GBCI 2022: the 10 least complex jurisdictions
TMF Group’s Global Business Complexity Index 2022 explores 292 different indicators relating to business complexity, to provide in-depth analysis of the global and local challenges that impact on the ease of doing business across the world.
In this article, we take a closer look at the jurisdictions at the lower end of this year’s index, exploring the reasons behind their rankings as the markets where doing business is the easiest. Levels of complexity are low in these locations, which is usually synonymous with quick incorporation times, a stable regulatory environment, straightforward reporting processes and high levels of digitalisation - all elements that typically pave the way to growth.
We hope that the insights from the GBCI will help investors pick and manage their target markets with greater confidence. Our message isn’t to gravitate towards simpler jurisdictions and avoid investing in those that are more complex , as these are often among the most attractive for talent and customer opportunities. Rather, it is to invest with eyes open, and be ready to manage the rules that might otherwise put your operations at risk.
68. United Kingdom (UK)
The UK has ranked in the ten least complex countries for the first time. One of the key areas is the country’s exit from the EU, or ‘Brexit’. Although at the time this created uncertainty for businesses incorporating and operating in the UK, in 2022 it seems that the dust is settling and the impacts of the UK’s departure are becoming clearer.
Since Brexit, the UK government has been actively working to become more relaxed and straightforward in its approach to business in order to remain attractive. For example, the UK takes a simple approach to business incorporation. There is no requirement for resident directors and set up can be achieved in as little as a day, meaning that international businesses can start full operations with ease. One aspect that can delay operation is setting up a bank account. This is driven by banks and financial institutions themselves and can create complexity for startups from other jurisdictions, such as the US.
Following Covid-19 and Brexit, the UK has been experiencing an inflation crisis and issues related to supply chains which has impacted business operation.
Furthermore, recent events in Russia and Ukraine have created some uncertainty in the UK. The government has been imposing new legislation and sanctions to impact Russia and support Ukraine. For example, the Economic Crime Bill, announced in February 2022, mandates the disclosure of foreign property ownership and aims to reduce the hiding of Russian money and assets in the jurisdiction.
The UK is set to remain attractive in the future as the government looks for more ways to compete with its European neighbours following Brexit. One advantage to operating in the jurisdiction is a highly skilled talent base that is accustomed to working internationally and for foreign businesses.
The UK government has signalled that it is going to relax regulations, it is going to take away some of the onerous EU rules. What the method is and how we stay in the market again causes some uncertainty, but I think businesses can probably look forward to things getting a bit easier.
Dive into the data for the UK on the Complexity Insights dashboard.
69. Norway
Norway benefits from a high level of digitalisation and automation. This includes anything from filing reports to completing tax returns, or registering a company.
Incorporating a company within Norway is relatively quick, typically taking a few days. For Norwegian citizens or residents, the entire process can be done online, but foreign parties don’t have the same upfront digital access. What can take the most time for foreign nationals is paying in share capital, which requires the opening of a bank account. The process of opening a bank account is not automated and, as such, has a longer lead time, sometimes taking up to two months. This is mainly due to the internal KYC (Know Your Customer) and AML (Anti-Money Laundering) processes of banks being quite fragmented and involving a lot of back-and-forth correspondence.
Looking at Norway in contrast to other Nordic countries, in Finland an entity can be established without paying in share capital. This means that a bank account isn’t required and doesn’t pose an upfront obstacle.
Within the Nordic environment, agreements exist which allow quick cross-border operations between local businesses, via a Norwegian ID. However, outside of this environment it becomes a little more challenging for non-local parties.
Like most other European countries, Norway is due to implement a UBO register, expected in 2022 or 2023, making it one of the last countries to do so. This extra formality will add a small administrative complexity to companies operating in Norway, as they must annually file the UBO or controlling person.
Larger corporations and those in the financial sector will soon have to comply with ESG reporting. This will initially be a large change for companies as they must report the environmental impact of their assets.
I'm not sure that all the companies are really aware of ESG reporting yet, and how to manage it. Years one and two are a big change for many companies.
During the height of the pandemic, the Norwegian government put incentive plans in place to support the parts of society most affected. There was also a leniency regarding reporting, whether it was annual statements, tax reporting or pre-payment of taxes. All these measures have either already been reversed or soon will be. However, important changes predicted to outlive the pandemic are flexible working arrangements and the use of technology.
Dive into the data for Norway on the Complexity Insights dashboard.
70. New Zealand
New Zealand is a new entry in the ten simplest jurisdictions, but is often widely praised for its simplicity and attractiveness for foreign businesses. A key driver is a straightforward incorporation process, facilitated by a slick online set up. New Zealand doesn’t mandate face-to-face requirements and the jurisdiction ‘went online’ seven years ago. Now more than 95% of tasks for businesses can be done online. The jurisdiction is also internally digitally aligned, meaning that one access code can be used across different systems such as ID matters and PAYE online.
Another driver of simplicity in the jurisdiction is the stability of its laws and legislation. In the accounting and tax space, there have been no big increases or significant changes year on year, so businesses are better prepared than in other jurisdictions where governments are more in flux when it comes to lawmaking.
Covid-19 did bring big changes in New Zealand with the government’s progressive stance globally praised. This included generous business support to aid organisations and individuals. Although this did ease the jurisdiction’s experience of and emergence from the pandemic, it is now contributing to inflation as more money has been brought into the economy.
Transparency is another area where the government has been progressive, further driving a supportive business culture. In 2018, AML legislation was introduced for all companies. This, along with KYC legislation, can cause some complexity when opening a bank account with certain resident director requirements to satisfy. As observed elsewhere in the GBCI, although the process of incorporation is straightforward opening a bank account can stall entity activation.
While such transparency can create complexity, it does drive attractiveness by offering businesses certainty. It also reflects the supportive approach of the New Zealand government, which drives simplicity in the jurisdiction and looks set to continue to do so in future.
New Zealand has always been seen as very simple when it comes to doing business. The reason for this is that the incorporation process and compliance are relatively straightforward. In terms of the requirements of appointing a director, they are relatively less complex compared to other jurisdictions. Most of the things you need to do, you could do online.
Dive into the data for New Zealand on the Complexity Insights dashboard.
71. United States (US)
Given its progressive approach to business and focus on driving simplicity, it’s unsurprising to see the US maintaining its ranking among the simplest jurisdictions. A key driver of simplicity is that the government actively looks to make it corporate friendly. For instance, in recent years corporate tax rates were reduced in an effort to increase investment into the jurisdiction.
The state of Delaware serves as a key example of the US’s progressive business stance. Revenue generated outside the state is tax-free, making it particularly popular and attractive for foreign business incorporation. During Covid-19, like the rest of the world, the US did witness some delays in the time it takes to incorporate a business and also in the processing of certain documentation, leading to a backlog in Delaware that is having an impact even now. Despite delays, the US boasts a quick online incorporation process that did help to ease complexity during the pandemic.
Operating across states in the US can add an administrative burden, with states having different tax rates, as we see in Delaware, so ensuring that such tax rates are honoured across state borders is a necessary aspect of business operation. This can also create additional administration when setting up as there can be a need to incorporate in multiple states when nexus is established. However, this is not typically complex so, when properly administered, foreign businesses can avoid issues.
Thanks to its skilled workforce and clear global reach, the US is set to remain one of the most attractive jurisdictions for foreign businesses. However, with recent developments in the jurisdiction related to the Russia-Ukraine crisis and inflation issues following the pandemic it will be interesting to see how the business landscape changes.
I think that when you have investors looking to expand abroad, consistency and predictable from policymakers is one of the main factors under consideration. History has shown that the US has a business-friendly culture that embraces entrepreneurship. This is one of the pillars of this country and contributed to is becoming one of the wealthier countries.
Dive into the data for the USA on the Complexity Insights dashboard.
72. Jersey
Despite boasting only 100,000 residents, Jersey has considerable international reach and influence. The jurisdiction tends to be an early adopter, engaging with new and trending areas of doing business such as FinTech and ESG legislation.
A key reason for the jurisdiction’s simplicity is the focus on digital processes during Covid-19. It’s now easier to contact relevant regulatory bodies and government organisations. Companies can incorporate in as little as two hours and there was a move away from ‘wet-ink’ signatures during the pandemic, as well as improvements to due diligence requirements. Before the pandemic, it was necessary to take a photocopy of a passport to a lawyer or accountant to certify the identity of owners and controller, which would then need to be mailed to Jersey. New technologies allow this to be performed remotely and digitally. The move towards digital marries with a focus on the technology industry, with more than 5,000 people employed in the digital sector.
Jersey has a well-established funds industry with great infrastructure in place. It makes up a significant, thriving part of the local financial services market - attaining a 20% growth in 2021. The popular ‘Expert Fund’ and ‘Private Fund’ regimes make it extremely easy to launch and run funds on the island.
Jersey has ESG disclosure rules in place and is a key jurisdiction in this space. Led by the Jersey Financial Services Commission, it’s also forged by investors and businesses seeking a more sustainable and ethical manner of doing business.
Despite all this there are still some complexities. For example, travel to the islands can be time consuming, with direct flights limited. Furthermore, due to low direct taxation, indirect duty can make the cost of living quite expensive, with property prices matching those of central London.
With its move towards digitalisation and ESG, Jersey is set to remain one of the most simple and attractive jurisdictions globally.
The jurisdiction has weathered the last couple of years exceptionally well. Significant investment by government, the regulator and industry has seen Jersey’s position on the global stage increase notably. It provides families, funds and corporates what they want: a safe, secure and responsive platform through which to invest and operate.
Dive into the data for Jersey on the Complexity Insights dashboard.
73. British Virgin Islands (BVI)
BVI is consistently one of the simplest jurisdictions in our index, steered by an ambition from government and legislative bodies to be attractive to foreign investors and businesses.
Two key aspects are the simplicity of incorporating a business and the lack of taxation. There is also an emphasis on transparency that means businesses and investors know that their money and assets will be safe and protected. Over the past ten years, the jurisdiction has focused on international alignment with bodies such as the OECD. This has, in some cases, created slightly more complexity as there are certain regulations and legislation that businesses and investors need to adhere to. However, the transparency and security has been perceived as worthwhile. Also, adherence to such standards is not hugely disruptive as these are commonplace in other jurisdictions globally.
With such transparency standards, issues can arise. Failure to meet economic substance requirements can result in hefty fines, so it’s important to ensure that these requirements are taken seriously and acted upon.
Thanks to its lack of taxation and focus on transparency, while preserving privacy, BVI attracts private wealth, family office and fund investors as well as capital markets deals. It acts as a neutral domicile for a large number of businesses and individuals from most regions in the world that need an efficient set up for their companies in a well-structured legal framework. The jurisdiction rebounded strongly from the pandemic at the end of 2021, proving to be resilient and offering efficiency and flexibility in cross-border transactions and management of assets, while complying with global regulations.
BVI private wealth and family office clients from South America and elsewhere in the world now frequently look for ESG credentials, especially when it comes to operating in an environmentally and socially responsible manner. Although the BVI does not have specific ESG legislation there is the expectation that this may change.
In the BVI we have very solid legislation, which is updated regularly. We also have the Commercial High Court for the Caribbean. We have a very well-functioning international tax agency, and some people might think, 'Okay, but isn't that scary?'. It's not because it makes the country a very well-regulated jurisdiction to do business in.
Dive into the data for the BVI on the Complexity Insights dashboard.
74. Hong Kong
Historically, Hong Kong as a part of China has operated a ‘one country, two systems’ policy. However, China has taken more control from a legal and economic perspective over the past few years. The direct impact on foreign business enrolment may be limited for now, as they are adopting the ‘wait and see’ approach to what lies ahead. Despite this, Hong Kong remains a simple jurisdiction for foreign companies.
The Hong Kong government has set its sights on developing a leading funds industry, which has been running for 18-24 months. Hong Kong set up a new fund structure to replicate the Cayman fund structure and provide tax exemption for asset managers, meaning they will only need to provide one set of compliance reports to the authorities. This should help attract more asset managers to domicile their Cayman funds in Hong Kong.
Hong Kong policymakers have raised the bar and started to introduce ESG regulations, specifically for listed companies, whereby they must report their ESG status to the authorities.
I think ESG is a global trend and Hong Kong is responding to stakeholders’ expectations by evolving and taking some solid steps.
Dive into the data for Hong Kong on the Complexity Insights dashboard.
75. Denmark
Denmark is in the top three simplest jurisdictions again in 2022, with digitalisation a key factor.
Towards the end of 2020 Denmark created a digital ‘one stop shop’, with paperless incorporation and operation. This means that businesses now only require one login and portal to access various services. The tax authority also updated its homepage interface to make it more user friendly. With Denmark positioning itself ahead of the curve when it comes to digitalisation, it is now adjusting to drive simplicity, while some jurisdictions are only just beginning their digital journey.
Complexity in the jurisdiction is limited, but snags such as understanding rudimentary setup processes and Danish language barriers can occur. However, the government is focusing on adding more and more information in English, so this may shift towards greater simplicity in future. Contractual business operation that requires short-term set up can create some complexity as this requires a considerable amount of administration, despite the short operation time.
During the pandemic the government put support packages in place that included shorter time to qualify for reimbursements for employees who became sick due to Covid-19, salary compensation and compensation to help cover fixed costs for companies. It was helpful but did place an administrative burden on businesses to complete the necessary paperwork. There were also fines for incorrect completion of forms.
Emerging from the pandemic, there has been discussion about the possible postponement of annual reports. This would lead to more flexibility as previously there has been a hard deadline. This mirrors steps taken during the pandemic, such as postponing deadlines, loans and reimbursements.
Given this flexibility, Denmark has been able to make a strong recovery following the pandemic and is set to remain one of the simplest jurisdictions for years to come.
Where the government can, they will digitalise. They started putting all the authorities' access into one place, so when you go in, you don't need to have five different logins. On the tax authority's homepage, the interface has changed to make it more friendly. They're also starting to have more and more information in English. It's a slow process but we can see the changes.
Dive into the data for Denmark on the Complexity Insights dashboard.
76. Curaçao
Curaçao has improved its ranking to be the second simplest jurisdiction in 2022. This is unsurprising considering the focus on simplicity that has been embedded into Curaçao’s laws and legislation in recent years.
Accounting and tax are particularly straightforward. For example, bookkeeping is less complex thanks to minimal government interaction. All wage tax returns and filings are to be submitted by the 15th of each month, and if businesses can stick to this deadline there is little complexity.
Payroll and human resources can be slightly more complex here as there are increased ‘proof’ requirements to ensure businesses and individuals remain transparent. However, this has become simpler thanks to the development of electronic filing and online processes. Also, it doesn’t necessarily impact the attractiveness of the jurisdiction because it’s seen as a positive to be transparent and open. For instance, businesses and individuals from South America are attracted to Curaçao as it offers protection of their assets and their own safety.
An additional attraction for organisations from South America and elsewhere are language capabilities, with much of the workforce speaking Papiamento, Dutch, English, Spanish and Portuguese. It is also part of the Kingdom of the Netherlands, and a focus on international alignment drives attractiveness and simplicity.
During Covid-19 there were some delays in business operation and incorporation. However, solutions were found and delays resolved within months. This included an increase in the ability to sign documents electronically. However, during and emerging from the pandemic, the jurisdiction has observed staff shortages, particularly within hospitality and leisure.
There is an expectation that UBO requirements may increase in coming years, which could impact doing business in Curaçao. However, there is little doubt that it will remain a highly attractive jurisdiction.
At the beginning of the pandemic business slowed down a bit, because nobody was used to working from home and notary offices were not open. Some business could not be done but, after a couple of months, everybody found a way to work around those issues. Governments, tax authorities are getting more flexible in accepting electronic signatures and electronic filings.
Dive into the data for Curaçao on the Complexity Insights dashboard.
77. Cayman Islands
The Cayman Islands is ranked as the simplest jurisdiction in the GBCI, driven by the jurisdiction’s very simple accounting and tax regulations. Incorporating a foreign entity is an extremely straightforward and streamlined process. However, while the Cayman Islands was removed from the FATF ‘grey list’, which flags jurisdictions in which money laundering is not sufficiently legislated against, it was added to the EU’s own grey list.
During 2022, the government is expected to pass legislation which will require limited partnerships (LPs), not just companies, to report their UBOs. Although it is not expected to impact on complexity, there will be a remediation project for financial services providers to obtain and report on their LPs.
The impacts of Covid-19 on how foreign businesses operate in the Cayman Islands have largely been positive. Pre-pandemic, wet signatures were expected, if not required, whereas now, e-signatures are expected going forward. Reporting processes have been digitally streamlined.
The Cayman Islands government was quick to respond and adapt its operations to increase efficiency, better supporting the financial services industry during the height of Covid-19. These changes have now become standard operating procedures for the most part. In stark contrast to just a few years ago, all transactions with the General Registry, such as entity formation and submissions, such as regulatory submissions to the Cayman Islands Monetary Authority and the Department of International Tax Cooperation are now solely conducted via online platforms.
Dive into the data for the Cayman Islands on the Complexity Insights dashboard.
The Global Business Complexity Index
The GBCI 2022 provides an authoritative overview of the complexity of establishing and operating businesses around the world. It explores factors driving the success or failure of international business, with a focus on operating in foreign markets, and outlines key themes emerging globally as well as local intricacies across 77 jurisdictions.
Explore the GBCI rankings, analysis and global trends to help you find your path to growth, amid the complexity of corporate compliance.
To download and read the report in full, visit the Global Business Complexity Hub today.
To find out more about the drivers of business complexity in the jurisdictions that matter to you, why not explore our Complexity Insights Dashboard?
