL BUSINESS
COMPLEXITY INDEX
2021
Bringing clarity to the complexities
of doing business across bordersCONTENTS Introduction 2 Global highlights – The growth of responsible governance 4 – 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 management 28 – 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 1
FOREWORD
I’m delighted to be able to bring to you our 2021 Global Looking ahead, we see no shortage of geopolitical
Business Complexity Index, looking at differences in tensions for firms to factor into their investment and
the rules and requirements for doing business in 77 operating decisions. There is continued debate over
jurisdictions around the world. Those jurisdictions the UK/EU trade agreement, focusing primarily on the
cover just 32% of the total country count, but capture Irish border, and economic nationalism prevails in many
the world’s largest economies and investment hubs, parts of the world. The big topic is relations between
representing 71% of world population, 92% of world US and China, the world’s two largest economies and
GDP and 95% of net FDI inflow. sources of FDI. A tense relationship is likely to worsen
given the US government review of the origins of
As was the case in 2020, our 2021 report is written in the Covid-19. Indeed, the investigation may act as a catalyst
shadow of Covid-19 and the disruptions to travel, trade for a much more overtly bipolar world economy, with
and health that it has brought. One small action on our countries and companies having to pick sides in terms
part to help our clients was to list government support of rules, infrastructure and markets. Firms required to
schemes, covering more than 1,300 such schemes straddle that potential divide may well need to consider
around the world. Against that difficult backdrop, permanent establishment as a protection against
attracting and encouraging business investment barriers ahead.
remains a critical driver of the world economy and local
prosperity, and we at TMF Group are pleased to play our
part in encouraging simplification by regulators Regardless of those macro considerations, many of our
and governments. clients operate in multiple jurisdictions, enjoying the
access it brings them to markets for their goods and
One such simplification in discussion as we go to print for talent. A continuing observation, from our now eight
are the G7/OECD minimum corporate tax proposals. years of reporting on complexity, is that some of the
While our assessment of fiscal complexity is about tax most attractive markets to operate in are both the most
rules rather than rates, we have taken a brief look at the complex and the most punitive for getting things wrong.
correlation between corporate tax, complexity and the Firms typically have a small number of large bases,
investment different jurisdictions attract. A number of often in relatively simple locations in which to operate.
offshore locations (or ‘tax havens’, in G7 parlance) are They then have a long tail of offices at lower scale in
low in complexity and high on corporate tax rate. Tax is more complex locations. That exposure caused by their
a complex subject, and there are often big differences ‘complex tail’ is where risk concentrates. I hope that
between headline and effective rates. It nevertheless the TMF Group Global Business Complexity Index, and
suggests that other factors, like ease of doing business, underlying insights into the rules and requirements for
underline their appeal often to funds rather than to doing business in those locations, helps you stay safe.
corporates and that their predicted demise as a result
of 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 to Mark Weil
obey, rather than creating a net simplification. Chief Executive, TMF Group2 INTRODUCTION The Global Business Complexity Index 2021 provides Through analysis of both the quantitative an authoritative overview of the complexity of statistics and the qualitative in-depth establishing and operating businesses around the examples within each jurisdiction, our study world. It explores factors that drive the success or has revealed three global trends at play in failure of international business, with a focus on 2021. For each, we have shown how the operating in foreign markets, and outlines key themes Covid-19 pandemic has impacted on the emerging on the global scene and their associated trend, at some times accelerating them and local intricacies across 77 jurisdictions. at others temporarily reversing them. While 77 jurisdictions may not be geographically exhaustive, the locations included in this report are where most business is done. Besides representing 71% of the world’s population, they account for a very large 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 the world. These data points are used to compile a global ranking of the 77 jurisdictions, based on the complexity of their business environments in terms of legislation, compliance, accounting procedures, tax regimes, human resources (HR) rules and payroll procedures.
GLOBAL BUSINES S COMPLE XIT Y INDE X 2021 3
3 GL BAL TRENDS
1 2 3
The growth Simplification International
of responsible through vs local
governance digitalisation complexity
Businesses across the globe are Governments across the globe The drive towards international
increasingly being encouraged are turning to digitalisation as alignment and cooperation
to behave in a responsible, a way to simultaneously adjust between jurisdictions has clashed
transparent and more socially to the remote working world with local, often idiosyncratic,
minded manner. that Covid-19 has created and complexities. While the push for
remove or improve the traditional standardisation continues, via
processes that have long been a regulation such as CRS, UBO and
source of complexity. FATCA, uptake varies globally.
At a time when the global economy is seeking to recover However, the consequences for underestimating
from the challenges it has faced in the past year, having these challenges can be severe. Not complying with
a thorough understanding of global and local business regulations can expose companies to penalties and
complexity can help multinational organisations to mitigate sanctions, with individuals facing imprisonment in the most
further risk and manage their existing operational footprint extreme cases.
compliantly. For those seeking to expand internationally,
the rewards can be considerable if the challenges We hope that the Global Business Complexity Index 2021
associated with complexity can be overcome. serves to inform you and help you stay compliant,
wherever you do business.4 THE GROW TH OF RESPONSIBLE GOVERNANCE
Transparency requirements such as
#1
UBO and PSC steady since 2020
Operating with transparency is a cornerstone of
responsible governance. Since 2020, the percentage of
jurisdictions adopting ownership records remains stable,
demonstrating that these transparency processes are
consistent year on year.
The requirement to provide UBO and/or PSC information
to a central register is highest in EMEA, where it is
mandatory 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 register
at the company’s registered address, with 64% of
North American jurisdictions requiring it, compared to
THE GROWTH OF only 30% of jurisdictions in South America.
RESPONSIBLE Similar nuances are found with the accessibility of
GOVERNANCE the UBO/PSC central register. In 41% of jurisdictions
in EMEA, information in the UBO/PSC central register
is accessible to the general public, compared to zero
jurisdictions in South America.
2021 has seen a renewed focus on ensuring The shift away from traditional offshoring
companies are behaving responsibly with global
operations. This extends across all business In 2021, there has been a shift away from traditional
’offshoring’ in some jurisdictions and an increasing global
activities, from employing workers, to paying
need for transparency among multinationals, which are
appropriate levels of tax, and ensuring
being encouraged to pay tax in the jurisdictions where
their structure and behaviours are transparent. they conduct business.
In Curaçao, for example, economic substance legislation
means that offshoring for tax benefit is no longer
possible without a physical operation on the ground.
In January 2021, economic substance rules were
introduced for Curaçao Investment Companies (CICs)
meaning that such companies must demonstrate
that they are conducting core operations within the
jurisdiction, such as having an adequate number of
employees. This has impacted Curaçao in terms of
attracting organisations wishing to offshore there.
However, moving wealth offshore to this jurisdiction is
still popular for private individuals due to concerns about
Responsible
governance
security in their home countries, such as those in South
America that are experiencing issues with inflation and
financial instability.GLOBAL BUSINES S COMPLE XIT Y INDE X 2021 5
Percentage of jurisdictions where different
requirements around UBO and PSC registers apply
Requirement to Requirement to Information in UBO/
provide UBO and/or maintain UBO and/ PSC central register
PSC information to a or PSC register at the accessible to the
central register company’s registered public
address
2021 | 71% 2021 | 45% 2021 | 23%
2020 | 68% 2020 | 48% 2020 | 24%
The Philippines has seen similar changes with the
introduction 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
TRANSPARENCY
to take this offshore share from traditional ‘major players’
in the space. For instance, the Government of Hong Kong
is 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 fund
regime in 2020, creating a quicker and simpler solution
for offshore funding in the jurisdiction. The introduction
of such incentives could mean that, in the coming
years, we may see a shift in offshoring away from the
traditional jurisdictions such as Curaçao and the Cayman
Islands to emerging players such as Hong Kong.6 THE GROW TH OF RESPONSIBLE GOVERNANCE
Increasing mandated use of third-parties in Guatemala, where helplines and support are available
to aid accounting and tax compliance. This ensures that
Since 2020, the mandated involvement of a third party in large multinationals comply with often complex local
a company’s operations has become more common. For regulations.
instance, in 2020 only 17% of jurisdictions required that
an entity appoint a certified accountant and register them Penalties for non-compliance are getting
with the authorities, compared to 27% in 2021. A certified stricter, especially in more complex
accountant should aim to reduce errors and mistakes jurisdictions
related to tax returns and necessary documentation,
meaning that entities are better supported and operate in Alongside the more frequent requirement to work with
a more responsible manner. third parties to ensure compliance is a global increase in
the strictness of penalties for non-compliant businesses.
Local specialists are often available in-market to assist Fines are the most common penalty imposed for
firms in complying with this local legislation. In the British accounting and tax misdemeanours, and in the case of
Virgin Islands, for example, the use of a registered agent doing business without being tax registered, the frequency
model in order to incorporate is mandated. Companies of issuing fines has increased since 2020, with 93% of
can rely on these agents to ensure they are complying with jurisdictions now imposing a fine for this, compared with
regulations and meeting standards within the jurisdiction. 84% previously.
This support can also be less formalised, for instance
We have seen a link between complexity and stringency
of penalties. In our top ten most complex jurisdictions
organisations are significantly more likely to face the most
Percentage of jurisdictions where accounting stringent penalties. For example, in the case of doing
standards and tax requirements apply business without being tax registered, 45% of jurisdictions
globally would suspend an organisation’s licence. This
jumps to 60% of the most complex jurisdictions. This
poses problems for those seeking to operate in more
complex environments, as not only can it be more
An entity needs to challenging to meet the varying legislation and regulatory
appoint a certified 2021 | 27% criteria in place, but organisations are more likely to face
accountant and 2020 | 17% penalties for wrongdoing.
register him/her with
the authorities
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
An entity need to
payments, it would not be fined. This has decreased to
2021 | 14% appoint a certified
accountant and 27% of jurisdictions in 2021, showing that globally the
2020 | 8% register him/her response to inaccuracies is getting stricter.
with the Chamber of
Commerce
While we have observed this global trend, it should be
noted that the Covid-19 pandemic has resulted in some
jurisdictions temporarily relaxing some deadlines and
penalties. This was the case in New Zealand, Singapore
and Bulgaria, where certain deadlines were extended and
Tax returns need
to be prepared / 2021 | 17% some penalties relaxed during the pandemic. In most
2020 | 12%
reviewed by a instances, however, our experts predict that penalties for
certified tax advisor/ non-compliance will continue to become more severe.
consultantGLOBAL BUSINES S COMPLE XIT Y INDE X 2021 7
Penalties imposed in the case of…
Fines Suspension Imprisonment Licence Prevention from Other None of
of activity suspension doing further the above
business
Doing business 2021 93% 68% 39% 45% 47% 8% 3%
without being
tax registered 2020 84% 57% 43% 36% 34% 12% 5%
Missed deadlines 2021 97% 19% 10% 14% 13% 10% 0%
for tax filings
2020 97% 20% 16% 14% 13% 13% 1%
Inaccurate 2021 95% 25% 22% 14% 18% 13% 1%
calculations for
tax filings 2020 93% 13% 24% 9% 8% 16% 3%
Penalties imposed in the case of…
(10 most complex jurisdictions only)
Fines Suspension Imprisonment Licence Prevention from Other None of
of activity suspension doing further the above
business
Doing business 2021 100% 80% 60% 60% 70% 10% 0%
without being
tax registered
Missed deadlines 2021 100% 30% 10% 30% 20% 10% 0%
for tax filings
Inaccurate 2021 100% 10% 20% 0% 10% 20% 0%
calculations for
tax filings8 THE GROW TH OF RESPONSIBLE GOVERNANCE
Percentage of jurisdictions in which certain
conditions apply to correcting tax returns
2021*
27% 71% 1%
Yes, they can Yes, they can No, they cannot
voluntarily correct voluntarily correct voluntarily correct
their tax return/tax their tax return/tax their tax return/
payment and will not payment but will be tax payment
receive a fine fined anyway
39% 60% 1%
2020
* Total is not 100 because individual percentages are rounded to the nearest whole number.
Non-compliance can have personal Employees have gained more protection
consequences for directors as businesses are encouraged to be
responsible employers
Furthermore, the sanctions for misdemeanours or
for failing to remain compliant can extend beyond There has been a shift as industrial relations are now
punishments issued to organisations. The likelihood of becoming more employee focused than ever before.
individuals, most frequently company directors, being This is, in part, related to the Covid-19 pandemic leading
held liable is high globally. 89% of jurisdictions overall to huge uncertainty for businesses and authorities. Some
report that directors can be held personally liable for jurisdictions responded to meet the needs of employees
wrongdoing by their own company, but there is some and offer them protection during this challenging time.
regional variation. Whereas directors are always held For example, in Denmark the government recently
personally liable by companies in EMEA, this is only the revised the Working Environment Act (updated May
case in 69% of jurisdictions in North America. 2020) which ensures that the physical and psychological
environment for employees is both safe and suitable.
As for directors being held personally liable by
authorities, the percentage is consistent at 88% overall; In line with this shift toward a more employee-focused
North America and APAC are the regions where this is workplace, since 2020 it has become more difficult
less likely to be the case (79%). The penalties handed out to dismiss employees without citing a reason. It was
to individuals vary between individual jurisdictions, but permitted in 29% of jurisdictions in 2020, dropping to
in the most extreme cases, directors can be punished by 20% in 2021.
imprisonment.GLOBAL BUSINES S COMPLE XIT Y INDE X 2021 9
Ability to dismiss an employee without citing a reason
– shown globally and regionally for 2020 and 2021
North 2021 | 23% APAC 2021 | 0%
2020 | 64% 2020 | 0%
America
South 2021 | 70% EMEA 2021 | 13%
America 2020 | 80% 2020 | 13%
Looking at this shift at a regional level, we see that the Since 2020 it has become
change is driven by both North and South America. In more difficult to dismiss
2020, 64% of 14 jurisdictions in North America permitted employees without
the dismissal of employees without a reason, dropping to citing a reason.
23% in 2021. In South American jurisdictions that figure
decreased from 80% to 70% . It was permitted in 29%
of jurisdictions in 2020,
In Argentina, this has been taken a step further. Due to
the Covid-19 pandemic, the Argentinian government has dropping to 20% in 2021.
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 pandemic-
driven outlier, our experts predict that employers will
continue to see the rise of pro-employee legislation,
which simultaneously encourages companies to act
responsibly in their local communities and increases the
level of complexity that they must navigate.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 N
Digitalising the relationship
#2
between businesses and the state
This 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 in-
person 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 antiquated
nature of such requirements. For example, the timeframes
for incorporating businesses in Colombia, Guatemala, and
Argentina have increased, as certain documentation can only
be approved during in-person appointments.
Elsewhere, Covid-19 has sped up the process of digitalisation,
with authorities in Portugal, Paraguay, India and the
S I M P L I F I C AT I O N Dominican Republic temporarily permitting digital signatures.
In Portugal, at least, it is predicted that this step towards
THROUGH digitalisation will be a long-term change which will last
D I G I TA L I S AT I O N beyond the pandemic.
Jurisdictions where official entity documents
require an official stamp, chop or seal to be
legally 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 % requiring an
official stamp,
2021 | 38%
Covid-19 pandemic, which has rendered physical chop or seal 2020 | 43%
procedures 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.
State investment in digitalisation
2021 has also seen an increase in the automatic notification
of 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.
rise of technologies
and automation as One good example is Mauritius, where an online platform has
enablers of simplicity been introduced to ensure smoother coordination between
various government bodies and to reduce processing
downtime during incorporation.
decline in the
requirement of
in-person processes 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 out
of ten jurisdictions already having an online portal in place.GLOBAL BUSINES S COMPLE XIT Y INDE X 2021 11
Percentage of jurisdictions where other relevant Percentage of jurisdictions where it’s compulsory
authorities (eg tax, payroll, industry-specific for tax invoices to be issued in an electronic
bodies) are notified automatically as part of format
incorporation
Overall
17% 24% 47% 12%
2021 North America*
14% 51% 35%
14% 21% 50% 14%
South America
All relevant Some relevant Relevant authorities
40% 30% 30%
bodies notified bodies are notified are not notified
automatically automatically automatically
APAC
14% 29% 43% 14%
6% 65% 29% EMEA
2020 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, an example, Indonesia has undergone the huge task of
it is common that they will lead to an initial short-term creating an Online Single Submission system (OSS).
increase in complexity, especially if authorities lack This all-at-once strategy has been highly problematic
alignment. In Turkey, for example, each authority is using – a contributing factor to Indonesia placing 6th in the
a different technology platform, resulting in an increased GBCI – and regular changes to legislation (eg the new
demand on businesses to familiarise themselves with a Omnibus Law) must be updated in the system too. Yet
variety of separate portals. Elsewhere, jurisdictions such this strategy does highlight that a gradual step-by-step
as Poland and Hungary require that all businesses must process isn’t the only possible route to digitalisation.
submit documents in their local language. This adds to And as jurisdictions compete globally for foreign
complexity for foreign businesses. investment through simplification, we may well see
more governments following Indonesia’s lead in
embracing rapid digitalisation.
Differing approaches to digitalisation
Whether embarking on a gradual or rapid digitalisation
Most jurisdictions can be mapped onto a trajectory strategy, one thing is clear: the process will be arduous.
of a gradual, lengthy and incremental process of Yet we’re seeing mounting evidence that the results are
digitalisation. The introduction of technological systems worthwhile. Some of the most digitalised jurisdictions
and phasing out of physical processes is rarely a smooth globally are proving highly attractive to foreign
process, and businesses need time to adjust to these investment, and Covid-19 has further widened the
requirements. complexities of operating in jurisdictions at extreme
ends of the digitalisation spectrum.
In stark contrast, we’ve seen a minority of jurisdictions
championing a rapid digitalisation strategy. By way of12 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 in
place, 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 the
#3
jurisdiction to operate as normally as possible for
incorporation processes throughout the pandemic.
The Republic of Ireland can also be looked to as
I N T E R N AT I O N A L
a jurisdiction which has undergone an effective VERSUS LOCAL
digitalisation process. The international investment
has naturally followed, with Dublin being home to the COMPLEXITY
European headquarters of Google. Interestingly, the
Republic 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 a
highly productive home-based workforce.
As we have seen in previous years of the GBCI,
While technology is a tool to overcome physical regulations developed by international bodies
boundaries, for island states or other geographically continue to be followed by jurisdictions globally.
small jurisdictions, it is questionable whether full The Organisation for Economic Co-Operation and
digitalisation is as much of a necessity. The Caribbean Development (OECD) and the European Union (EU)
are two such transnational bodies that coordinate
island of Curaçao, with a total area of 444km², is so
international legislation, though national governments
small that visiting the offices of various authorities is a
may sometimes dictate international practices.
straightforward task. Similarly, the compact footprint of
Luxembourg makes maintaining physical links between International legislation is typically a result of the
businesses and regulators or authorities simple. economic globalisation that has seen international
trade expand rapidly in the past 50 years. As trading
Our expectation is that we will continue to see relationships have become internationalised, legislation
jurisdictions take steps to digitalise in the years to come. has had to scale beyond national borders in order to
Covid-19 has highlighted the necessity of moving to a regulate and govern those relationships. International
largely online infrastructure and will likely accelerate legislation, therefore, often overlaps with the themes of
this global trend. As the pressure mounts to swiftly responsible governance already covered in the report.
digitalise to compete for foreign investment, will more
governments follow Indonesia’s lead with a highly
disruptive, yet rapid, digitalisation strategy?
OECD EU
National
GovernmentsGLOBAL BUSINES S COMPLE XIT Y INDE X 2021 13
International reporting The percentage of jurisdictions that have
committed to the exchange of information
The OECD’s Common Reporting Standard (CRS) is a prime under CRS
example of international legislation that aims to regulate
international trading arrangements. The standard requires Overall 2021 Overall 2020
governments to share details of the accounts individuals
hold in their jurisdiction with other participating jurisdictions,
including information such as name, account number and
balance. This communication between jurisdictions promotes 83% 82%
transparency, making it more difficult for individuals and
companies to hide undeclared wealth in jurisdictions beyond
where they are based.
North America 2021 South America 2021
Our data shows that 83% of jurisdictions have now committed
to the exchange of information under CRS, a slight increase
on 82% last year. The uptake of CRS varies significantly by
71% 50%
region, with the highest being in EMEA and APAC.
International laws introduce legislative complexity for
businesses – in the case of CRS companies will be required
to submit their account information to the authorities.
However, complying with international legislation can also APAC 2021 EMEA 2021
have a reputational element for jurisdictions – Costa Rica, for
example, complies with international laws (including the CRS)
that many countries in Central America do not, resulting in a
more robust reputation as a jurisdiction open to international 86% 95%
business within the region. This has knock-on benefits for
corporations looking to set up there, through a greater influx
of 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 reforms. In previous years, many sectors of Indonesia’s
being a less favourable location for ‘tax aggressive’ structures economy had been closed off to foreign investment, while
than it was in the past, it is still a hotspot for setting up sectors that were open were categorised as part of an
joint ventures due to the historic legislative infrastructure. incredibly complex tax code system. The Omnibus reform has
As another example that geography is still important in an opened up sectors that were previously nationally regulated,
internationalised world, Curaçao is often the favoured location and has reduced the number of regulated sector codes from
for wealthy South American individuals looking to hold 515 to 356. However, incorporating under the wrong code
investments abroad due to its proximity to the continent. will still have tax consequences and may leave businesses
liable to penalties. A similar ‘ease of doing business’ reform
in the Philippines aims to reduce the administrative burden
Dismantling complex local systems to for entities – for example, even for minor processes such
open up jurisdictions as obtaining a VAT refund, the number of documentary
requirements was reduced from 65 to 41.
In addition to international legislation having further reach,
individual jurisdictions are attempting to dismantle localised Efforts to improve the ease of doing business may be much
laws and decrease friction for international businesses narrower and more targeted in scope – for example, around
looking to invest there. In some cases, this might be a language requirements for official documents. Data from
large-scale, systematic restructuring, specifically with the the GBCI shows that jurisdictional governments are relaxing
aim of creating a simpler business environment for foreign requirements around submitting documents in their local
investment, as is the case with Indonesia’s Omnibus law language, a process which adds complexity for foreign14 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 Percentage of jurisdictions where accounting
official documents for submission to local government standards are applied: IFRS, US GAAP, local GAAP
and director/shareholder minutes to be submitted in their
local language, the percentage of both requirements has
This standard is not applied within the jurisdiction
decreased significantly since 2020. 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% 70% 19%
US GAAP
2021 | 78% Official documents
for submission to
2020 | 86% local government 83% 17% 0%
Local GAAP
13% 30% 57%
2020
IFRS
2021 | 59% Director and
shareholder
2020 | 73% minutes 25%
US GAAP
0%
Local GAAP
42%
* Total is not 100 because individual percentages are rounded
Local legislation dominates in to the nearest whole number.
some business areas
While progress towards a more internationalised business jurisdictions where all companies are required to adhere
landscape is being made, there are certain areas of business to some form of local standard has increased since
management where international practices are very much 2020, suggesting accounting practices are becoming
secondary to local customs. For example, our analysis even more localised.
of accounting practices suggests that local accounting
regulations are much more dominant than internationally Nevertheless, there may be opportunities for further
aligned processes. In 57% of jurisdictions, all companies alignment in the area of accounting and tax. The OECD
must adhere to a set of local Generally Accepted Accounting is currently considering a requirement for jurisdictions to
Practices (local GAAP). In contrast, the International Financial commit to a minimum corporation tax threshold, which
Reporting Standard (IFRS) is only required by all companies would challenge and standardise the fiscal models of
in 19% of jurisdictions. Furthermore, the percentage of many jurisdictions.GLOBAL BUSINES S COMPLE XIT Y INDE X 2021 15
Even within a jurisdiction, there The international and local complexities
is often legislative variation of assembling a workforce
Differences at the sub-national level can cause a In many ways, the pandemic has made the workforce
significant amount of complexity for corporations. For less internationally mobile, notably by closing borders as
example, during the incorporation process, while the national governments have attempted to keep Covid-19
national government is the most common authority at bay. At the same time, remote working has become
that entities must notify in order to register, 27% of embedded in corporate culture, meaning workers can
jurisdictions require notification at the provincial or easily log in from any location with just a laptop and an
state level, while 42% require notification at the city or internet connection. However, current payroll legislation
local level. In some instances, jurisdictions may require is very much set up for a pre-Covid world, meaning that
notification at all three levels, essentially tripling the any companies looking to take advantage of a more
administrative burden of the incorporation process. globalised workforce will also need to understand the
administrative complexities of hiring overseas.
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,
Indonesia
the local talent pool is often fairly limited, meaning that
Brazil
corporations may need to consider making foreign
Jurisdictions where Argentina
hires. In some cases, however, jurisdictions may recruit
notification of Nicaragua
workers who have particular skills – despite being small,
incorporation is Mexico
Curaçao has a highly specialised workforce made up of
required at national, Peru
individuals with financial and legal backgrounds, due to
state and city level Japan
the nature of business that takes place on the island.
Venezuela
Philippines
In larger jurisdictions, cross-border difficulties may occur
El Salvador
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
Sub-national complexity also varies between from other parts of the country due to rising popularity
jurisdictions, as some have far more regionalised of remote working, which led to more complex situations
structures than others. Colombia has more than arising when calculating and reporting payroll.
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 each
municipality in turn, meaning companies must keep a
detailed, regionalised ledger of their transactions so that
taxes are paid correctly in each municipality.
Regional complexity can also create opportunity for
corporations, 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 with
more favourable tax rates on imported goods than in the
rest of the UK.16
2021 2020
1 Brazil (2)
TEN MOST COMPLEX JURISDICTIONS
2 France (12)
3 Mexico (13)
4 Colombia (8)
5 Turkey (11) PAGES
18–23
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)GLOBAL BUSINES S COMPLE XIT Y INDE X 2021 17
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)
TEN LEAST COMPLEX JURISDICTIONS
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) PAGES
36–41
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)18
TEN MOST COMPLEX
JURISDICTIONS
2 France
5 Turkey
3 Mexico
Costa Rica 9
6 Indonesia
Colombia 4
Bolivia 8 1 Brazil
10 Poland
7 ArgentinaGLOBAL BUSINES S COMPLE XIT Y INDE X 2021 19
1 Brazil 2 France
While Brazil is the most complex jurisdiction in the GBCI 2021, France’s place as the second most complex jurisdiction is
it is also an attractive destination for investment given that it is driven by complexities in accounting and tax processes, and
ranked as the 13th largest economy in the world and has grown heavily employee-centric HR regulations.
rapidly in recent years.
All accounting in France is subject to local language
Complexity in Brazil is driven by a multi-layered system of requirements, which can prove challenging to non-French
governance, where federal, state-level and city-level authorities speaking businesses. In addition, France has been one of
all have significant legislative power. Brazil is one of the few the first jurisdictions to put the EU regulation of SAF-T (an
jurisdictions where incorporating companies must register with electronic exchange for accounting data) into place. The French
all three of these levels of government. Various taxes are also government has strongly endorsed a process of digitalisation,
levied at each level of government, meaning that tax rates differ with all tax audits expected to be completed digitally in the near
from city to city and state to state. future.
There are significant tax reforms taking place, but these are
“ Even though France still
complex due to the tensions between the multiple levels of
government. For example, the federal government is looking
requires much administrative
to increase VAT across the jurisdiction, but such sweeping work to comply with requirements,
changes can affect areas very differently, as economic wealth the country is also encouraging
is concentrated in some of the more affluent cities and states. investors through various schemes,
The devolved structure is therefore very difficult to navigate or
such as temporary exemption
unify, leading to complexity for multinationals.
arrangements for innovative
Much of the labour law in Brazil dates from the 1940s, though start-ups and new businesses. ”
reforms in the last five years have given employers more
flexibility and seen some relaxation of strict unionisation The French government is proposing more services in English
requirements. These reforms allowed companies to hire to foreign investors on its institutional websites and has
contract workers without the same responsibilities as full- introduced the initiative of ‘Business France’ – a website to
time workers, at a time when many jurisdictions are looking assist foreign companies in navigating the complexities of
to restrict the use of contract workers. In addition, while all French accounting standards. Yet these standards are subject
employees in Brazil were required to be members of a labour to constant change, with new financial laws being enacted each
union, this rule has been relaxed in recent years. year. Moreover, the presidential election is scheduled for April
2022, with all tax audits expected to be completed digitally in
While the country has been hit hard by Covid-19, the pandemic the near future.
has modernised many business practices, such as allowing
electronic documents for a variety of business activities. As a very employee-focused jurisdiction, France is also highly
However, many businesses were slow to take up support complex when it comes to HR and payroll. The conseil de
packages provided by the authorities because they were often prud’hommes – a specific court for employment litigation –
unclear, and companies were reluctant to commit to schemes rules in favour of the employee in more than three out of four
that could potentially leave them with unknown liabilities in cases. The government, however, has introduced a scale which
future. allows companies to anticipate the amount they are likely to
have to pay. Employees have a high holiday allowance, and
staff benefits, including mandatory health and life insurance,
“ The Brazilian Government must be paid monthly.
has a comprehensive list
of reforms that, once Covid-19 has further added to complexity with the introduction
implemented, should of chômage partiel (France’s equivalent of the furlough
scheme) which has been very generous to employees. Yet from
facilitate doing business
an employer standpoint, this scheme has added complexity,
and attract international necessitating updates to payroll software and the addition of
investors. ” tax 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 Colombia is currently going through its eighth tax reform in
three. Major drivers of this increase in complexity are the need the last ten years – which is indicative of the pace of change
for in-person interactions with the state, and a reliance on hard that companies must adapt to keep up with local legislation.
copy documents in order to incorporate. These factors have Although there were no tax increases in 2020, the latest project
been compounded by the Covid-19 pandemic. of 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 and
tax, hiring or dismissing employees and payroll. Furthermore,
“ Colombia is a growing economy
with the effects of the pandemic beginning to ease in the and is emerging as a strategic
jurisdiction, these processes should become simpler over the point for the regional supply of
next year. reliable and quality goods and
services, thanks to its strategic
In order for foreign businesses to incorporate, Mexico requires
that documents are provided in hard copy and need to be
location. Colombia can take
notarised in their country of origin. This means, for instance, advantage of its extensive
that businesses coming from the US must send the required network of trade agreements,
documentation back to the US to be notarised, before being which allow it preferential access
returned to Mexico. Prior to the pandemic, this process would to more than 60 countries and
take around a week. However, in light of the crisis, this can now
take over a month.
1.5 billion consumers around the
world. Despite the complexity in
taxes or regulated laws, Colombia
“ Regulations and processes is a great place to invest. ”
in Mexico may seem excessive
and lengthy at first glance.
Tradition and different The key changes in the most recent tax reform project involve
a requirement for certain sectors to pay more of certain types
interpretations of how to
of tax. For example, the standard Value Added Tax (VAT) rate
apply regulations are common. in Colombia is 19%, though some industries are on a lower tier
But with the right knowledge and of 5% VAT. Tax codes can also be quite granular – medicine
understanding, investors can systems providers have just been added as a sector where the
navigate complexity and realise 5% VAT rate applies in the latest reforms.
the benefits. ”
Colombia has become more digitalised in recent years.
Following a process spanning the last two years, electronic
Furthermore, in Mexico in-person interactions are required invoicing has now been made mandatory for all companies.
to register with the authorities. During the pandemic, Sharing payroll information with the DIAN (tax and customs
appointments have been hugely limited in order to meet national authority) will also be electronic as of autumn 2021.
Covid-19 regulations, meaning that waiting times for certain Furthermore, the DIAN has also been increasing the use
interactions can now be over two months. Businesses must of technology in different processes, for instance, in the
also demonstrate that they have a physical company address last few months the process of electronic notification has
in Mexico, in order to operate legally. It is not enough to simply been regulated.
have a virtual Mexican address.
Following the Covid-19 pandemic, many banks in Colombia
Another factor that adds to complexity in the jurisdiction is mandated electronic pension payments from corporate bank
the need to have a Mexican legal representative in order to accounts to pension funds. This digitalisation was in place
incorporate. While foreign businesses do not need to have before the pandemic but was optional, whereas now it is
locally resident directors, they must have a locally resident legal fully mandated. Before digitalisation, employees had to
representative. In the case of tax misdemeanours, this legal manually ask for a cheque from the bank and present it to
representative will be easily traced, providing a form of security their pension provider.
for the Mexican authorities.GLOBAL BUSINES S COMPLE XIT Y INDE X 2021 21
5 Turkey 6 Indonesia
Turkey has moved into the top ten in 2021, up from number 11 Indonesia is a rapidly growing market that is demonstrating a
in 2020. Compared to other jurisdictions, its accounting and tax commitment to opening up to foreign direct investment. The
regulations are particularly complex. jurisdiction is currently undergoing a great deal of change
due to the introduction of the ‘Omnibus law’, a sweeping set
Turkey supports a highly localised regulatory system and of reforms that aims to make the jurisdiction much more
enforces local language requirements – both of which prove attractive to Foreign Direct Investment (FDI).
challenging to foreign investors. Moreover, the government
passes frequent legislative changes (most recently passing As part of the reform, one of the key changes is to open up
new legislation to restrict the finance cost relief that can be various sectors of the economy that have previously been
deducted from taxable income) and companies often must closed to foreign companies. However, even within the sectors
adapt within very short timeframes. that are open for business, there is a huge deal of complexity
in terms of the filing structure in Indonesia: despite the tally
It is positive to see that Turkish authorities are engaging in a decreasing from 515, there are still 386 regulated sectors
process of digitalisation, yet the absence of a collaborative into which businesses must be categorised. Businesses
cross-government approach is increasing complexity in the must identify their sector correctly in order to comply with
short term. Each authority has adopted a different technology the maximum foreign share ownership regulation. This
platform, meaning businesses must learn to use and submit also impacts whether a business can enjoy certain fiscal
documents via multiple portals. It is hoped that this increased incentives, such as tax holidays, tax allowances and import
complexity is only a temporary uptick as businesses adjust duty exemptions, or non-fiscal incentives, including support
and, in time, Turkey’s digitalisation strategy will work to simplify in obtaining business licenses, work permits, energy, raw
the process of doing business within the jurisdiction. materials, 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 from
hiring temporary labour.
“ The government is fully aware that in order
to 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 and
transparent business atmosphere, to
make Indonesia an attractive and sound
investment destination. ”22 TEN MOST COMPLEX JURISDICTIONS
7 Argentina 8 Bolivia
The key drivers of complexity in Argentina are constant Complexity in Bolivia has been driven by a long process that
legislative changes, difficulty sending and receiving foreign began with a civic strike against electoral fraud in October 2019
currency and high levels of inflation. and reached its peak with the Covid-19 pandemic, along with
the assumption of a new government through elections, after a
In December 2019, president Alberto Fernández was elected. period of governmental transition.
From that point onward, there have been a series of rapid,
and sometimes unpredictable, legislative changes in the Both the Covid-19 pandemic and the inauguration of a new
country. One such change, brought about in response to the government have accentuated complexities surrounding the
Covid-19 pandemic, is the inability to dismiss underperforming functional immobility of workers. These factors compounded
employees, meaning that Argentinians have had total job a workforce mobility situation which was already tricky. Due
security throughout the pandemic. However, this adds to the Bolivian Constitution and the existing labour legislation,
significant complexity for businesses operating in the employees who face a situation of dismissal can appeal to the
jurisdiction, as employees must leave a company of their own Ministry of Labour to reinstate the position.
volition, or else the business can face massive penalties.
On the other hand, in some sectors, such as finance, the
Bolivian government has begun to introduce measures to
“ The key thing that foreign combat money laundering and tax evasion. These measures
direct investors need to know aim to instil best practices within the sector, in a bid to increase
about Argentina, is that it is a transparency.
jurisdiction with a high number
Looking ahead, our experts predict that similar regulation will
of constantly changing rules
be introduced in other sectors of the economy, increasing the
and regulations. TMF Group likelihood of Bolivia becoming a more complex place to do
can help companies to business in the coming years.
remain 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 to
incorporate 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.GLOBAL BUSINES S COMPLE XIT Y INDE X 2021 23
9 Costa Rica 10 Poland
Complexity in this jurisdiction is primarily driven by a need Legislation in Poland often changes quickly, leaving businesses
for businesses to demonstrate high levels of transparency. little time to react and implement changes in accordance with
Costa Rica has seen significant fiscal reform, aimed at new laws. This has been exacerbated during the pandemic,
increasing transparency to combat tax evasion. It is also the which has brought about quick responses on the government’s
first Central American country to become a member of the part to a fast-moving situation. For example, lockdown
OECD. It is inevitable that these reform efforts will bring about restrictions have been introduced and removed at short notice,
additional requirements that increase the complexity for foreign while longer term law changes in response to the pandemic
companies seeking to operate in Costa Rica. 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 jurisdiction
is the implementation of UBO legislation, enacted in 2019.
Compliance with these regulations can entail a lengthy “ All official documentation in
administrative process, which often requires local support. Poland has to be submitted in the
However, despite the complexity in the jurisdiction, it is still an
local language, sworn translated,
attractive destination for FDI. Amazon and Microsoft have large or accompanied by an apostille
operations in Costa Rica and given their educated workforce, certificate. Foreign investors should
increasingly we see companies selecting Costa Rica for make sure they consult with
nearshoring operations. Although the need for transparency professional legal and tax advisors
adds complexity, it also adds security, making it an attractive
location for foreign business to establish operations.
to make sure they are aware of all
requirements and obligations. ”
Costa Rica has a free trade zone regime that has existed for
more than two decades. Although the application process is
complex, it has allowed the country to successfully attract Some recently introduced laws have also lacked clarity in
foreign investors. specific cases, such as the recent roll out of the Employee
Capital Plans, a scheme that allows employees to invest part
of their salary in shares and bonds. Employees of foreign
“ While the country offers highly
companies should currently be covered by the plans but, as yet,
qualified labour, it is important there is no clear way for foreign companies to manage this for
to note that Costa Rica is one of their employees.
the most expensive countries
in the region, in terms of The government is currently undergoing a process of
digitalisation and has adopted electronic signatures. This is
production. Investors should
particularly noteworthy in accounting and tax, as companies
carry out feasibility studies, in are now required to submit financial statements electronically.
collaboration with professionals However, Polish authorities currently don’t accept many
familiar with the current internationally accepted signature providers such as DocuSign,
situation in Costa Rica. ” and instead require signatures from specific local providers,
adding to complexity in the jurisdiction.You can also read
