As a follow-up to our previous material, we explore in this article the top ten least complex for business jurisdictions globally. They are ranked by the experts of TMF Group in their latest report.
What is the purpose of the Global Business Complexity Index?
Based on 292 different indicators the GBCI evaluates the conditions of doing business around the world. In 2022 the report explores 77 jurisdictions that form 32% of the total country count, capturing the world’s largest economies and investment hubs, representing 71% of world’s population, 92% of world GDP & 95% of the net FDI inflow.
GBCI 2022 provides an authoritative overview and in-depth analysis of the global and local challenges that impact on the ease of doing business across the world. The global ranking of the 77 jurisdictions formed within the report is based on the complexity of their business environments, covering legislation, compliance, accounting procedures, tax regimes, human resources (HR) rules and payroll processes.
With this said, let’s have a look at the 10 least complex for business jurisdictions ranked by the GBCI 2022.
Least complex jurisdictions to do business in the world
Standing on 68th position United Kingdom ranks among the ten least complex jurisdictions for business globally
It is the first time for the UK to rank among the ten least complex countries in the GBCI report. The TMF experts point as key areas for that the country’s exit from the European Union (EU), also known as “Brexit”. At the time this created uncertainty for businesses that incorporate and operate in the UK. As the 2022 passes it seems that the impacts of the UK’s departure are becoming clearer.
In order for the UK to remain an attractive business location after the “Brexit”, its government has been actively working to become more relaxed and straightforward towards the business. For instance incorporating a business in UK is quite simple compared to other much more complex jurisdictions. There is no requirement for resident directors and set up can be achieved in as little as a day. These eased conditions help international businesses start full operations in almost no time. Setting up a bank account may be one aspect that can delay operation. This is driven by banks and financial institutions themselves. Respectively this can create complexity for startups from other jurisdictions, like the US.
Negative impact on business operations from external global factors
The UK has been experiencing an inflation crisis and issues related to supply chains due to both Brexit and Covid-19 in 2020. Respectively this has impacted business operations. Another negative contributor have been the recent events in Russia and Ukraine that additionally created some uncertainty in the UK. The Government has been imposing new legislation and sanctions against Russia and in support of Ukraine. Such example is the Economic Crime Bill, announced in February 2022. It mandates the disclosure of foreign property ownership. This aims to reduce the hiding of Russian money and assets in the jurisdiction. After the Brexit the UK looks for more ways to compete with the EU members in order to remain attractive business jurisdiction in the future. One advantage to operating in the UK is a highly skilled talent pool. UK employees are accustomed to working internationally and for foreign businesses.
69th position as less complex business jurisdiction: Norway
There’s a high level of digitalization and automation in Norway that Norwegian citizens benefit from. This includes anything from filing reports to completing tax returns, and registering a company.
In Norway to incorporate a company typically takes a few days, which is relatively quick. The whole process can be done online if you are a Norwegian citizen or resident. However foreign parties don’t have the same upfront digital access. It may take the most time for foreign nationals to pay in share capital. This requires opening a bank account, which is not automated. The process takes a longer lead time, sometimes up to two months. This is mainly due to the internal KYC (Know Your Customer) and AML (Anti-Money Laundering) processes of banks. They are quite fragmented and involving a lot of back-and-forth correspondence.
Better conditions within the Nordic environment
In contrast to other Nordic countries, in Finland an entity can be established without paying in share capital. This eliminates the requirement for opening a bank account. Within the Nordic environment there are agreements that allow quick cross-border operations between local businesses, via a Norwegian ID. However, non-local parties experience a little more challenges if their business operates outside of this environment.
Norway is due to implement an Ultimate Beneficial Owner (UBO) register like most other European countries. This is expected to happen in 2022 or 2023, making it one of the last countries to do so. The formality will add a small administrative complexity to companies operating in Norway, since they’ll be required to file the UBO or controlling person annually.
Also, 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. During the height of Covid-19, the Norwegian Government activated incentive plans to support the most affected parts of society. Business could benefit from some level of 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, flexible working arrangements and the use of technology are important changes that are very likely to outlive the pandemic.
In 2022 New Zealand ranks at 70th position among the least complex jurisdictions for business
Another new entry in the top ten least complex jurisdictions ranking is New Zealand. Country is often widely praised for its simplicity and attractiveness for foreign businesses. The straightforward incorporation process, facilitated by a slick online set up is a key driver for that. New Zealand doesn’t mandate face-to-face requirements. Also seven years ago the jurisdiction ‘went online’. More than 95% of tasks for businesses can be done online now. Since the jurisdiction is also internally aligned digitally, one access code can be used across different systems like ID matters and Pay As You Earn (PAYE) online.
The stability of the laws and legislation is another driver of simplicity in the jurisdiction.
There have been no big increases or significant changes in the accounting and tax space year on year. In this regard businesses are better prepared than in other jurisdictions where governments are more in flux when it comes to lawmaking.
Like with the rest of the world, Covid-19 did bring big changes also in New Zealand. The Government’s progressive stance included generous business support to aid organizations and individuals. This did ease the jurisdiction’s experience of emergence from the pandemic. However, as more money have been brought into the economy the inflation also increased.
The government has also been progressive in terms of transparency, further driving a supportive business culture. The AML legislation was introduced for all companies in 2018. This, along with KYC legislation, may be the cause of some complexity when opening a bank account with certain resident director requirements to satisfy. As observed elsewhere in the GBCI, despite the straightforward process of incorporation, to activate a business entity could be stalled by the process of opening a bank account. While such transparency can create a certain level of complexity, it does also 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.”- concludes the GBCI 2022 report.
71st position as less complex business jurisdiction: United States
US ranks among the easiest jurisdictions for business and for good reason. A key driver of business simplicity is the government’s focus on making the US corporate friendly. For example to increase investment in the jurisdiction, corporate tax rates were reduced in recent years.
A key example of the US’s progressive business stance is the state of Delaware. Revenue generated outside the state is tax-free, making it particularly popular and attractive for foreign business incorporation. During Covid-19, the US also witnessed some delays in the time it takes to incorporate a business and also in the processing of certain documentation. Respectively this lead to a backlog in Delaware that has an impact even now. Despite the delays, the US boasts a quick online incorporation process that did help to ease complexity during the pandemic.
Cross state business operations may be more complex
Businesses that operate across states in the US can experience some added administrative burden due to the different tax rates among the states. Ensuring that tax rates (like those in Delaware) are honored 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.
The US is set to remain one of the most attractive jurisdictions for foreign businesses. Key drivers for that are its skilled workforce and global reach. However, it will be interesting to see how the business landscape changes with the inflation issues following the pandemic. Another factor influencing the recent developments in the jurisdiction is related to the Russia-Ukraine crisis.
Taking the 72nd position Jersey ranks among the top ten least complex jurisdictions for business
Jersey may be a small island with only 100,000 residents, but it 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. Digitalization of processes during Covid became a key reason for the jurisdiction’s simplicity now. The focus on digitalization resulted in many process simplifications like contacting relevant regulatory bodies and government organizations or incorporating a company in as little as two hours.
Another positive turn was the move away from ‘wet-ink’ signatures during the pandemic, as well as improvements to due diligence requirements. Prior Covid-19 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. Moving towards digital goes along with focusing on the technology industry. There are more than 5,000 people employed in the digital sector in Jersey.
The jurisdiction has a well-established funds industry with great infrastructure in place.
It makes up a significant, thriving part of the local financial services market – growing with 20% in 2021. It is extremely easy to launch and run funds on the island thanks to the popular ‘Expert Fund’ and ‘Private Fund’ regimes. 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. However, there are still some complexities. For instance, travel to the islands can be time consuming, since direct flights are limited. Furthermore, due to low direct taxation, indirect duty can make the cost of living quite expensive. Property prices match those of central London. As the GBCI concludes Jersey is set to remain one of the most simple and attractive jurisdictions globally thanks to its move towards digitalization and ESG.
The GBCI 2022 ranks at 73rd position British Virgin Island (BVI) as less complex business jurisdiction
Consistently one of the simplest jurisdictions in the GBCI ranking is British Virgin Island. Making the jurisdiction attractive to foreign businesses and investors is one of the top priorities of the government and legislative bodies. Significant aspects in favor to BVI’s business appeal are the simplicity of incorporating a business and the lack of taxation. There is also an emphasis on transparency, aiming to ensure that businesses and investors know that their money and assets will be safe and protected.
In the past ten years, the jurisdiction has focused on international alignment with bodies such as the OECD. In some cases there’s slightly more complexity for businesses and investors that need to adhere to certain regulations and legislation. However, the transparency and security has been perceived as worthwhile. As these standards are commonplace in other jurisdictions globally, the adherence to BVI’s regulations and legislation is not hugely disruptive. Taking seriously the transparency standards is key factor for avoiding issues.
For example, failure to meet economic substance requirements can result in hefty fines, so it’s important to ensure that these requirements are acted upon.
BVI attracts private wealth, family office and fund investors as well as capital markets deals.
This is due to the lack of taxation and focus on transparency, while preserving privacy. The BVI 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. At the end of 2021The jurisdiction rebounded strongly from the pandemic. Proving to be resilient the BVI offers efficiency and flexibility in cross-border transactions and management of assets, while complying with global regulations. Private wealth and family office clients from South America and elsewhere in the world now frequently look for ESG credentials in BVI, 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.
Taking the 74th position Hong Kong is one of the least complex jurisdictions for business in the world
Historically, as a part of China, Hong Kong has operated a “one country, two systems” policy. However, in the past few years China has taken more control from a legal and economic perspective. 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. Still, Hong Kong remains a simple jurisdiction for foreign companies.
The Hong Kong government has set its sights on developing a leading funds industry.
This has been running for 18-24 months. Hong Kong set up a new fund structure (replicating the Cayman’s) and provided 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. Also the policymakers in Hong Kong have raised the bar and started to introduce environmental, social and governance (ESG) regulations, specifically for listed companies, whereby they must report their ESG status to the authorities.
Standing at 75th position Denmark ranks among the ten least complex jurisdictions for business worldwide
Key factor for Denmark being in the top three simplest jurisdictions again in 2022 is digitalization.
Denmark created a digital ‘one stop shop’, with paperless incorporation and operation by the end of 2020. Now businesses only require one login and portal to access various services. To make it more user friendly the tax authority also updated its homepage interface. When it comes to digitalization Denmark definitely positioned itself ahead of the curve and is now adjusting to drive simplicity.
Complexity in the jurisdiction is limited.
However obstacles like understanding rudimentary setup processes and Danish language barriers may occur. In the last regard 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 well. It requires a considerable amount of administration, despite the short operation time. As the GBCI 2022 notes during the pandemic the Danish government put support packages in place. They 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. Although helpful the support package did place an administrative burden on businesses who needed to complete the necessary paperwork. There were also fines for incorrect completion of forms.
Potential postponement of annual reports in terms of more flexibility
As the jurisdiction is 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.
The GBCI 2022 concludes that given this flexibility, Denmark has been able to make a strong recovery following the pandemic. TMF experts state that Denmark is set to remain one of the simplest jurisdictions for years to come.
On 76th position Curaçao ranks among the least complex jurisdictions for business globally
In 2022 Curaçao has improved its ranking as the second simplest jurisdiction. Key factor in the recent years has been the focus on simplicity, embedded into Curaçao’s laws and legislation. Accounting and tax are particularly straightforward. For instance, 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 there is little complexity for businesses who stick to this deadline.
Payroll and human resources can be slightly more complex here due to the increased ‘proof’ requirements to ensure businesses and individuals remain transparent. Thanks to the development of electronic filing and online processes this has become simpler. Also, it doesn’t necessarily impact the attractiveness of the jurisdiction because it’s seen as a positive to be transparent and open.
For example, 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 organizations from South America and elsewhere are language capabilities. Much of the workforce speak 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.
Covid-19 impact on business operations in the jurisdiction
There were some delays in business operation and incorporation during Covid-19. However, within months solutions were found and delays resolved. This included an increase in the ability to sign documents electronically. On the negative side, 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. This in turn could impact doing business in Curaçao. However, as the GBCI2022 states there is little doubt that it will remain a highly attractive jurisdiction.
On 77th position and the least complex jurisdiction for business worldwide is Cayman Islands
In the GBCI2022 the Cayman Islands ranks as the simplest jurisdiction for doing business. The top position is driven by the jurisdiction’s very simple accounting and tax regulations. Incorporating a foreign entity is an extremely straightforward and streamlined process.
The Cayman Islands was removed from the Financial Action Task Force (FATF) “grey list”, which flags jurisdictions in which money laundering is not sufficiently legislated against.
However, it was added to the European Union’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 Ultimate Beneficial Owners (UBO). 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. Prior the pandemic, wet signatures were expected, if not required. Now, e-signatures are expected going forward. Reporting processes have been digitally streamlined.
Being aware of wider geopolitical events and the local factors driving complexity are fundamental to the success of establishing a business in a jurisdiction.
The top 10 least complex jurisdictions in GBCI 2022 definitely put a lot of efforts to attract more and more foreign businesses and investments. Main pillars in this direction are creating straightforward processes and procedures as well as their fast simplified, mostly or entirely digital execution. It’s a trend prior the Covid-19 and the Russian-Ukrainian conflict, but seems to be emphasized by those external events, affecting the business globally. Pandemic sped up the digitalization not only in regions that had to start their digital journey but also in jurisdictions already way ahead in the process. After all better conditions that attract more business investments in one’s jurisdiction means faster recovery for its economy.
Synchronizing legislation and digital incorporation of business, as well as aligning with the global norms especially in terms of transparency and ESG are fields where jurisdictions worldwide will continue to put a lot of efforts to become or remain compliant. For the time being technology continues to play a role in both increasing and curtailing complexity. The latter is expected to prevail over time.
Wonder where Bulgaria is among the 77 jurisdictions explored in the GBCI 2022?
In 2022’s ranking Bulgaria stands on 50th position. Our nation ranks at only 17 positions before the top 10 world’s least complex jurisdictions. The 2022 GBCI indicators valued Bulgaria as country with much less business complexity. In this regard Bulgaria is positioned ahead of countries like France, Poland, Germany, Russia, Spain, Portugal, Hungary, Croatia, Romania, Greece, Turkey, China, India, Philippines, Brazil, etc.
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