Page 73 - Ameft Journal 2021/1

MARKET
Indonesia, a complex jurisdiction for corporate compliance!
With over 7,800 in-house experts, TMF Group is the leading provider of international business administration services. The report, titled ‘Rules and regulations: Managing the evolving compliance landscape facing multinationals’, ranks 77 jurisdictions by the complexity of legislation, regulations, rules and the penalties they prescribe.
According to a latest report by TMF Group that expands on the findings of its Global Business Complexity Index 2020 that ranked jurisdictions on overall business complexi- ty, Indonesia tops the rank as the Asia Pacific’s most complex jurisdiction for corporate compliance. Indonesia is followed by Taiwan, Japan, South Korea and Malaysia. By contrast, Hong Kong, Australia, Vietnam, Philippines and New Zealand were seen as the least complex, with all of them having le- gislative environments that encourage foreign direct invest- ments.
Amongst the reasons for Indonesia’s ranking was the fact that it takes more than a year to dissolve a company, more than a year to incorporate a public company and, until re- cently, it had legislation on the statute book denying inve- stors access to many industries.
The report found that the burden of legislation governing transparency and ownership disclosure is steadily growing across the region. Examples include: Ultimate Beneficial Owner (UBO), Know Your Customer (KYC) guidelines; Anti- Money Laundering (AML) guidelines; and The Organisation for Economic Co-operation and Development’s Common Re- porting Standard (CRS).
“Compliance requirements are increasingly layered, of- ten resulting from simultaneous international and local le- gislative demands. Businesses will need to have a strong understanding of both local practices and international fra- meworks to successfully navigate the complexity of rules, regulations and penalties.”, said Predrag Maletic, head of strategic growth and development at TMF Group.
The European Union continues to flex its regulatory mu- scle regarding transparency and fairness in taxation by in- troducing the DAC6 mandate, which requires reporting of cross-border tax arrangements. The reporting obligation ap-
Source: Image by vGerd Altmann from Pixabay
www.ameft.com
AMEFT 1 2021 73
plies 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, says the TMF Group report. Mexico and Aus- tralia are in the process of introducing their own versions 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. Disso- lution 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 incre- asingly using digital tools to streamline processes and reduce complexity. TMF Group found that official submis- sions to authorities are now done electronically in 71% of jurisdictions.
“The most innovative jurisdictions are refining their pro- cesses to accommodate the rising tide of compliance requi- rements. A key strategy for maintaining a simple environ- ment despite legislative change is to leverage technology in order to make interacting with authorities as simple as possible for companies.”, says Predrag Maletic.