Brazil leapfrogs Indonesia as most complex place to do business in 2021

Brazil is the most complex jurisdiction this year, topping a list of six Latin American countries in the top ten, followed by Mexico, Colombia, Argentina, Bolivia and Costa Rica, according to the eighth annual report of the Global Business Complexity Index (GBCI). by the professional service company TMG Group.

The comprehensive report analyzes rules, regulations, tax rates, penalties and compliance issues in 77 jurisdictions that account for 92% of global GDP and 95% of global net FDI flows.

On the subject of matching items

Brazil’s ranking owes a lot to its bureaucracy: When companies are set up, they register with three different levels of authorities (federal, state and city). In addition, tax rates differ from city to city and from state to state.

Some of the most attractive markets are both the most complex and the most criminal if something is done wrong. ”

France and Poland top the European rankings as the second and tenth most complex companies. In sixth place, Indonesia is the only jurisdiction in APAC among the top ten.
Denmark and Hong Kong are the easiest jurisdictions, followed by the Cayman Islands, Ireland and Curacao. The success of Denmark is based on an uncomplicated start-up process, the acceptance of English documentation and digitization.

The UK has dropped to 58th place, which means it’s easier to do business with. The conclusion of Brexit, together with new international trade agreements, will bring greater clarity and stability. Familiarity with digital tax processes has increased and the legal environment has stabilized – legislative changes that lead to higher requirements for economic substance are unlikely to be passed in the next five years.

The United States continues to be an attractive travel destination and ranks 7th among the least complex. Factors that make doing business easier include the three-week turnaround to incorporating through a single corporation, the ability to pay taxes from an overseas bank account, and the fact that the company’s directors do not have to be US residents.

Mark Weil, CEO of TMF Group, said: “Our 2021 report is overshadowed by Covid-19 and the disruptions it brings to the travel, commerce and health sectors. Against this difficult backdrop, attracting and promoting business investment remains a critical factor in the global economy and local prosperity, and we at TMF Group are delighted to be doing our part to promote simplification by regulators and governments.

“An ongoing observation from our eight year reporting on complexity is that some of the most attractive markets are both the most complex and the most criminal if something is done wrong to operate in relatively simple locations. You then have a long line of smaller-scale offices in more complex locations. This exposure caused by their “complex tail” is the focus of risk. “

In addition to analyzing 77 locations, the report identifies key issues that shape the global business landscape and the regulatory environment. Penalties for violations have increased worldwide. Fines are the most common accounting and tax offense penalty imposed in 93% of jurisdictions for doing business without tax registration in 2021, compared to 84% the previous year.

In complex jurisdictions, the penalties are more severe. While 45% of jurisdictions worldwide may suspend an operating license to conduct business without tax registration, this rises to 70% in more complex jurisdictions. The fines for errors in tax returns and payments have also increased since 2020.

Rise of Good Governance

The focus is once again on ensuring that companies behave responsibly in all business activities, from hiring employees and paying taxes to ensuring transparent structures.
Requirements like UBO and PSC have remained constant since 2020, as has the percentage of countries adopting proof of ownership, which shows that the transparency processes are consistent year on year. The report shows that the requirement to provide UBO and / or PSC information to a central registry is highest in EMEA at 82% of jurisdictions, compared with 43% in APAC.
The mandated involvement of a third party in business operations has increased. In 2020, 17% of jurisdictions required a company to appoint and register a certified accountant, compared to 27% in 2021.

Effects of Covid-19 on digitization, human resources and payroll

Covid-19 has accelerated the trends towards process digitization and simplification of interactions between companies and authorities. In 2021, automatic notification of all competent government agencies when starting a business increased to 14% of jurisdictions worldwide, up from 6% in 2020.

Some jurisdictions temporarily allow digital signatures, a move that our experts predict as a long-term change. Conversely, there have been significant delays in jurisdictions such as Colombia and Argentina, where personal appointments are required to process the founding documentation.

The report shows how the pandemic has changed the way companies manage their employees. In 2021, 20% of jurisdictions allowed companies to lay off an employee without a reason, up from 29% in 2020. North America’s 14 jurisdictions were the largest contributors to this decline, with 64% allowing such layoffs in 2020, up from 23 % in 2021.

Remote working and a globalized workforce create hiring and payroll challenges across and within jurisdictions. In the US, Covid-19 has resulted in companies in various states hiring teleworkers, creating payroll challenges as income taxes are set and reported at the state level.

Top and bottom ten

1. Brazil
2. France
3. Mexico
4. Colombia
5. Turkey
6. Indonesia
7. Argentina
8. Bolivia
9. Costa Rica
10. Poland

68. Mauritius
69. El Salvador
70. Netherlands
71. United States
72. British Virgin Islands
73. Curacao
74. Ireland
75. Cayman Islands
76. Hong Kong
77. Denmark

The eighth annual Global Business Complexity Index (GBCI) shows the focus on good governance and responsible business practice; tougher penalties for rule violations; long-term effects of Covid-19 on the global business landscape.

The report from TMF Group, a leading professional services company, analyzes rules, regulations, tax rates, penalties and compliance issues in 77 jurisdictions that account for 92% of global total GDP and 95% of global net FDI flows.

292 indicators are tracked annually and provide data on key aspects of doing business, including startup schedules, payroll and benefits, and regulatory compliance.