When planning your entry into Asia Pacific, your first priority should be determining whether you need to set up a company in the region. This depends on two main factors:
- Cost: You need to look at your expected volume of sales and determine whether or not the cost of setting up a company exceeds the your potential profits. Hugh advises assessing your options on a country by country basis. Although there are various trade and economic partnerships allowing for reduced tariffs across the region, each country still maintains its own tax an corporate laws so you need to make sure you understand them. Each country will also have its own compliance costs such as monthly tax returns, vat costs etc.,. These need to be factored in before you can determine your sales figures would offset the cost of setting up a company.
- Staff: The second factor is whether or not you will need employees on the region. If you do need local staff to manage sales and marketing, look at the local laws to find out if you actually need a company based in the region as you may be able to use an “employer of record”. These third party organizations can employ and sub contracts staff on your behalf which is often more efficient and cost effective than setting up a company.
Tax obligations
Even if you don’t set up a company, you may still have an obligation to register in a particular country for Goods and Services Tax (GST) or VAT. This will depend on which market you want to sell to and how you plan to do it.
A number of countries in Asia Pacific have introduced ecommerce laws that are designed to bring transactions from non-resident company’s into their VAT net. Rules differ from nation to nation. Some countries require registration with no sales threshold, some have thresholds around the 50-100k mark, and some require no registration at all.
If you plan to sell via online marketplaces, you still need to consider your tax obligations.
Some marketplaces can assist with compliance as, in some jurisdictions, VAT is passed on to them while in others it is the sole responsibility of the seller.
It all comes down to ensuring you have a good understanding the laws and requirements for each region you plan to sell in.
Local currency
One final point to consider is that consumers nearly always prefer to pay in their local currency so it is important that you factor this into your sales plans. There are many online foreign exchange providers with whom you can develop a working relationship with to support your Asia Pacific expansion.