In a world of increasing complexity, there are few business destinations which can attract firms to set up shop with claims of truly easy tax and accounting systems, policies, and procedures.
In a previous series, we had studied the financial system of the world’s most complex tax and accounting jurisdictions. In this one, we’ll look at diametrically opposite countries.
The study over the complexity of tax and accounting systems was carried out by the Netherlands-headquartered TMF Group in its Financial Complexity Index for 2017. The TMF Group had shortlisted 94 countries for its study, 50 of which were from the Europe, Middle East, & Africa (EMEA) region, 24 were from the Americas, and 20 were from Asia-Pacific (APAC). The table below shows the top ten least complex jurisdictions.
Let’s take a brief overview of the world’s top three countries with the friendliest tax and accounting systems.
The Cayman Islands have emerged as the easiest jurisdiction in terms of tax and accounting compliance. A “stable economic and political climate and sound legal framework” makes for an attractive business destination, the report observes.
The country does not levy any income, capital gains, profits, or estate tax. Its strict bank secrecy laws are an attractive selling point as a place for business, and no restrictions on foreign exchange transactions enhances its appeal.
British Virgin Islands
The British Virgin Islands (BVI), ranked second according to the Complexity Index report with “The country’s central location and favorable commercial environment makes the BVI very attractive for international investors.”
One of the most appealing aspects of the BVI is that a company incorporated there, along with its partner firms, can adopt any accounting standard from the countries in which they function.
BVI does not levy any profit, sales, income, capital gains, or value-added taxes. Alike the Cayman Islands, there are no restrictions on foreign currency movements.
United Arab Emirates
While the Complexity Index report says that the United Arab Emirates (UAE) is “among the least complex nations in the world,” a little complexity does creep in due to the differences amongst the over 35 free zones in the emirate.
However, given that the UAE is a no-tax jurisdiction, and does not place any limits on repatriation of capital or profits, it significantly drives down accounting complexity and continues to attract businesses.
After this brief overview, let’s look at the top two simplest jurisdictions of each region in detail, starting with EMEA.