Mexico
GBCI 2023 ranking: 4th
Mexico’s high ranking is mainly due to the mandated processes in place in the jurisdiction. For instance, there are still a lot of face-to-face requirements in place, which can present challenges for international businesses with senior directors residing elsewhere.
Furthermore, legislation can be unclear and open to interpretation. For example, in 2022 Mexico introduced UBO requirements. There was a lack of clarity when they were launched around what documentation was needed for businesses to incorporate. Notaries who approve businesses without the correct documentation are subject to hefty fines and sanctions, so tend to take a risk-averse approach to signing off required documents. This means that organisations can find it difficult to incorporate in Mexico.
The Mexican government is also facing some controversy due to its position on renewable energy, taking a clear stance to block foreign investment into renewables in favour of supporting more traditional fuel-based energy sources. This is a polarising decision because the negative environmental impact is countered by the financial support it provides to the many Mexicans working in fossil fuel industries.
Dive into the data for Mexico on the Complexity Insights dashboard.
Dominican Republic
GBCI 2023 ranking: 18th
The Dominican Republic offers a stable environment in which to do business. Although there can be some complexity for organisations incorporating and operating there, ways of working remain similar year-on-year. This means that once companies are adjusted to the rules and regulations in the jurisdiction, they do not need to make constant changes to keep up with varying legislation.
The jurisdiction can also offer rich opportunities to those within industries like agriculture, energy, logistics, mining, tourism and even cinema. The market is constantly growing and developing. However, complexity still plays a role in incorporation and operation within the the country. For instance, certain documents need to be submitted in Spanish, meaning that international businesses may need to work with translators to be compliant.
Furthermore, labour laws are protective: employees can only work a maximum of eight hours per day, 44 hours per week. The working week within the jurisdiction ends at midday on a Saturday and any hours beyond this must be supplemented with 135% wage overtime, increasing to 150% for night-time hours. Ten per cent of company profits must be shared with employees and all receive a Christmas bonus of one month salary, by law. Although such rules and regulations drive worker protection and wellbeing, they also serve to deliver additional costs to organisations entering the jurisdiction and increased complexity to meet employee requirements.
Dive into the data for the Dominican Republic on the Complexity Insights dashboard.
Nicaragua
GBCI 2023 ranking: 26th
Since 2018, Nicaragua has been facing a socio-political crisis that has widespread impacts, including democratic rules and human rights indices. This has triggered a strengthening of local laws and controls, and has also led to the US Government sanctioning officials and public institutions.
Such uncertainty causes complexity for businesses operating within the jurisdiction as response times from officials and public institutions have slowed and new tax rates have been introduced. Consequently, certain businesses have exited Nicaragua in favour of setting up in more stable jurisdictions. Further complexity comes from high inflation within the jurisdiction. In 2022 this sat at 11.59%, resulting in more significant costs for businesses operating within the country.
The political setup in the jurisdiction can also cause complications. Nicaragua has a single political party, with a majority of votes in the National Assembly, which has the power to issue laws and decrees with ease. Consequently, legislation can change rapidly and with little notice.
However, despite the complexity businesses can face, Nicaragua has rich resources and a favourable location within South America meaning that, if businesses are able to manage the current political uncertainty, they are able to reap the rewards of operating within the jurisdiction.
Dive into the data for Nicaragua on the Complexity Insights dashboard.
Panama
GBCI 2023 ranking: 27th
Panama has continued to be a very stable and straightforward jurisdiction for foreign businesses to operate within and is an appealing investment destination in South America. Panama is as an international banking hub and a leading offshore centre for finance. In recent years, promoting foreign investment has been a primary objective of the government, which has implemented initiatives such as extending tax benefits.
However, complexities include opening and setting up a bank account, which can take around three months and hold up companies’ entry into the jurisdiction. Additionally, there are limitations on the number of foreign employees that can work for a company operating in Panama. For instance, native Panamanians and those who have been legally resident for at least 10 years must make up at least 90% of a company’s workforce. There are exceptions granted by the Ministry of Labour but that reduction in the threshold to 85% is only applicable in special circumstances. However, in April 2023 the authorities in Panama introduced a large change to work permit categories which is expected to increase businesses’ access to foreign skilled labour.
Digitalisation provides is an example of simplification of elements of business incorporation and operation in Panama. The country has introduced electronic invoicing for accounting and tax requirements, making it more accessible for businesses completing their tax reports. However, this a certified accountant (CPA) needs to be registered in a fiscal entity to carry out the invoicing.
Looking to the future, Panama is expected to remain stable when it comes to geopolitical, economic and social aspects, meaning it is likely that the jurisdiction will remain an attractive place for foreign businesses to operate.
Dive into the data for Panama on the Complexity Insights dashboard.
Guatemala
GBCI 2023 ranking: 37th
Guatemala once again ranks 37th in the GBCI, meaning there are complexities and more simple aspects for foreign businesses operating there. Reasons for complexity include the challenges of foreign entry, as businesses must register with different government authorities before starting operation. The initial setting up process can be difficult in Guatemala. However, once established, it is a strong jurisdiction for businesses to trade in.
Companies must be registered legally with at least four local entities before starting operation, in order to comply with entity management and regulatory compliance. Despite this, the processes are mostly done virtually, making it is easier for foreign investors and businesses. It is essential for businesses to understand the HR and payroll system in Guatemala in order to comply with the necessary employer requirements. However, in the past 12 months, there have not been any significant changes to employer and labour contributions, making the process stable and accessible for business.
In late 2022, the Regulation of Environmental Evaluation, Control and Monitoring came into effect. This means that any project, work, industry, or any existing activity must be regulated if, due to its characteristics, it could deteriorate any natural resources. Any company that carries out these activities must obtain an environmental licence. This demonstrates the government’s commitment to preserving the environment in Guatemala. Although this adds an initial layer of complexity due to the additional regulation, it is a relatively simple legislation for relevant companies to comply with.
Over the coming years, Guatemala’s economic, social and political, and geopolitical situation is expected to stay stable, making it an attractive jurisdiction for businesses to operate in.
Dive into the data for Guatemala on the Complexity Insights dashboard.
El Salvador
GBCI 2023 ranking: 44th
In El Salvador, foreign businesses are required to comply with obligations from multiple institutions, renew numerous permits and licences each year, and complete many processes in person. However, foreign businesses can maintain foreign representatives for compliance in El Salvador and carry out most registrations and processes through limited powers of attorney.
Tax documents are still issued physically, which makes the local presence and assistance of representatives necessary for issuing and sending those documents. However, the tax authorities in El Salvador are making a transition towards digital processes, which would make it easier and quicker to carry out tax reporting and procedures. This presents a good opportunity to perform invoicing in a decentralised and more agile way.
In the past year, social security taxes in El Salvador have increased, along with labour costs, making the jurisdiction a more expensive place for foreign businesses to invest. However, social security compliance procedures are fairly simple, as the digital processes in place make it easy to file reports from any location. In addition, the digital channels for consultations are very efficient, which means that any problems that arise are resolved quickly.
Dive into the data for El Salvador on the Complexity Insights dashboard.
Costa Rica
GBCI 2023 ranking: 45th
Costa Rica is an attractive jurisdiction for foreign businesses to operate in, driven in part by the digitalised processes that exist and the fact that it is not necessary to have local legal representatives for the majority of businesses (excluding some regulated activities or industries). Corporate and tax obligations are clear and standardised, meaning foreign businesses face limited challenges when incorporating and operating in Costa Rica.
Nonetheless, there are some challenges for foreign businesses. UBO requirements mandate a high level of detail and can be time consuming. However, for entities that maintain orderly documentation and information of their share capital structure, it is possible to navigate the requirements with limited complexity.
The government in Costa Rica has introduced campaigns to attract foreign investment. For example, the Free Zones Law provides incentives for businesses to operate or trade in Costa Rica through reduced income and corporation tax. Additionally, the Digital Nomads Law was introduced in 2022, meaning that remote workers, business owners, and freelancers can work in Costa Rica for longer than a tourist visa may permit.
Costa Rica has been at the forefront of environmental sustainability regulation in the Central American region for many years. For example, the National Policy for Sustainable Production and Consumption seeks to adopt sustainable actions in terms of production and consumption within a period of 12 years. While the sustainability legislation may cause complexities for businesses, it is usually vague and open for interpretation, and it is not required for all businesses to apply. In the future, there is an expectation that more businesses will be required to abide by environmental legislation, however there are question marks over what that will mean in practice.
Dive into the data for Costa Rica on the Complexity Insights dashboard.
Honduras
GBCI 2023 ranking: 47th
Honduras is one of the simpler jurisdictions in which to do business in Latin America. Legislation and regulation are fairly stable meaning the legislative frameworks are clear for foreign businesses looking to navigate these processes.
There are some aspects of incorporation that are complex for foreign businesses in Honduras. For instance, a separate incorporation process is required for different government entities, meaning that the overall process can take longer than expected. Businesses are required to have a legal representative present in Honduras, with that legal representative being a Honduran national or resident foreigner, in order to comply with entity requirements. Furthermore, businesses are required to have a legal domicile inside the jurisdiction and submit UBO information to banks. Access to information from government authorities is limited, and the lack of consistent and virtual support from those authorities can make it challenging for businesses attempting to navigate key processes or new regulations.
Over the next five years, TMF Group experts in Honduras expect that the jurisdiction will be less politically, economically and socially stable than before. Although this will inevitably create a challenging business environment for foreign businesses, an increase in investment in the jurisdiction over the next five years is also expected.
Dive into the data for Honduras on the Complexity Insights dashboard.
Canada
GBCI 2023 ranking: 48th
There is a relatively low level of complexity for foreign businesses operating within Canada. Other than corporate income tax and VAT filings, standalone financial statements do not need to be prepared or filed with any government bodies. Additionally, there are relatively few payroll withholding and remittance requirements in Canada, and remittances for all provinces (except Quebec) are all submitted to the Canada Revenue Agency.
Businesses can face challenges if they wish to be incorporated at a federal level, as the 13 provinces and territories that make up the jurisdiction have varying requirements. For example, there are differing requirements for resident directorships, as well as UBO transparency registers. Other variations by province include VAT rules and rates, tax withholdings, and workplace insurance and compensation schemes.
Canada has been impacted by geopolitical challenges, with inflation rises having a direct impact on businesses. However, Canada continues to be a healthy marketplace for employees and, as a result, wage increases are common across most industries in line with inflation. While there is some risk of a recession, it appears that inflation and interest rates have stabilised, meaning the economic outlook is expected to be stable from an international investment standpoint.
Dive into the data for Canada on the Complexity Insights dashboard.
Jamaica
GBCI 2023 ranking: 49th
Jamaica is one of the simpler jurisdiction for foreign businesses to operate in, ranking 49th in this year’s GBCI. This is in part driven by straightforward incorporation processes, with most filings and registers completed through clear and simple forms. In most government entities, digital signatures are accepted and apostilled documents are rarely required.
On the other hand, Jamaica has a complex tax system where there are relatively high rates, narrow bases and numerous exemptions and waivers. There is a high level of informality associated which, along with weak tax compliance, can cause uncertainties for businesses navigating these processes. Another area that can create complexity for foreign businesses is the National Insurance Scheme, where there are frequent changes in legislation which can make it difficult for foreign companies and investors to keep up (the latest change occurred mid-2022).
During the past year, there have not been any significant changes to business incorporation and operation, meaning that businesses have faced limited challenges when navigating any new requirements. At the end of 2023, a data protection law is expected to be introduced in Jamaica, which aims to bring the jurisdiction more in line with GDPR laws applicable in the EU. This is expected to add a layer of complexity for businesses in Jamaica in the short term, due to the time needed to become familiar with the new requirements.
Dive into the data for Jamaica on the Complexity Insights dashboard.
United States (US)
GBCI 2023 ranking: 68th
The US remains one of the simplest jurisdictions in this year’s GBCI, just missing out on being in the top 10 most simple jurisdictions worldwide. The simplicity in the US stems from the active focus on creating a business-friendly environment that works to entice foreign direct investment (FDI). Consequently, FDI in the jurisdiction has increased since before Covid-19. This increase comes from the fact that, during a time of great geopolitical instability, the US has remained steady especially when compared to some European jurisdictions.
The US has experienced some inflation in recent years, however the change from President Trump to President Biden means that there is some greater confidence among investors. Although President Trump was tax and business friendly, the volatility that his administration brought could be challenging for businesses in the country. The Biden administration tends to offer a calmer environment to invest, which entices FDI to the US.
The US is expected to remain at a similar level of simplicity in future years, however some changes are on the horizon. For instance, the Corporate Transparency Act (CTA) will be introduced from 2024 for new entities and 2025 for established organisations. The CTA mandates more detailed disclosures to drive transparency and reduce issues with corruption and money laundering. This may create some additional complexity for businesses entering the US, however it should work to keep the stability, that attracts FDI, in place for future years.
Dive into the data for the USA on the Complexity Insights dashboard.
British Virgin Islands (BVI)
GBCI 2023 ranking: 73rd
BVI is consistently one of the least complex to do business, with simplicity and global business needs deeply imbedded into processes and principles within the jurisdiction. For example, processes are highly automated and the jurisdiction prioritises alignment with global standards, to enable international businesses to operate within familiar structures and frameworks.
However, the BVI was added to the EU’s blacklist of non-cooperative jurisdictions for tax purposes in February 2023 due to the late submission of necessary documentation. The jurisdiction is in fact aligned with required international standards and currently waiting for the EU to revoke this blacklisting. Despite the challenges that may be expected with such categorisation, businesses operating within the BVI are not overly concerned about this. They know that the jurisdiction is transparent and aligned, so expect business to return to normal in the coming months.
The transparency of the BVI and security this offers means that it remains a particularly attractive jurisdiction for PWFO and funds investors as they can protect assets that may be at risk in more unstable jurisdictions. For instance, in South America, climates can be unstable due to historic issues of corruption, hyperinflation and political unrest.
Dive into the data for the BVI on the Complexity Insights dashboard.
Curaçao
GBCI 2023 ranking: 76th
Curaçao remains one of the simplest jurisdictions for business operation and incorporation worldwide due to its stability, despite the tumultuous geopolitical environment, and a focus on driving simplicity year on year. For instance, Curaçao’s tax authority has taken steps in the past year to speed up and simplify processes, as well as clear backlogs from the Covid-19 pandemic. This has made investment into Curaçao more attractive than it was in previous years and has brought new opportunities.
Opening a bank account is the most complex aspect of incorporation, as banks tend to be risk averse, so need to ensure that capital is legitimate. This is in line with the global trend of an increased focus on transparency regulations such as KYC. Investors and businesses alike anticipate such checks, so it doesn’t tend to present much of a surprise for organisations and individuals entering Curaçao.
Due to its connections with the Netherlands and setup for remote working, Curaçao has been attracting increasing numbers of digital nomads in recent years. Young entrepreneurs in particular are taking advantage of lower property prices and other benefits that Curaçao offers. Coupled with the flexibility that comes with remote working, Curaçao is likely to continue to attract international workers for years to come.
Dive into the data for Curaçao on the Complexity Insights dashboard.
Cayman Islands
GBCI 2023 ranking: 78th
The Cayman Islands remain the least complex jurisdiction in the GBCI, boasting simple entity incorporation and accounting and tax standards, which make setting up and operating a business here relatively easy. Regulators in the Cayman Islands take a ‘light touch’ approach, and regulation itself is transparent and clear. Compared to onshore jurisdictions where there is the complexity of taxes and more developed, professional bodies and regulators, offshore jurisdictions can benefit from an easier way of doing business.
Over recent years, there has been a fundamental shift towards the adoption of global regulatory compliance requirements, such as UBO, AML, FATCA and CRS. Businesses in the Cayman Islands are now well aware of these requirements and navigating these has become a familiar task for many multinational outfits.
Despite its simplicity, there are some challenges for new clients operating in the Cayman Islands who are not used to offshore jurisdictions. For example, businesses can be surprised by the level of detail required for KYC and AML purposes, thus making the process of opening a bank account a more rigorous affair. However, this level of regulation feeds into the stability of the jurisdiction and its standing as a global financial centre.
Dive into the data for the Cayman Islands on the Complexity Insights dashboard.
The Global Business Complexity Index 2023
This article is an extract from TMF Group’s latest report: The Global Business Complexity Index 2023.
Explore the GBCI rankings, analysis and global trends, to help you cut through the layers of corporate compliance complexity – download the report in full here.
To find out more about the drivers of business complexity in the jurisdictions that matter to you, why not explore our Complexity Insights Dashboard?