Brazil and other Latin American nations are examples of how complex compliance can be in different jurisdictions.
Multinational companies are facing an ever-growing number of new regulations and are required to meet their obligations in each jurisdiction around the world. The complexity of compliance varies greatly depending on what country your business operates in. The Compliance Complexity Index 2018 ranked 84 countries around the world according to the difficulty of adhering to compliance requirements. These included the types and amount of information that companies must report to local authorities as well as complying with national regulations.
Many countries in South America, including Brazil, ranked among the top ten in the index. This means that they are some of the most complex nations for corporate compliance in the world. Brazil was ranked as number 7 globally and number 2 in the Americas.
Brazil's political situation and upcoming elections as well as procedural changes in registering companies add to the complexity of the country. This can make it hard for business owners to stay compliant. Brazil's large bureaucracy may be trying to make things easier by implementing new regulations but it brings new challenges during the initial start of the processes. For Marco Sottovia, president of TMF Brazil, the general picture of complexity is far from uniform. "It is worth noting that the way regulations are implemented differs from country to country. In the case of Brazil, the fact that it is the second country in Latin America in terms of complexity reinforces the enormous movement of companies to restructure their area of compliance and to be more transparent after the troubled period. And this resumption affects directly the level of complexity, leaving the highest," he points out.
Some of the reasons for this complexity are that South American countries have received very little digital infrastructure investments compared to other Latin American countries. Their processes are more bureaucratic adding to their complexity. Some of the countries like Brazil, Uruguay and Argentina are working to put global regulatory initiatives onto the statute book pushing them toward even more complexity when it comes to compliance. Uruguay has implemented global regulatory initiatives such as Ultimate Beneficial Owner (UBO) and Common Reporting Standard (CRS) which has significantly increased the complexity of doing business in the country. The country has also put anti-money laundering regulations on the book.
Compliance complexity is not the same just because countries share borders. Some of the least complex countries to do business in are Honduras and Nicaragua located in Central America. While one of the most complex countries, Costa Rica, is also in Central America.
Honduras ranks as the least complex jurisdiction in the Americas and one of the least complex global because of the lack of requirements when it comes to corporate secretarial work. Businesses do not have to do much reporting. The country has been working to put in new policies to try to stop illicit activities so in the future this will increase the complexity of the financial processes.
With no recent changes in legislations or any new regulatory processes in Nicaragua, this country is one of the least complex when it comes to corporate compliance.
Costa Rica's relatively high position in the ranking is partially due to the nation's status as a leader in implementing global transparency best practices like the CRS and Base Erosion and Profit Shifting (BEPS) framework—which tend to increase the compliance burden on companies—as well as the relative rulemaking power and active role its regulatory bodies play compared to other countries in the region. "It's the only country in the region that has implemented laws around both BEPS and CRS," said TMF Mid-Americas Managing Director Lyndsey Wheeler. "We've also seen a lot of activity in the past few years in other regulatory areas."
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Compliance complexity varies around Latin America and business people and legal teams need to take this into account when operating in these jurisdictions. Using in-country corporate secretarial experts, such as TMF Group in any of these countries, allows companies to reach new heights and focus on their core business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.