THE TOP 10 MOST COMPLEX INTERNATIONAL JURISDICTIONS FOR DOING BUSINESS IN 2015
Written in conjunction with TMF Group, based on the Global Benchmark Complexity Index: International Entity Management
Taking your business overseas? Be forewarned. If your global expansion plans include these 10 jurisdictions, anticipate spending more time and administrative resources on corporate subsidiary compliance.
The Global Benchmark Complexity Index
The Global Benchmark Complexity Index, compiled by international expansion experts TMF Group, ranks 81 of the top international jurisdictions in order of complexity for complying with local business laws and regulations. In this 2nd annual index, some countries moved positions, and some stayed the same. We highlight the top 10 to help you consider some key factors impacting international corporate governance and compliance, and to alert you to jurisdictions where you may need to allow for longer launch timelines.
The top three complex jurisdictions are in South America. Argentina retained its distinction as the number one most complex jurisdiction. Controls on trade and access to foreign exchange is one of various ways in which the Argentine government can make doing business in the country a complicated affair.
Brazil moved up 15 places to take second place. Brazil’s entry into the top three is not a complete surprise. Its legal system lags behind its regional peers, and it suffers from a high level of government bureaucracy. The resulting “red tape” makes company secretarial compliance extremely challenging there.
Bolivia, ranked number two last year, moved down one spot to third place. Recent government legislation is continuing to help improve the country’s image as a difficult place in which to do business. However, it’s likely that Bolivia, along with Brazil and other jurisdictions in Central and South America, will continue to rank highly in the Complexity Index. Doing business in these jurisdictions demands close local knowledge and representation to navigate government departments, accurately draft documents, and manage relationships with authorities.
In the Middle East, the United Arab Emirates (UAE) held its rank at number four. Challenging requirements based upon Sharia law make the UAE one of the most complex jurisdictions in the world. In spite of the emirates’ apparently modern persona driven by the cosmopolitan metropolis of Dubai, the administrative nature of corporate compliance requires local knowledge and an acute awareness of local custom. Another complexity factor is the UAE’s 25 different jurisdictions, 20 of which are in Dubai. All have differing rules, regulations, and processes to be mastered.
In the Asia-Pacific region, South Korea moved into this year’s top 10, to number five. This may be attributed to a perception among multinational companies that annual compliance in the Asia-Pacific region is more complex and time-consuming than in the EMEA region, and that fines for non-compliance tend to be higher than other world regions.
Mexico is in sixth place, jumping up 24 places from last year’s rankings. This is due to new rules enacted by the Mexican Tax Authorities (SAT), including the electronic submission of financial statements. In Europe, Poland remained at number seven as it continues to be hampered by systems and laws inherited from the Soviet Union. However, Poland’s ranking is expected to improve with the Polish government’s investment in Special Economic Zones that offer tax incentives to foreign investors, along with its low labor costs and strong educational system.
Paraguay is now in eighth place, reflecting the overall complexity of the South American region. In fact, half of the top 20 most complex countries to do business with are in this region.
While Asia-Pacific hosts 40% of the top 20 most complex countries for international entity management, both Indonesia and Thailand were ranked as less complex from last year. Indonesia moved from number five to number nine, validating the Indonesian government’s efforts to improve its business environment. Their measures included reducing corporation tax, simplifying licensing processes, and amending laws to give foreign companies greater protection.
Thailand’s improvements to its regulatory environment moved it to 10th place from sixth. Thailand’s Board of Investments has ramped up its approvals of foreign projects. Even though restrictions remain in certain sectors, foreign investors’ confidence is returning because of the notable improvements under the Foreign Business Act.
Conclusion
New legislation enacted by the jurisdictions seems to have the greatest effect on corporate secretarial complexity. However, this may reduce complexity on one hand yet introduce new forms of complexity on the other.
Each jurisdiction presents its own unique combination of factors that challenge or facilitate doing business overseas. Local knowledge and expertise remains an essential support for the success of the internal teams who manage their global corporate compliance and governance.
To learn more about how CT can help you better manage your global compliance needs, contact a CT representative at 844-318-1457 (toll-free US).