Brazil ranks as the most complex jurisdiction this year, leading a list of six Latin America countries in the top ten, with Mexico, Colombia, Argentina, Bolivia and Costa Rica close behind, according to the eighth annual Global Business Complexity Index (GBCI) report by professional services firm TMG Group.

The wide ranging report analyses rules, regulations, tax rates, penalties and compliance issues across 77 jurisdictions, accounting for 92% of the world's total GDP and 95% of net global FDI flows.

Brazil's ranking owes a lot to bureaucracy: businesses register with three different levels of authorities (federal, state and city) when incorporating. Furthermore, tax rates differ from city to city and state to state.

France and Poland top the European rankings as the 2nd and 10th most complex. Indonesia, at number six, is the only jurisdiction in APAC in the top ten.
Denmark and Hong Kong are the simplest jurisdictions, followed by the Cayman Islands, Ireland and Curaçao. Denmark's success is driven by a straightforward incorporation process, acceptance of English documentation, and digitalisation.

The UK has moved down to 58th, meaning it is simpler to do business. The conclusion of Brexit, along with new international trade agreements, brings increased clarity and stability. Familiarity with digital tax processes has increased and the legislative environment stabilised - law changes resulting in greater economic substance requirements are unlikely to be approved within the next five years.

The United States continues to be an attractive destination, ranking 7th least complex. Factors driving ease of doing business include the three-week turnaround to incorporate via a single body, the ability to pay taxes from a foreign bank account, and that company directors need not be US residents.

TMF Group CEO Mark Weil said: "Our 2021 report is written in the shadow of Covid-19 and the disruptions to travel, trade and health that it has brought. Within that difficult backdrop, attracting and encouraging business investment remains a critical driver of the world economy and local prosperity, and we at TMF Group are pleased to play our part in encouraging simplification by regulators and governments.

"A continuing observation, from our eight years of reporting on complexity, is that some of the most attractive markets to operate in are both the most complex and the most punitive for getting things wrong. Firms typically have a small number of large bases, often in relatively simple locations to operate in. They then have a long tail of offices at lower scale in more complex locations. That exposure caused by their ‘complex tail' is where risk concentrates."

In addition to analysing 77 locations, the report identifies key themes shaping the global business landscape and regulatory environment.There has been a global increase in penalties for non-compliance. Fines are the most common penalty for accounting and tax misdemeanours, imposed for doing business without being tax registered in 93% of jurisdictions in 2021 compared to 84% last year.

Penalties are more stringent in complex jurisdictions. While 45% of jurisdictions globally can suspend an operating licence for doing business without being tax registered, this jumps to 70% in more complex jurisdictions. Since 2020, there has also been an increase in fines for errors in tax reporting and payment.

Rise of responsible governance

There is renewed focus on ensuring companies behave responsibly across all business activities, from employing workers to paying taxes and ensuring transparent structures.
Requirements such as UBO and PSC have remained steady since 2020, as has the percentage of jurisdictions adopting ownership records, demonstrating that transparency processes are consistent year-on-year. The report shows the requirement to provide UBO and/or PSC information to a central register is highest in EMEA at 82% of jurisdictions compared to 43% in APAC.
The mandated involvement of a third party in business operations has increased. In 2020, 17% of jurisdictions required that an entity appoint and register a certified accountant, compared to 27% in 2021.

Impact of Covid-19 on digitalisation, HR and payroll

Covid-19 has accelerated the trends toward process digitalisation and simplification of interactions between businesses and government authorities. In 2021 the automatic notification of all relevant state authorities when a company incorporates rose to 14% of jurisdictions globally, up from 6% in 2020.

Some jurisdictions are temporarily permitting digital signatures, a step which is predicted by our experts to become a long-term change. Conversely, there have been significant delays in jurisdictions such as Colombia and Argentina where in-person appointments are required to process incorporation documentation.

The report highlights how the pandemic has changed how companies manage employees. In 2021, 20% of jurisdictions allowed businesses to dismiss an employee without reason, falling from 29% in 2020. North America's 14 jurisdictions contributed most to this fall, with 64% permitting such dismissals in 2020 versus 23% in 2021.

Remote working and a globalised workforce bring challenges in hiring and payroll, across and within jurisdictions. In the US, Covid-19 has led to companies hiring remote workers in different states, bringing payroll challenges because income taxes are set and reported at 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. The Netherlands
71. United States
72. British Virgin Islands
73. Curaçao
74. Ireland
75. Cayman Islands
76. Hong Kong
77. Denmark

The Eighth annual Global Business Complexity Index (GBCI) revealed focus on good governance and responsible business; tougher penalties for breaching regulations; long-term impact of Covid-19 on global business landscape.

The report by TMF Group, a leading professional services firm, analyses rules, regulations, tax rates, penalties and compliance issues across 77 jurisdictions, accounting for 92% of the world's total GDP and 95% of net global FDI flows.

292 indicators are tracked annually, offering data on key aspects of doing business, including incorporation timelines, payroll and benefits, and staying compliant.