China is ranked 7th in the world - the second most complex jurisdiction in Asia. Hong Kong remains the easiest place in Asia for accounting and tax.
China is among the most complex countries in Asia Pacific for Accounting and Tax compliance - only slightly less complex than Vietnam - according to TMF Group’s inaugural Financial Complexity Index 2017.
The leading provider of global business and compliance services ranked 94 jurisdictions across Europe, the Middle East, Africa, Asia Pacific and the Americas, with 1 being most complex and 94 the least complex. Hong Kong came in at 91 as the easiest place in APAC for compliance from an accounting and tax perspective; only the Cayman Islands, BVI and UAE were ranked less complex for business across the world.
In determining the rankings with its in-house accounting and tax experts, TMF Group used four weighted complexity parameters, considering the accounting and tax rules and regulations in different jurisdictions, and risks associated with non-compliance.
TMF Group also surveyed its in-house experts to get a local view on emerging compliance trends, and how they are viewed in Asia. These results show the traditional worries of regulatory and tax compliance are still top of mind for accounting professionals around APAC, though current trends such as BEPS and transfer pricing are starting to creep into the collective consciousness
TOP 5 MOST COMPLEX JURISDICTIONS IN ASIA PACIFIC FOR ACCOUNTING AND TAX COMPLIANCE
MOST IMPORTANT COMPLIANCE TRENDS FOR APAC PROFESSIONALS
- Risk of non-compliance with local regulation: 24%
- Tax compliance (possibly of tax audits): 20%
- Accounting complexity: 16%
- Future impact of technology: 14%
- BEPS and transfer pricing: 12%
- Asia Pacific has three jurisdictions in the top 10: Vietnam (5), China (7) and India (10). Complexity around invoicing, filing and the conducting of audits is high with very specific documentation and processes applied.
- Local language and currency requirements took China to 7th place globally. Its core requirement for statutory accounting reporting to be undertaken in both Chinese language and Chinese renminbi (RMB) is a major contributor to the market’s complexity.
- At the other end of the rankings, China’s Special Administrative Region Hong Kong is among the least complex. Ranking 91 out of 94, Hong Kong still has some key regulatory requirements where non-compliance could mean personal fines for company directors.
- The automation and digitisation of accounting processes and reporting will continue to impact across the region – especially when any accounting system used for a Chinese entity’s bookkeeping and reporting must be pre-approved by the Finance Bureau.
Commenting on the rankings, TMF Group’s Head of Asia Pacific Paolo Tavolato said:
“The contrast between complexity in China and Hong Kong shows that doing business in Asia Pacific needs special attention.
“Although a part of mainland China, Hong Kong’s special status is a throwback to its colonial days when, buoyed by favourable regulation and rates, international business flocked to use the tiny island-state as a base for regional trading. ‘One country, two systems’, as they call it in China, adds a peculiar layer of complexity to those businesses trading across the water.
“Working with a partner expert in local regulation can ease that burden for international companies – after all, when operating in a diverse global market, knowing and understanding local requirements for financial compliance can prove the difference between cross-border business success or failure.”
To download the full report please visit: tmf-group.com/FCI2017