Why You Should Expand Your Tech Business to Southeast Asia
Table of contents
Southeast Asia is home to several tech companies that have seen growth thanks to the region’s top IT talent. Some notable examples include Go-Jek, Tokopedia, Sendo, Momo, and Kalibrr. In this article, we will talk about why you should expand your tech business to Southeast Asia.
Establishing an offshore team or office will bring many benefits to your company. These include lower capital requirements, labor conditions, and incentives for technology companies. We discuss these in further detail below.
Many countries in Southeast Asia offer incentives to tech companies. This is to encourage investment and development of their respective IT sectors.
Incentives for IT Companies in Vietnam
IT companies involved in the following are eligible for tax incentives:
- Software production
- Digital information content products
- Key information technology products
- Software services
- Information security incident correction services,
- Information security protection according to regulations on information technology
Qualified IT companies will enjoy preferential tax rates for 15 years. The 15-year period starts on the company’s first year earning a taxable income. The terms for the tax rates are as follows:
First 4 years
Succeeding 9 years
Remaining 2 years
Vietnam has three IT parks. These have infrastructure and facilities to support IT companies:
- Da Nang Hi-tech Park (Da Nang)
- Hoa Lac Hi-tech Park (Hanoi)
- Saigon Hi-tech Park (Ho Chi Minh City)
Establishing a company in one of these IT parks comes with additional incentives. Such incentives include exemption or reduction in land rental fees.
Companies in IT parks will also enjoy reduced customs taxes and duties on certain goods. Examples of these goods are materials used to
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Emerhub’s consultants in Vietnam will help you register your IT company. We will also assist in setting up operations in Vietnam. Fill out the form below to get started or send us an email at [email protected].
Incentives for IT Companies in Indonesia
Per Regulation No. 150/PMK.010/2018 of Indonesia’s Minister of Finance, there are tax incentives for companies engaged in the digital economy. This industry includes services related to the following:
- Hosting infrastructure
- Data processing
- Web hosting
- Streaming services
- Hosting applications
Eligible companies will enjoy a tax reduction for five or more years. The exact terms of tax reduction vary depending on the investment amount.
In addition to the above, eligible companies may deduct the following from its gross annual revenue:
- Expenses that went toward internship programs or training for employees. The company may deduct a maximum of 200% of the total cost.
- Expenses that went toward research for innovation and acquisition of new technology. The company may deduct a maximum of 300% of the total cost.
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Get in touch with us to learn more about Indonesia’s incentives for IT companies. Our consultants will be glad to help you. Fill out the form below or send an email to [email protected]. You can also email [email protected] for inquiries about doing business in Bali.
Incentives for IT Companies in the Philippines
The Philippines has two government agencies that offer incentives to qualified companies. These are the Board of Investments (BOI) and the Philippines Economic Zone Authority (PEZA). Both agencies offer incentives to companies that meet certain criteria. IT companies may enjoy these incentives if they are registered locators in an IT ecozone.
Board of Investments Incentives
Eligible companies do not need to pay income taxes during an income tax holiday. This period initially lasts for four to six years. This depends on the company’s pioneer status and location.
After the initial period, companies may apply for extensions. However, the total years for the income tax holiday period cannot exceed eight years.
The BOI also offers incentives for imports. These include duty exemption and simplified customs procedures. They can also deduct labor expenses from their taxable income. Costs for infrastructure work are also deductible.
PEZA also offers income tax holidays to eligible companies. The initial period lasts from four to six years, depending on pioneer status. Companies may also apply for an extension. But like with the BOI, the total period cannot last longer than eight years.
Upon expiry of the income tax holiday, a special of 5% will apply to gross income. The company will also be exempt from national and local taxes. Eligible companies will also be exempt from local government and license fees. In addition to these, imports of certain goods will also be tax and duty-free.
Foreign investors and employees will also be eligible for a special non-immigrant visa. This visa has multiple-entry privileges. Their spouses and unmarried children under 21 years of age are also eligible.
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Find out more about the Philippines’ incentives for IT companies. Our team in Manila can help you set up your IT company in the Philippines. Fill out the form below to contact us or send an email to [email protected].
Labor costs in Southeast Asia’s emerging markets continue to be very competitive. The average salary of an IT professional in the Philippines, Vietnam, and Indonesia is lower than in neighboring countries.
The chart below shows the average salary for an entry-level software developer as stated in Salary Expert.
*Values converted using exchange rates at the time of writing
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Foreign Ownership of Tech Companies in Southeast Asia
A foreign investor can have full ownership of a tech company in Indonesia, Vietnam, or the Philippines. There are no regulations in these countries limiting foreign ownership.
Minimum Capital Requirements in Southeast Asia
Minimum capital requirements in Southeast Asia vary across countries. The table below shows the capital requirements in Southeast Asia’s biggest emerging markets.
|Country||Minimum Capital Requirement|
|Indonesia||IDR 2.5 billion (approx. USD 170,000)|
Vietnam does not have a minimum capital requirement for IT businesses. However, your capital must be within reason and able to cover your company’s expenses. Foreign-owned companies in Vietnam usually start with USD 10,000 capital. However, this can be higher or lower depending on your specific plans.
Neither Indonesia nor the Philippines has minimum capital requirements specific to IT companies. As such, foreign ownership dictates the minimum capital. The amount listed above applies to Indonesian companies with foreign ownership. Meanwhile, the amount for the capital requirement in the Philippines is for a company with more than 40% foreign ownership.
You do not need to set up a company to hire employees or establish an offshore office in Southeast Asia. The methods below will allow you to do business in Southeast Asia without a local company.
Hiring Remote Employees in Southeast Asia
With an employer of record in Southeast Asia, you can hire employees without a local entity. An employer of record will hire employees on your behalf. It will also take care of compliance with local labor laws. This option will allow you to hire software developers and other IT professionals in Southeast Asia.
Set Up an Offshore Office in Southeast Asia
You can set up a representative office in Southeast Asia to act as your offshore office. A representative office is an office set up by a foreign parent company. The main thing to remember about representative offices is that they cannot earn revenue locally. Representative offices can also hire local and foreign employees.
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