The ten least complex jurisdictions for doing business in 2023
TMF Group’s Global Business Complexity Index 2023 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.
Malta is a new entry in the ten least complex jurisdictions for 2023. It’s considered a simple jurisdiction due its business-friendly environment and attractiveness for foreign investment.
A member of the EU, Malta follows EU AML regulations, as practiced by all other member states. EU membership also means that Malta has a lot to offer investment entities, SPVs and trading companies. With a generous corporate tax rate and refunding system, Malta is viewed as a highly attractive destination for FDI.
However, for non-EU clients, DAC6 legislation can be an area of compliance which businesses can struggle with, due to their unfamiliarity with the regulation. Another aspect that creates some complexity in Malta is changing rules and regulations. For example, there are stricter rules being introduced around cross-border information sharing, which could impact Malta’s complexity in the future.
Recent geopolitical events have contributed to higher inflation rates of 5-7%. Additionally, Malta is witnessing a shortage of skilled professionals within the jurisdiction, which has driven salaries up. This has created an opportunity for foreign workers to earn more, but these costs can be challenging for businesses entering Malta.
As part of the EU, and assessing the corporate tax rate and refund system, Malta is viewed as one of the most attractive jurisdictions of choice.
Jersey maintains its place in as one of the ten simplest jurisdictions worldwide. This is driven by the small size of the jurisdiction – with a population of only 100,000 people – and the commitment and communication from legislative and industry bodies such as Jersey Finance, who take a supportive and responsive stance to business operation and incorporation. For instance, business incorporation can happen in as little as two hours – a process which can take months elsewhere.
Within Jersey, funds and PWFO industries form a significant portion of the economic environment. Investors have been able to take advantage of the weak currency (GBP), driven by the economic turmoil in the UK during 2022. Investors from APAC and jurisdictions that use stronger currencies have benefitted from the volatility. Although issues like inflation can have significant global impact, they also present opportunities for investors and businesses. Jersey is able to attract these investors due to its stable business environment and strong ecosystem of professionals.
Its status as a magnet for foreign investment has contributed to Jersey being an early adopter of ESG principles and regulations. With the rise of younger investors, who have hopes of a more sustainable and equitable future, this is a trend that is only set to continue within Jersey.
Jersey continues to evolve and become a jurisdiction of true low complexity in which to do business. With a proactive legislative, regulatory and financial services industry body, it is an easy jurisdiction through which foreign capital can be safely and securely invested.
While elections loom later this year, New Zealand is experiencing a very stable period. The only key changes over the past year have been those the government put in place to support the economy after Covid-19 and due to inflation. For instance, the government continued to subsidise tax on fuel for businesses and individuals. Some taxation changes are expected to follow the elections, including the lowering of the top tax bracket for individuals.
Despite the simplicity of the jurisdiction, the process of opening a bank account can cause some issues for international businesses incorporating and operating in New Zealand. KYC legislation mandates the need for face-to-face interactions. Its geographical location can be challenging for business leaders who may need to take long flights for KYC procedures in order to get their organisation’s finances up and running.
However, the New Zealand government has been making it easier for international workers to gain permanent residency in the jurisdiction and has offered greater protection for employees entering the country. Although this can result in upfront costs and complexity to complete necessary checks, it means that the jurisdiction is becoming increasingly internationalised and open to foreign workers and more attractive for FDI.
It’s very simple to operate in New Zealand, from start up to wind up. Things are all online and government support is very good.
The UK has moved down the ranking this year its position in the ten simplest places to do business. In the wake of Brexit, there is a stable environment and favourable industry support from advisors and industry groups, making the jurisdiction an attractive place to do business. There are still regulations that the UK needs to finalise in the post-Brexit world, one of which relates to VAT.
Despite the simplicity, the UK’s stringent KYC checks add to the length of time it takes to open a bank account when setting up a business. The jurisdiction also introduced a new register for overseas entities which was established at the start of 2023, meaning anyone who owns real estate in the UK from an overseas territory could face high penalties for non-compliance. The war in Ukraine has been the catalyst of these changes as the UK tax authority has placed sanctions on Russian businesses and investors.
The UK experienced great political turmoil in 2022, impacting the economy alongside a high inflation rate. However, the political environment has settled somewhat and over the next 12 months the UK is expected to remain a simple place to do business. The authorities here are consistent at implementing new funds and capital markets regulations and are also keeping in line with ESG recommendations. This makes it attractive to foreign investors.
The UK remains a key international financial market that services the world, with connections to all major markets alongside a deep and broad knowledge and talent pool. The advisor and financial base of the UK is second to none for competitiveness and access.
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.
The BVI is a pivot in international FDI that creates independence from set countries and their legislation and gives international businesses and private individuals loads of freedom to structure their activities and wealth. There is a well organised, very smooth-running legal framework that aligns strictly with international standards set by the OECD, among others.
Hong Kong prioritises international alignment and a general ease of doing business, making it one of the simplest jurisdictions in 2023. Accounting and tax processes are highly simplified: salary tax, for example, operates on a tier system and there are no VAT or social security measures in place.
Due to Hong Kong’s relationship with China, more advanced KYC regulations have been introduced, aligning both jurisdictions. Although this can cause initial complexity, it does simplify entry into the Chinese market, which is highly desirable for many international businesses.
Despite its simplicity, Hong Kong still relies on paper for certain transactions and processes. While there are online platforms available manual ways of working tend to be preferred, which can slow down some aspects of business operation. However, digitalisation is expected to be embraced in future.
Another expected change is an increased focus on ESG. The government in Hong Kong has recently started bringing the topic into political discussions and there’s an expectation that ESG legislation may be on the horizon. Increased legislation around cryptocurrency is also expected which will impact businesses in that industry.
Hong Kong remains as a jurisdiction with strengths which are favourable for doing business. Its infrastructure enables free flow of goods, capital, talent and information. Hong Kong is well known for its simple tax regime with low tax rates.
The Netherlands has historically been a simple place to do business due to the flexibility ingrained in its business culture, and it finds itself back in the bottom ten (most simple) jurisdictions for 2023. Incorporation and making changes to an existing structure or company is straightforward and lacking in unnecessary formalities. For instance, companies do not need regulatory or government approvals to incorporate.
This business focus is set to continue in the Netherlands, with the government discussing making more processes digital in future, such as introducing an online portal for incorporation. This would remove the need for a notary during the incorporation process, making it even quicker for organisations to set up business.
Despite its simplicity, some businesses that previously operated in the Netherlands have turned to other locations that offer more attractive tax incentives, such as the UK and Ireland. For instance, both Shell and Unilever moved their headquarters to the UK within the past three years.
While some organisations have looked elsewhere, it’s likely that the Netherlands will remain a highly competitive jurisdiction for FDI for years to come.
When foreign businesses come to the Netherlands to start their operations, they come to a country that is very internationally orientated. Even during difficult and uncertain times with the global pandemic, high inflation and the war in Ukraine, the Netherlands has shown to be a stable and resilient country, welcoming foreign investments.
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.
Curaçao is a safe haven to invest into South America. It’s not particularly complex provided you have the right expertise to help you set up. Only opening a bank account can cause a bit of a burden.
Up one place from third in 2022, Denmark is now the second simplest place to do business. Its straightforward incorporation process for businesses, coupled with political, social, and economic stability make it a very attractive jurisdiction. Denmark not only continues to implement EU regulations but is commonly the first EU country to embrace them, so new requirements are integrated fairly quickly.
As we’ve seen globally, high inflation in Denmark has impacted businesses operating here. Due to economic pressures, some businesses in Denmark have put activities such as expansion on hold or left the jurisdiction altogether, though this is a trend also seen in neighbouring jurisdictions such as Sweden and Norway. Inflationary pressures are also impacting the labour market, where some businesses are not able to find, or afford, the right employees.
Denmark is keen to observe and promote ESG requirements. In the coming year, a new regulation concerning gender equality for board directors is being introduced. Currently, ESG requirements are focused on larger companies, however, smaller companies are also putting actions in place to make them more compliant due to its importance in the country.
Denmark is a very equal country with relatively little difference between rich and poor, and a large focus on gender mix and equal rights for women and men. I think companies and people in Denmark are very conscious about ESG in general.
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.
Cayman is way ahead of the curve compared to the rest of the world, when it comes to regulatory and compliance legislation.
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?