THE GLOBAL BUSINESS COMPLEXITY INDEX - TMF Group
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THE GLOBAL BUSINESS COMPLEXITY INDEX 2019
02 THE GLOBAL BUSINESS COMPLEXITY INDEX
CONTENTS
03 Introduction
04 Methodology
05 The Global Business Complexity Index 2019
07 Global highlights
09 10 most complex jurisdictions
15 Spotlight on: Rules, regulations and penalties
16 Spotlight on: Accounting and tax
17 Spotlight on: Hiring, firing and paying employees
18 10 least complex jurisdictions03 THE GLOBAL BUSINESS COMPLEXITY INDEX
INTRODUCTION
This report looks at the complexity Unfortunately, some of the world’s
most commercially attractive countries
of operating businesses in countries
are the most complex from a ‘rules’
around the world. TMF Group is proud perspective. Failure to understand
to sponsor it. or comply with these processes and
procedures carries a cost, ranging from
As a leading provider of international business disruption and reputational
administrative services, we help clients damage to penalties including fines,
invest and operate around the world imprisonment and business closure.
safely and efficiently. We deal every day
with the rules required to operate in This report is designed to help.
over 100 countries, from fiduciary and The Global Business Complexity Index
compliance requirements, to accounting, ranks jurisdictions around the world in
tax and payroll. terms of how difficult they are to operate in.
It highlights what to expect from different
Since our 2018 report, the world of countries across a range of business
international business has become more requirements including legal, compliance,
challenging. Trade disputes, tariffs, rising accounting, tax and employment rules.
nationalism and Brexit now point to
a shift from globalisation to economic Complexity is not a reason to avoid
fragmentation. As a result, businesses investing. It is a factor which must be
in many cases have to localise their managed. With the right local knowledge
presence in order to establish themselves and preparation, good companies can
in markets they wish to do business in. thrive anywhere.
That’s why a good understanding of the
rules that prevail – and how to manage
them – are even more important. Firms
will have to grapple with several ways
of doing the same thing. Processes such
as paying staff, filing accounts and
registering a company all differ between
jurisdictions – in some instances, Mark Weil
procedures vary between regions Chief Executive Officer
within a single jurisdiction. TMF Group04 THE GLOBAL BUSINESS COMPLEXITY INDEX
METHODOLOGY
The Global Business Complexity Index The data for each jurisdiction were
was compiled using research conducted statistically weighted and combined
among TMF Group’s specialists in 76 to produce an overall complexity score
jurisdictions*. We measure ‘complexity’ and ranked index.
in terms of how complicated and
unpredictable a business environment Follow-up interviews were conducted with
is – and how difficult it is to understand specialists from the ten highest and ten
01
and operate in. lowest ranking jurisdictions, exploring their
business environments and investigating
An in-depth survey explored three areas: scores in greater detail. Experts were
asked to score the complexity of several
• Rules, regulations and penalties issues on a scale of 1 to 10, with 10 being
• Accounting and tax the most complex. We calculated mean
02
• Hiring, firing and paying employees scores on the same scale.
RULES, REGULATIONS
A N D P E N A LT I E S
ACCOUNTING
AND TAX
03
*
We use ‘jurisdiction’ to mean an area governed
by a set of laws. A country can include several HIRING, FIRING AND
jurisdictions which, from a business point of view, PA Y I N G E M P LOY E E S
are separate. For example, Curaçao is part of the
Kingdom of the Netherlands but it is an entirely
separate jurisdiction to the Netherlands.05 THE GLOBAL BUSINESS COMPLEXITY INDEX
THE GLOBAL
BUSINESS COMPLEXITY
10 MOST COMPLEX JURISDICTIONS 10 LEAST COMPLEX JURISDICTIONS
INDEX 2019
TOP 10
01 GREECE
02 INDONESIA
03 BRAZIL
04 UNITED ARAB
EMIRATES
05 BOLIVIA
06 SLOVAKIA
07 GERMANY
08 TURKEY
09 CHINA
10 PERU
BOTTOM 10
67 NETHERLANDS
68 BRITISH VIRGIN
ISLANDS
69 DENMARK
70 SWITZERLAND
71 ISRAEL
72 PARAGUAY
73 THAILAND
74 JERSEY
75 CURAÇAO
76 CAYMAN ISLANDS06 THE GLOBAL BUSINESS COMPLEXITY INDEX
THE GLOBAL
BUSINESS COMPLEXITY
INDEX 2019
01 Greece 21 Poland 41 Ecuador 61 South Korea
02 Indonesia 22 Kazakhstan 42 Singapore 62 Mauritius
03 Brazil 23 Nicaragua 43 United Kingdom 63 Dominican Republic
04 United Arab Emirates 24 Italy 44 Russia 64 New Zealand
05 Bolivia 25 Malaysia 45 Austria 65 Australia
06 Slovakia 26 Canada 46 Taiwan 66 United States
07 Germany 27 Vietnam 47 Finland 67 Netherlands
08 Turkey 28 India 48 Czech Republic 68 British Virgin Islands
09 China 29 Serbia 49 Malta 69 Denmark
10 Peru 30 South Africa 50 Venezuela 70 Switzerland
11 El Salvador 31 Costa Rica 51 Panama 71 Israel
12 France 32 Slovenia 52 Guatemala 72 Paraguay
13 Colombia 33 Ireland 53 Romania 73 Thailand
14 Ukraine 34 Norway 54 Cyprus 74 Jersey
15 Belgium 35 Honduras 55 Sweden 75 Curaçao
16 Portugal 36 Luxembourg 56 Hong Kong 76 Cayman Islands
17 Qatar 37 Jamaica 57 Hungary
18 Argentina 38 Uruguay 58 Bulgaria
19 Spain 39 Mexico 59 Japan
20 Philippines 40 Chile 60 Guernsey07 THE GLOBAL BUSINESS COMPLEXITY INDEX
GLOBAL
HIGHLIGHTS E X T R E M E LY O R V E R Y C O M P L E X QUITE COMPLEX
NOT AT ALL COMPLEX
Globalisation is creating a more uniform regulatory
landscape across jurisdictions as they adopt international
standards. However, significant variation between countries SETTING UP A BUSINESS* IN A NEW JURISDICTION
and continents remains. In some instances, global and
domestic legislation combine to amplify complexity.
8%
International versus domestic 25%
—
Companies setting up and running a business in a new jurisdiction 41%
32%
need the right knowledge and support to achieve their aims.
61%
It is easier for a local firm to incorporate than a foreign-owned
one, with domestic companies facing an average complexity score 34%
of 4.3 out of 10 when incorporating, compared to 5.6 out of 10 for
multinational firms. Reasons vary from basic linguistic barriers
to local representation and procedural challenges. For example,
banks may require copious additional information from foreign
entities applying to open an account and signatories may need M U LT I N AT I O N A L DOMESTIC
to be present. However, once firms are up and running, the
gap narrows. The average complexity score for managing
a business is 4.9 out of 10 for domestic firms and 5.3
for multinationals. M A N A G I N G A B U S I N E S S **
9%
18%
55% 34%
57%
26%
M U LT I N AT I O N A L DOMESTIC
*
The processes and procedures required by law to establish an operational entity.
**
The legal obligations for established firms to operate on an ongoing basis.08 THE GLOBAL BUSINESS COMPLEXITY INDEX
GLOBAL
HIGHLIGHTS
Complexity drivers Looking ahead
— —
Four key themes about the causes of complexity emerged from The biggest challenge is likely to be rapid legislative change,
our research: affecting most jurisdictions. Overall, however, the global outlook
is positive.
•L
ocal rules, regulations and penalty systems can be hard to
navigate. Companies in over a third of jurisdictions find this Technology is proving a powerful tool in reducing complexity.
very or extremely complex. While adopting digital systems has created friction in some
jurisdictions, it is streamlining processes in others. Online
• Many jurisdictions change their legislation frequently, either incorporation is a prime example. In some jurisdictions, including
to bolster the economy or make their market more attractive the British Virgin Islands (BVI), the Cayman Islands and Jersey, it
for investment. In the United States, for example, tax reform can happen very speedily, sometimes in less than 24 hours. This
is making it easier for foreign businesses to repatriate profits, increases their attractiveness to global investors. Harmonised
which encourages foreign investment. rules signal an established business environment, making the
process of compliance simpler for multinational companies.
• Managing accounting and tax is very or extremely complex for
17% of jurisdictions — often because local authorities prescribe their Our experts believe their respective jurisdictions are moving
own reporting formats for accounting. Strict deadlines for tax in the right direction, creating opportunities for businesses.
reporting requirements, and harsh fines and penalties for non- Even seven out of the ten ranked most complex predict they will
compliance, can ramp up the pressure. develop more attractive business environments over the next five
years. Businesses looking for overseas opportunities should cast
• Setting up processes to manage hiring, firing and paying their nets widely for the best expansion options.
employees is very or extremely complex in 42% of jurisdictions
because of complex local labour laws, specific reporting
requirements and the difficulty of hiring staff before a business
has been incorporated as a legal entity. The mean complexity score
across all jurisdictions for hiring before legal incorporation is
high at 7.5 out of 10.
E X T R E M E LY O R V E R Y C O M P L E X QUITE COMPLEX NOT AT ALL COMPLEX
FIRST OPERATING IN A NEW JURISDICTION MANAGING DAY-TO-DAY OPERATIONS
R U L E S , R E G U L AT I O N 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 33% 39% 28% A N D P E N A LT I E S 22% 38% 39%
A C C O U N T I N G A N D TA X 21% 34% 45% A C C O U N T I N G A N D TA X 17% 30% 53%
HIRING, FIRING HIRING, FIRING
A N D PAY R O L L 42% 25% 33% A N D PAY R O L L 32% 28% 41%09 THE GLOBAL BUSINESS COMPLEXITY INDEX
10 MOST COMPLEX
JURISDICTIONS
Every week, new decisions and 1/GREECE
laws affect the way companies in
Greece do business, manage their
bookkeeping, plan for the future Rapidly changing legislation
combined with complex labour laws
Staffing: demands and restrictions
—
and communicate with clients. puts Greece at the top of the Global
Business Complexity Index.
Greece is a welfare state. Mandated
benefits include Christmas and Easter
bonuses, life insurance, transportation
— allowance and tax breaks for staff who
Greece’s existing legislation can be
Yannis Goussiakis, are married or have children. Although
complicated and new measures are
TMF Group, Greece. the benefits system has been simplified
continually being introduced. Sometimes,
multiple laws conflict and it can be hard for over the last two years, payroll legislation
businesses to know which one to comply changes frequently and is often applied
with. For example, in some cases, VAT retroactively. Many businesses require
refunds are subject to different treatment local support to help them manage
depending on the tax office dealt with. their obligations.
On occasion, individuals declaring
identical dividends have been taxed Businesses face hiring restrictions.
at rates varying by more than 10%. For example, it can be extremely difficult
The Greek government does not always to employ workers from outside the EU
provide enough guidance, making this because government authorities are
a tough jurisdiction for foreign firms reluctant to provide work permits.
to navigate.
Some Greek islands operate as
independent provinces for compliance
and tax. This scenario is relatively
unusual since compliance requirements
vary between provinces in only 22% of
jurisdictions and tax requirements vary
between provinces in only 33%.10 THE GLOBAL BUSINESS COMPLEXITY INDEX
2/INDONESIA 3/BRAZIL
Indonesia ranks second place in Once a company has been set up, Despite ranking third for complexity, Understanding the labour force
complexity because its legislation reporting requirements are stringent. Brazil is likely to remain economically —
Rules and standards are set by different While 2017 labour reforms enabled more
changes frequently and regulations attractive.
authorities and can vary significantly. flexibility in collective agreements and
can be at odds with each other. For example, companies must report
It has made strong progress in stabilising union relations, complying with Brazilian
to the Ministry of Finance, the Financial labour laws remains onerous. It was rated
This is exemplified by the enforcement Services Authority and the Central interest rates and government spending
is tightly controlled. Brazil has pioneered 8 out of 10 for complexity, against a mean
of VAT on online sales – a change Bank. However, many of these bodies
the use of technology – it recently score of 5 across the Americas.
announced in 2018 and scrapped in 2019. have different reporting formats and
While Indonesia is gradually modernising, timeframes, often leading to confusion and implemented digital bookkeeping with the
Sistema Público de Escrituração Digital Employment rights remain strong and
the existing legal infrastructure cannot complexity. The associated bureaucracy
(SPED) to standardise tax reporting and workers have a good chance of winning
always keep pace with the changes. can be challenging. For example, the tax
enhance foreign investment. against employers in court disputes.
authorities must, in principle, accept digital Instead of firing employees for
Incorporation and regulation signatures but 'wet signatures' are often wrongdoing, companies often choose
required in practice. However, companies require local insight
are complex to grant severance payments. This can
to navigate the legislative landscape and
— determine what regulators are likely to discourage employees from performing
The Online Single Submission (OSS) “Indonesia is one accept. Furthermore, VAT percentages well during their notice period.
system used for incorporation –
which has launched but is still under of the most complex and tax incentives vary from state to
Labour unions wield significant influence,
state, requiring an even deeper level
development - complicates an already jurisdictions in Asia of local knowledge. particularly in the more traditional
complex process. manufacturing and industrial sectors
Pacific for incorporation. where they have established industry-
The regulatory landscape specific protections for workers.
Companies can bolster their reputations
is constantly shifting by developing good relationships with
and is subject to some unions but compliance with union rules
can prove very expensive.
quite drastic changes."
“You need to become
– Alvin Christian,
TMF Group, Indonesia. ‘seasoned’ when it
comes to the best way
to execute business
in Brazil. Part of that
is trial and error."
– Rodrigo Zambon,
TMF Group, Brazil.11 THE GLOBAL BUSINESS COMPLEXITY INDEX
4/UNITED ARAB EMIRATES
Much legislation is being introduced Local tax and payroll knowledge
in the United Arab Emirates (UAE). is essential
Over the long term, this should make —
it operationally easier for businesses Last year, as part of a drive to ensure
but in the short term, the new rules companies file their VAT correctly,
authorities introduced a system of fines
and regulations add complexity.
for mis- or incorrect filing. Some companies
failed to understand the new requirements
UAE comprises many internal
and having missed strict deadlines are
jurisdictions, each with its own set of
now facing penalties. The UAE’s Wage
regulations and requirements governing
Protection Scheme varies between
company establishment, compliance and
jurisdictions. Ensuring salaries are paid
filing. Navigating this environment requires
correctly each month is a significant
accountancy professionals with specific
responsibility for all employers.
expertise. The relatively business-friendly
jurisdictions are pushing ahead with
automation and digitisation of processes.
However, operating in other jurisdictions
requires in-depth local knowledge and may
entail translating official documents into
Arabic. Businesses investing in a detailed
understanding of their jurisdictions will
reap rewards.
Once you are in the UAE, and you Maintaining a business in the UAE
can involve time-consuming processes,
understand the market, or have good
encompassing annual trade licence
renewal, payroll compliance and ongoing
maintenance of residency visas and
advisors that will work through the labour cards.
complexity, it’s fine and doing business
is much more straightforward.
—
Stephanie Williams,
TMF Group, UAE.12 THE GLOBAL BUSINESS COMPLEXITY INDEX
5/BOLIVIA 6/SLOVAKIA
Demanding regulations and Employee rights Although Slovakia’s legislation Understanding employee benefits
high corporate taxation create — is in line with that of the European and tax compliance
a challenging business environment Businesses need to be aware of the Union, difficulties with technology —
in Bolivia but there are moves priority Bolivia’s government gives implementation are increasing The Slovak Labour Code complies
to workers’ rights and understand with European Union standards but
to reduce complexity. For example, complexity in the short term.
compliance requirements. For example, workers are entitled to benefits that
digital processes and e-signatures are if employees are dismissed, they can
An electronic submission system for few other European countries mandate.
being introduced to reduce paperwork. apply to be rehired and stand a good These include dental insurance and
the incorporation of companies was
chance of success. transportation allowance, benefits
The Bolivian government requires implemented last year. The new portal
is expected to make registration much legally required in only 5% and 16%
businesses to adhere to local policies.
However, many domestic regulations, “The economic stability simpler once fully operational. of jurisdictions respectively.
such as the national labour code, of the country is linked Most penalties for failing to comply with
are not straightforward because of
regional differences in interpretation. to the international the Slovak accounting and tax reporting
system amount to only minor fines
Tax structures vary. Foreign companies prices of gas, petroleum but company managers must operate
operating through a subsidiary pay an
additional 12.5% tax on profits, on top and lithium. A fall in the safely within the law to avoid being
personally liable.
of the standard 25% tax, due to the international prices of
presumption of payment revenues
to foreign shareholders. these commodities can “The Slovak labour code
make the context more is quite complex and
complex by increasing favours, in most cases,
regulations and taxes." the employee."
– Luis Maria Gonzalez, – Julian Dietz,
TMF Group, Bolivia. TMF Group, Slovakia.13 THE GLOBAL BUSINESS COMPLEXITY INDEX
7/GERMANY 8/TURKEY
Germany earns a high complexity German requirements In Turkey, modern legislation Managing mandatory pensions
ranking as one of the most — is overlaid on traditional laws —
challenging jurisdictions for As elsewhere in the European Union, KYC which sometimes creates conflicts. Since June 2018, companies with ten
accounting and tax legislation. (Know Your Customer) requirements are However, moves to integrate the or more employees have been required
very strict in Germany and banks demand to register for a private pension scheme.
legal system should smooth out
The country adheres strictly to European a wealth of information from applicants However, employees can withdraw from
wishing to open an account. The process any contradictions over the next them after two months – and frequently
and global regulations, which can wrong-
often takes six weeks or longer. few years, making this an easier do. This means companies can bear
foot foreign investors unfamiliar with
requirements. Federal Office of Justice jurisdiction in which to operate. the administrative burden of setting up
fines for missing deadlines start at 2,500 Meeting the terms of legal formalities is and dismantling pension funds for new
euros and escalate quickly. essential. For example, when establishing When setting up in Turkey, a company employees, contributing to a complexity
a German corporation or making notable must register with the Tax and Social score of 9 out 10, compared to the global
changes to its structure, a German notary Security offices. While both departments mean of 4.
and all company shareholders must require online registration, for now, paper
be present or represented. All official
documents must be submitted in German.
documents must also be submitted.
“We expect Turkey
Companies require a Turkish national will continue to move
Although conforming to these rules can
be challenging, the well-organised German
with a citizen ID number to act as their
representative during some application
towards online-only
system helps to create predictability and and registration processes. processes but these
security for businesses.
New entrants to the market can be
transformations
“Germany is heavily tripped up by complications involving the take time."
accounting profession. For example, unlike
regulated, with rules in many countries where accounting and
– Emir Sagkan,
becoming stricter tax can be separate specialisms, Turkish
accountants have ‘mutual responsibility’
TMF Group, Turkey.
all the time. There is for the accuracy of tax filings. This means
a desire for companies they are required to have a greater working
knowledge of tax than many of their
to become more counterparts in other jurisdictions.
transparent."
– Ursula Rutovitz,
TMF Group, Germany.14 THE GLOBAL BUSINESS COMPLEXITY INDEX
9/CHINA 10/PERU
China’s complexity is driven Opening up and automating In 2018, a corruption scandal “We think the political
by variation in legislation across — brought down Peru’s President and
different regions, coupled with While China is working to level the created political unrest. However,
situation in Peru will
legislative changes. Although these playing field, some processes are still the country’s current President has improve, making things
more complex for international firms than
changes pose challenges in the short
their local counterparts. However, as the
committed to stabilising the economy simpler for businesses.
term, they are likely to bring huge to restore confidence.
government gradually dismantles this All indicators suggest
benefits to international businesses legislation as part of its drive to open up
investing in China in the future. China to the global economy, the situation As Peru looks to join the OECD, it will aim that if current growth
should improve. to align with global economic standards, is maintained, the
Government legislation is set nationally creating a less complex environment for
but implementation of the laws differs Digitisation will also ease the path multinational companies to navigate. economic outlook
at the provincial level and even between for companies setting up in China. will get much better."
different cities. While China is developing The government has launched the Presently, it takes two to three months
rapidly, there is still a significant disparity third phase of its ‘Golden Tax’ project, for a company to become established
between the ‘first tier’ cities which are open simplifying the submission process as a legal entity. During the registration – Javier Grau,
to foreign investment, and lower tier cities for electronic tax returns. process, multiple documents must be TMF Group, Peru.
which are less internationally aligned. submitted including information about the
company or business and its operational
“President Xi Jinping plans. Operations cannot begin until
is keen to further a registration number has been received.
strengthen China’s A corporation must ensure tax compliance
position as a key to avoid severe penalties for the incorrect
submission of taxes.
player in the world
economy. Legislation
should become more
straightforward,
streamlined and
transparent."
– Wandy Chan,
TMF Group, China.15 THE GLOBAL BUSINESS COMPLEXITY INDEX
SPOTLIGHT ON:
RULES, REGULATIONS
A N D P E N A LT I E S
Our analysis spans the areas of regulatory In Switzerland, for example, banking Smoothing the path Compliance challenges
compliance that apply to businesses secrecy legislation laid the groundwork — —
looking to expand overseas. for data protection a decade before GDPR, Technical and regulatory developments Reporting requirements frequently add
making compliance a simpler process. are simplifying processes for companies to compliance complexity.
While globalisation is driving many that expand overseas.
jurisdictions to align with international Companies are responsible for their own • International reporting requirements
regulatory standards, most also maintain compliance with international regulations • Electronic filing and reporting systems are increasing as part of a global
their own local requirements. These two and that of suppliers and partners. This can make it easier to do business and drive to improve transparency – 83%
sets of rules determine the overall level can add complexity but steers all parties boost efficiency as processes become of jurisdictions have committed to
of complexity faced by businesses. Our towards operational alignment. streamlined. Specialists in 68% of exchange information under the
specialists report that most jurisdictions jurisdictions report that technology Common Reporting Standard.
aim to develop local standards that reduces reporting complexity. However,
exceed international norms, enabling rates of adoption vary: official submissions • Official documents must be prepared
international legislation to be pre-empted. to authorities are carried out electronically and submitted in the local language
in 84% of jurisdictions in EMEA but only in 74% of jurisdictions.
50% of jurisdictions in APAC. In some
instances, digitisation has created an • Regions within a jurisdiction may
initial upswing in complexity, especially have different legislative requirements.
in jurisdictions where online platforms Tax requirements differ between regions
are not yet working perfectly or where in 33% of jurisdictions and compliance
hard copies are still required in addition requirements in 22%.
68% 68% 74%
to electronic submissions.
57% • Residency requirements are not
overly demanding in most jurisdictions,
• Our specialists report that penalties are
relatively high in relation to the severity
of the compliance failure in 70% of
with only 1 in 12 requiring shareholders jurisdictions. Rapidly changing legislation
to live locally. However, a quarter adds to the challenge for companies,
require directors of private companies which must strive to keep on top of
to be native or resident in the country. developments. They can reduce their
of jurisdictions said opening of jurisdictions agree that of jurisdictions said dissolving of jurisdictions require official
a corporate bank account technology is reducing a private company takes more documents for submission to
This requirement shows strong regional exposure to risk by seeking guidance
abroad is time-consuming complexity in their market than six months on average local government authorities trends. It is true of 50% of jurisdictions from local authorities and experts.
to be in local languages across APAC but only 38% in the
Americas and 11% in EMEA. Overall, the global trend towards
international compliance standards
is good for business. While sometimes
adding to the workload, it increases
uniformity across jurisdictions, boosts
transparency and reassures potential
% OF JURISDICTIONS REQUIRING DIRECTORS OF investors that a jurisdiction is a safe and
A P R I V A T E C O M PA N Y T O B E N A T I V E O R R E S I D E N T: secure place for businesses to operate.
50% 38% 11%
A PA C AMERICAS EME A16 THE GLOBAL BUSINESS COMPLEXITY INDEX
SPOTLIGHT ON:
ACCOUNTING
AND TAX
The accounting and tax component of our •G
lobal efforts to stamp out tax fraud The digital revolution
research explores what is legally required can give rise to harsh penalties for —
of businesses in the financial sphere. businesses which are not tax registered Digitisation is transforming reporting in many jurisdictions. Electronic submissions
or do not comply with regulations. boost transparency, efficiency, accuracy and processing speeds.
Complexity increases when legislation Companies that are not tax registered
changes frequently and when new risk significant fines in 85% of jurisdictions Our research reveals that companies need to submit accounting records to state
requirements move the goalposts. and long-term suspensions of activity authorities electronically in 51% of jurisdictions, while 39% require tax invoices
in 40%. In 45% of jurisdictions, company to be issued in an electronic format. In Brazil, for example, digitisation of these
• Reporting formats are not standardised directors can be given prison sentences. processes began in 2000 with the development of SPED, which includes digital
around the world. Our research revealed Accuracy of tax reporting is essential. signature technology.
that in 70% of jurisdictions, local Non-compliance can lead to significant
authorities prescribe the format fines in 83% of jurisdictions and possible New technology frequently suffers from teething pains and it takes time for businesses
of accounting reports. imprisonment in 48%. to learn how to comply with new processes. In the long term, however, as platforms are
refined and developed, the shift to online should benefit businesses by reducing complexity.
• Rigid tax reporting timeframes add However, in many jurisdictions,
pressure: in 63% of jurisdictions it is not modernisation is starting to make life
possible to postpone a tax audit and easier for foreign firms. For example,
in 67%, deadlines for tax or statutory 63% of jurisdictions allow accounting
filings cannot be extended. records to be maintained abroad and
52% accept tax payments from an
overseas bank account. Authorities
in many jurisdictions are providing
businesses with useful advice. Two thirds
of the jurisdictions we surveyed provide
written guidance on how to apply local
rules and regulations.
39% 50% 51% 63% in 63% in 67% 74% 86%
of jurisdictions of jurisdictions say that the of jurisdictions must submit of jurisdictions have a separate of jurisdictions, a tax of jurisdictions, deadlines of jurisdictions say country-by- of jurisdictions require a local
require tax invoices accounting software used to accounting records to state tax registration and entity audit cannot be postponed for tax/statutory filings country reporting requirements license to be obtained prior
to be issued in an maintain local books of accounts authorities in electronic format incorporation process cannot be extended are implemented in to becoming operational
electronic format must comply with local their jurisdiction
authorities’ requirements17 THE GLOBAL BUSINESS COMPLEXITY INDEX
GLOBAL TOP 10 BOTTOM 10
SPOTLIGHT ON: H I R I N G , F I R I N G A N D PA Y I N G
EMPLOYEES COMPLEXITY FACTORS
HIRING, FIRING AND (1-10 SCALE, 10 = THE MOST COMPLEX)
PA Y I N G E M P LOY E E S
8
6
4
We have investigated the human resources Other benefits are more commonplace 2
and payroll challenges facing businesses. in some regions than others. In the A B C D E F G H I J K L M N
Americas, workers are often paid A SE T T I N G U P N E W E M P LOY E E C O NT R A CTS G M A N A G I N G E M P LOY E E C O M P L A I NTS L C OMPLYING WITH E QUAL
Around half our specialists report that a 13-month salary (a mandatory annual B U N D E R STA N D I N G L O C A L L A B O U R L A W S H M A N A G I N G D I SC I P L I N A RY P R O C E S SE S OPPORTU NITIE S LE GISL ATION
labour laws are difficult to understand bonus) which is a legal requirement in C C O M P LY I N G W IT H LO C A L L A B O U R L A W S
D M A N A G I N G U N I O N R E L A T I O N SH I P S
I FI R I N G A N U N D E R -P E R FO R M I N G
E M P LOY E E
M COMPLYING WITH MOD E RN
A NTI-S L AV E RY LE GISL ATION
and comply with in their jurisdictions. 71% of jurisdictions. In APAC and EMEA, E SE T T I N G U P PA Y R O L L J M A N A G I N G R E D U N DA N C I E S N M AN AGING E MPLOYE E
It gets even harder if payroll legislation it is required in only 21% and 16% of F C O M P LY I N G W IT H H E A LT H A N D
SA FE T Y L E G I SL A T I O N
K C O M P LY I N G W IT H B U L LY I N G A N D
H A R A SSM E NT L E G I SL A T I O N
P ROBATION PE RIOD S
continually changes – sometimes jurisdictions respectively. In pension
retrospectively – especially if the local provision, APAC leads the way: a fund
government does not provide useful must be offered in 79% of its jurisdictions,
compliance guidance. compared to 63% in the Americas and 50% EMPLOYEE BENEFIT COMPLEXITY FACTORS
in EMEA. Meanwhile, some jurisdictions (1-10 SCALE, 10 = THE MOST COMPLEX)
There are multiple sources of complexity demand relatively unusual benefits,
in this area: including transportation allowance
7
(16%) and life insurance (11%).
• While businesses are setting up in a new 6
jurisdiction, they may be restricted from • Reporting requirements vary. 5
finding and employing staff, making it In particular, payroll data must be
harder to hit the ground running. Hiring submitted to the government monthly 4
employees usually becomes much easier in 76% of jurisdictions. 3
once the business is established. 2
• Where unions exert a powerful influence –
•R
ecruiting workers from overseas in 29% of jurisdictions – businesses need A B C D E F G H I J K L M N O P Q R S T U V
is often much more difficult than staffing to establish and manage relationships.
from domestic sources as labour laws In union strongholds, the interpretation A FL E X I B L E W O R K I N G H O U R S H H E A LT H I N SU RA N C E O PE RSON AL LE AV E
are typically designed to encourage of labour laws often benefits employees B O P T I O N FO R R E M OT E W O R K I N G
C PA I D M A T E R N IT Y L E A V E
I D E NTA L I N SU RA N C E
J PA I D VA C A T I O N / T I M E O FF
P PE NSION FU ND
Q SE V E RANCE /RE D U NDANCY PAY
local employment. rather than the employer. D PA I D PA T E R N IT Y L E A V E K PA I D SI C K DA YS R MINIMUM WAGE/MINIMUM HOURLY RATE
E SH A R E D M A T E R N IT Y / PA T E RN IT Y L E A V E L C H I L D C A R E A SSI STA N C E S HOU SING/S OCI AL CARE CONTRIBU TIONS
F C O M PA SS I O N A T E L E A V E M FR E E / SU B SI D I SE D E Y E T E STS T T RANSPORTATION ALLOWANCE
•S
ome employee benefits are required • Managing a disciplinary process G OV E RT I M E PA Y N L I FE I N S U R A N C E U GROCE RY BONU S
by law almost everywhere, including and firing an underperforming employee V PAYING A 13 -MONTH S AL ARY OR BONU S
minimum wage (mandated in 89% is complex in over half of jurisdictions.
of jurisdictions), maternity leave (87%), There are radical differences around
redundancy pay (87%), vacation leave the globe: in EMEA and APAC, FREQUENCY OF LEGISLATION CHANGE
(84%), overtime (80%) and sick pay (80%). businesses must typically give three
to eight weeks’ notice. In the Americas,
employees can be fired with less than 9% 12% 10%
a day’s notice in 52% of jurisdictions. 20%
10% 30%
25% 40%
GLOBAL 10% T O P 10 B O T T O M 10
33%
40%
21% 40%
V E R Y F R E Q U E N T LY Q U I T E F R E Q U E N T LY N E I T H E R F R E Q U E N T LY N O R I N F R E Q U E N T LY
Q U I T E I N F R E Q U E N T LY V E R Y I N F R E Q U E N T LY18 THE GLOBAL BUSINESS COMPLEXITY INDEX
10 LEAST COMPLEX
JURISDICTIONS
6 7 / T H E N E T H E R L A N D S 6 8 / T H E B R I T I S H
VIRGIN ISLANDS
The Netherlands is making The banking challenge The financial services industry is the Talent pool
compliance straightforward. — lifeblood of the British Virgin Islands —
Many regulatory processes have As in much of Europe, opening a bank (BVI). Within days of Hurricane Irma As with many other island jurisdictions, the
been digitised, improving efficiency account in the Netherlands involves in 2017, the company registry was BVI promotes the hiring of its own citizens
enhanced KYC (Know Your Customer) over foreigners, leading to a complexity
and security of data exchange back up and running – testament
requirements. A high level of due diligence score of 9 out of 10 for seconding workers
between tax payers and tax is required and companies will need to to the government’s prioritisation from overseas. Strict immigration controls
revenue services. provide detailed information about their of the sector. mean that only highly-skilled workers can
operations in other jurisdictions. move there.
The Dutch government is responsive and The BVI is one of the world’s largest
often willing to provide guidance to help centres for the incorporation of companies,
businesses gain a clear understanding of “Dutch culture focuses especially those which facilitate cross- “The British Virgin
new legislation. It conducts consultations on getting things done border trade, investment and business. Islands could be very
with business groups before new measures The incorporation process is extremely
are introduced, aiming to ensure their and builds towards efficient and can take only a matter of attractive to start-
application is practical and user-friendly. harmony rather than hours. Further, the BVI’s government ups in terms of the
offers lower fees than the governments
It can be hard to secure employees towards power. I think of similar economies, including the cost of setting up and
in the Netherlands. In a strong economy, that’s the best reason to Cayman Islands. maintaining a company."
employers need to offer competitive
benefits if they want to attract the most go to the Netherlands."
skilled workers to facilitate growth. – Charlotte Bailey,
TMF Group, the British Virgin Islands.
– Priscilla Schraal,
TMF Group, the Netherlands.19 THE GLOBAL BUSINESS COMPLEXITY INDEX
6 9 / D E N M A R K 7 0 / S W I T Z E R L A N D
In Denmark, establishing and Standardised employee benefits Switzerland offers a very stable Direct democracy meets liberalism
operating a business is relatively — legislative environment combined —
easy because nearly all document Benefits are agreed by representatives with currency and price regularity Switzerland has a distinctive political
submission takes place online, for workers, employers and the government and a highly professional international system and any legislation that is
and are reviewed triennially. Payroll passed must be ‘put to the people’.
making compliance straightforward banking system.
processing systems are established These consultations take time, which
and fast. to manage those benefits. gives companies ample warning of
With a business-friendly attitude,
putative changes. New legislation is
Setting up a business authority company the country’s tax authorities provide
ID or tax ID can usually be done within “Employees in highly companies with guidance and support
usually considered very carefully before
it is put to the vote.
24 hours. Furthermore, all statutory filing unionised sectors to ensure they can comply with laws and
legislation. Contacting them is easy and
documents are submitted electronically.
Once a company signatory has been can benefit from most problems can be resolved with
Swiss employers and employees negotiate
contract terms with a high degree of
granted digital access rights they are employment terms a phone call.
freedom and terms can even be agreed
allowed to sign documents electronically,
removing the need for hard copies. dictated by collective orally. While severance pay is legally
required in 87% of jurisdictions, it is not
agreements, resulting in Switzerland. There are basic national
in very strong stipulations, such as a minimum of four
weeks paid annual leave. However, the
employment rights." finer details of each contract are agreed
individually. This system allows both
parties to achieve the terms they want.
– Dannie Wai,
TMF Group, Denmark.
“The usual principle is
the liberty and freedom
of the employer and
employee. In that sense,
Switzerland is one of the
most liberal countries in
the world."
– Giorgio Incognito,
TMF Group, Switzerland.20 THE GLOBAL BUSINESS COMPLEXITY INDEX
7 1 / I S R A E L 7 2 / PA R A G U A Y
Israel scores well for simplicity Straightforward reporting Paraguay is relatively light on Stable microeconomic conditions
because its government has requirements legislation, compared with its —
worked hard over the last 20 — South American neighbours. Paraguay suffers from a reputation for
years to create an attractive Tax invoices can be issued either corruption and a lack of transparency.
electronically or manually, but most It has minimal reporting requirements, However, most of these problems are
environment for overseas
ongoing reporting is done online. The domestically and internationally. For confined to government and publicly
businesses – its Ministry of owned companies and do not affect the
outcome is that, despite some unique example, it is not compulsory to maintain
Economy even has a dedicated local regulations, Israel is a relatively Transfer Pricing Files (domestic) or day-to-day running of private businesses.
foreign investment arm. easy country in which to do business. comply with Base Erosion and Profit
Sharing regulations (international – Corruption is diminishing, thanks to
Rules and regulations around hiring, a government crackdown. In April 2019,
firing and paying employees are “Israel is a small OECD). Most jurisdictions implement
these standards and Paraguay is highly a high-profile raid took place at the home
usually straightforward. In addition, country looking to attract unusual in abstaining from them. of the Director of the Customs Department
multinationals do not need a local of Specialised Surveillance, who had been
resident shareholder or director and, foreign investment and Despite undemanding regulations, accepting bribes from drug traffickers.
as long as a local fiscal representative support multinationals penalties for tax offences can be severe. The government is promoting transparency.
is appointed, firms can be entirely In 2014, it passed a law granting citizens
foreign-owned. This makes it relatively who choose to set up However, companies can arrange to pay
them in monthly instalments to help avoid free access to certain information sources
uncomplicated to establish a presence in here. There are local cashflow crises. including the ‘Portal Paraguay’ website,
the country. which lists the salaries of public officials
compliance processes including politicians and judges.
Although Israel’s official language is to follow, but usually
Hebrew, foreign companies can apply for
special dispensation that allows them to they are straightforward." “We do have cases
keep their documents and tax records in of corruption, but we
English, removing an otherwise painful
barrier to entry.
– Liat Shibolet, have had the same
TMF Group, Israel.
microeconomic
conditions for the
last 15 years with
very low inflation."
– Marcelo Gul,
TMF Group, Paraguay.21 THE GLOBAL BUSINESS COMPLEXITY INDEX
7 3 / T H A I L A N D 7 4 / J E R S E Y
While Thailand’s tax and accounting Staffing is straightforward As a financial services specialist, Fast incorporation
system is quite complex, it scored — Jersey has streamlined its legislation —
highly for simplicity because its Hiring and maintaining a local workforce – as evidenced by the Companies Incorporation is simple, especially for
regulatory landscape and employment is a relatively straightforward process in (Jersey) Law 1991 – to allow for easy financial operations which can be set
Thailand. Employee rights are enshrined up in a matter of hours. Labour and raw
rules are business-friendly. incorporation and operation in this
in law but few benefits are mandatory and material-intensive industries will face
they are easy to administer. The Labour sector. Companies setting up on the more challenges, such as strict housing
Despite frequent changes in government, island can expect political stability
Department sets the health and safety laws and restricted transportation options.
the country’s leadership is consistently
requirements for companies in each and a simple tax system which is
pro-business and keen to attract foreign
investment. The National Competitive
industry but the requirements are not
complex or overly onerous.
straightforward and not liable to “J ersey is one of
sudden change.
Enhancement Act waives the need for
work permits for highly skilled overseas
the world’s leading
workers and investors. Incorporation is “The government is The island’s legislation is highly aligned financial services
with international standards and is very
relatively simple. Once all documentation
has been prepared, establishing a company
committed to reducing likely to remain constant over the next five centres. Facilitating
can take less than a day. A local company complexity. Authorities years (true of only 17% of jurisdictions). global business is part
In fact, as a leader in its field, Jersey plays
secretary or director is not required, so
incorporation can be carried out from
are trying to make the a role in setting international standards, of its raison d'être."
anywhere in the world. business environment particularly in trust law.
easier for both Thai and – Norson Harris,
TMF Group, Jersey.
foreign investors."
– Janist Aphornratana,
TMF Group, Thailand.22 THE GLOBAL BUSINESS COMPLEXITY INDEX
7 5 / C U R A Ç A O 7 6 / T H E C A Y M A N I S L A N D S
The politically-stable, pro-business Flexible labour market Authorities have worked hard Lines of communication
jurisdiction of Curaçao in the — to ensure the Cayman Islands is —
Caribbean is part of the Kingdom of The island’s labour market favours the a transparent and pro-business Financial businesses are supported
the Netherlands. It is the second least employer. Zero-hour contracts – with jurisdiction. This has helped it by professional bodies which consult the
no minimum hours guaranteed by the Government, the Chamber of Commerce
complex jurisdiction and is oriented to achieve the lowest complexity
employer and no obligation on the part and regulators and communicate their
towards attracting foreign investment. of the employee to accept work – are score on our index. With its healthy findings to members. The Government
permitted in certain sectors to support economy, this is an easy place for is very engaged with the private sector
Its population speaks English, Dutch, entrepreneurs. Companies can give foreign companies to operate. and consults local businesses on draft
Spanish and Papiamento (a Creole workers temporary contracts up to laws before they are finalised.
language) and has close ties to Latin three times in a row and fire short-term The government has implemented an
America and the United States, making
it a welcoming environment for
employees without notice. Laying off
longer-serving employees will involve
online platform, significantly speeding
up the process of tax reporting.
“The Cayman Islands
multinationals. Foreign nationals can significant costs. has become a very
easily invest in real estate in Curaçao,
unlike many other parts of Latin America transparent place in
where the process can be complicated. “There are minimum which to do business.
wages but they are It has a very stable
Accounting is relatively easy because
foreign companies are permitted to use not high and there’s economic and political
their own accounting practices and do no requirement to pay environment with
not need to ‘translate’ their books to local
standards. Audits are only mandatory a pension or vacation reliable infrastructure.
for larger companies with annual sales allowances." The government is keen
exceeding approximately 5.6 million
US dollars.
– Evert Rakers,
to keep the international
TMF Group, Curaçao. community happy."
– Lesley den Exter,
TMF Group, the Cayman Islands.TMF GROUP –
LOCALISING THE
GLOBAL WORLD
TMF Group helps its clients operate internationally, ensuring they are properly set
up to do business in any country, fully compliant with local and international regulations.
Our work includes helping companies of all sizes with business services such as HR and
payroll, accounting and tax, corporate secretarial, global governance, administration and fiduciary
services for capital markets activities, private equity and real estate investments. We offer consultancy
services to extend our clients’ capabilities and help companies deal with the complexities arising from
growth and expansion.
In today’s environment, increasing business complexity means that a one-size-fits-all approach doesn’t
work, while the penalties for getting it wrong are becoming heavier. Operating in over 80 jurisdictions,
we provide 15,000 clients with on-the-ground compliance and administration services so they can
venture further, faster. We keep things running seamlessly, enabling them to focus on the bigger picture.
Our people localise the global world to help businesses succeed, which in turn helps communities
prosper. We believe the only way to be truly ‘global’ is to put local first, which is what our team
of 7,800 in-country experts do for businesses of all sizes, every day.
Find out more about TMF Group:
contact@tmf-group.com / tmf-group.com/complexity2019
Whilst we have taken reasonable steps to provide accurate and up to date information in this publication, we do not give any
warranties or representations, whether express or implied, in this respect. The information is subject to change without notice.
The information contained in this publication 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 a result 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 are
available on our website: tmf-group.com
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