Top five most complex places revealed for rules and regulations in APAC
Top five most complex places revealed for rules and regulations in APAC Hong Kong, 29 September 2020 – Indonesia is Asia Pacific’s most complex jurisdiction for corporate compliance, according to a new report by global professional services firm. TMF Group.
‘Rules and regulations: Managing the evolving compliance landscape facing multinationals’ ranks 77 jurisdicti ons by the complexity of legislation, regulations, rules and the penalties they prescribe. It found Indonesia’s re gulatory environment to be Asia Pacific region’s the most complex, followed by Taiwan, Japan, South Korea and Malaysia. By contrast, Hong Kong, Australia, Vietnam, Philippines and New Zealand were seen as the least co mplex, with all of them having legislative environments that encourage foreign direct investments
Amongst the reasons for Indonesia’s ranking was the fact that it takes more than a year to dissolve a company, mo re than a year to incorporate a public company and, until recently, it had legislation on the statute book denying investors access to many industries.
The report found that the burden of legislation governing transparency and ownership disclosure is steadily gro wing across the region. Examples include:
• Ultimate Beneficial Owner (UBO), a register that complements these initiatives, operates in 68% of global jurisdictions. In APAC, UBO registers which are now required in 57% of the jurisdictions surveyed, compared to 29% of jurisdictions surveyed last year.
• Know Your Customer (KYC) guidelines that require companies to conduct due diligence on their customers started off as a way to monitor transactions in the financial services industry. Now, 29% of APAC jurisdictions require KYC across all industries – compared to 26% globally.
• Anti-Money Laundering (AML) guidelines aim to hinder criminals in claiming illicit funds as legitima te income. This year, 50% of APAC jurisdictions have adopted AML across all industries, compared to 47% of jurisdictions worldwide.
• The Organisation for Economic Co-operation and Development’s Common Reporting Standard (CRS), which went into effect in 2017 and requires crosssharing of financial transaction data, has been committed by 79% of jurisdictions in APAC, compared to 82% globally and 95% in EMEA
Predrag Maletic, head of strategic growth and development at TMF Group said: “Compliance requirements are increasingly layered, often resulting from simultaneous international and local legislative demands. Businesses will need to have a strong understanding of both local practices and international frameworks to successfully navigate the complexity of rules, regulations and penalties.”
The European Union continues to flex its regulatory muscle regarding transparency and fairness in taxation by introducing the DAC6 mandate, which requires reporting of crossborder tax arrangements. The reporting obli gation applies to organizations doing.
business in the region regardless of the location of their headquarters. Failure to comply with DAC6 could result in significant penalties and reputational risks. The reporting requirement was supposed to take effect on July 1, but the EU postponed implementation because of the Covid-19 pandemic.
While EU directives are aimed at member states, they are often used as a model for other jurisdictions around the world, according to the TMF Group report. Mexico and Australia are in the process of introducing their own ver sions of DAC6 aimed at reducing international aggressive tax planning.
The process of dissolving a business is often overlooked. This takes more than six months on average at a global level, compared with less than a month for incorporation. Dissolution in APAC is particularly complex, taking around nine months on average and over a year in five jurisdictions (not only Indonesia, but also China, Malaysia, the Philippines and Thailand) within the region.
To ease the burden of compliance, governments are increasingly using digital tools to streamline processes and reduce complexity. TMF Group found that official submissions to authorities are now done electronically in 71% of jurisdictions. These sorts of technological advances are likely to remain in place going forward.
Predrag Maletic said: “The most innovative jurisdictions are refining their processes to accommodate the rising tide of compliance requirements. A key strategy for maintaining a simple environment despite legislative change is to leverage technology in order to make interacting with authorities as simple as possible for companies.”
This latest report by TMF Group expands on the findings of its Global Business Complexity Index 2020 that ranked jurisdictions on overall business complexity. To download a complimentary copy of the report, please click here.
About TMF Group
With some 7,800 in-house experts, TMF Group is the leading provider of international business administration services. On the ground in over 80 countries, we are the only company worldwide to provide the combination of fiduciary, company secretarial, accounting and tax and HR and payroll services essential to the success of busi nes ses investing and operating in multiple jurisdictions. That’s why our services are used by over 60% of the Fortune Global 500 and the FTSE 100 companies, as well as nearly half of the top 300 private equity firms worldwide. www.tmf-group.com
