Strategic Investment and Legal Frameworks in the ASEAN Region 

Corporate Taxation in the ASEAN Region 

Corporate income taxation is often the first element assessed when selecting a jurisdiction in the ASEAN Region. While statutory rates provide an initial indication, the effective tax burden depends heavily on incentives, exemptions, and territorial principles.

The following table offers a comparative overview of corporate taxation in the ASEAN Region, focusing on Hong Kong, Singapore, Thailand, Vietnam, and Indonesia.

This comparative overview highlights the key structural differences between jurisdictions, which are examined in further detail below on a country-by-country basis.

Singapore – Corporate Tax Advantages and Disadvantages 

•      Advantages

Singapore imposes a flat corporate income tax rate of 17% on chargeable income, as established under its Income Tax Act (Cap. 134) and administered by the Inland Revenue Authority of Singapore (IRAS). This rate applies equally to resident and non-resident companies on income which has accrued in or been derived from Singapore, as well as foreign-sourced income received in Singapore, pursuant to the conditions and reliefs specified under that act. Entitlement to exemption Under Singapore’s territorial tax system, foreign-sourced dividends, branch profits and service income may be exempt from Singapore tax upon remittal if certain conditions are satisfied as under 13 This can involve meeting or complying with the conditions imposed for granting of relief in respect of international double taxation relief (ITO) which is governed by sections including section 13(8) and connected provisions of the Income Tax Act.

Beyond the headline rate, Singapore offers a wide range of tax incentive schemes to promote targeted economic activities,  including for regional headquarters, global trading, investment management, research & development, and intellectual property development, through concessionary tax rates or exemptions under approved frameworks such as Sections 13O, 13U and related provisions of the Income Tax Act, often requiring substantive local economic activity and employment. Leading up to that, significant enhancements were made to extend core incentive schemes, and establishing new concessional tiers in taking forward its push for global competitiveness and international norms such as the OECD BEPS and Pillar Two minimum tax standards.

• Disadvantages

Despite its attractive headline rate, Singapore’s corporate tax regime imposes stringent substance and compliance requirements, which may limit aggressive tax planning structures. IIn reality, the benefits of tax incentives and exemption from foreign sourced income under the Income Tax Act (Cap. 134) hinges upon showing true economic substance, such as a qualified staff in terms of quantity and expertise, active decision making, R&D testing being down and business been done in Singapore – all of which are under strict scrutiny by the Inland Revenue Authority of Singapore (IRAS). In addition, recent changes in rules under the Singapore’s adoption of the OECD BEPS and Pillar Two would result in new compliance obligations such as bigger reporting requirements and tracking of effective tax rate for groups that are multinational enterprises. Accordingly, Singapore is still very competitive in the Asean perspective but not anymore for low substance or shell-like holding companies and it requires careful legal and operational set-up to be on a totally compliant footing.

Thailand – Corporate Tax Advantages and Disadvantages

• Advantages

Thailand applies a standard corporate income tax rate of 20%, as provided under the Thai Revenue Code, positioning it as a moderately taxed jurisdiction within the ASEAN Region. This regime is particularly attractive for operational and manufacturing businesses. Companies granted promotion by the Board of Investment (BOI) may benefit from substantial incentives under the Investment Promotion Act B.E. 2520, including corporate income tax holidays of up to eight years, reductions or exemptions on withholding taxes, and exemptions from import duties on machinery and raw materials. In addition, Thailand offers progressive reduced corporate tax rates for small and medium-sized enterprises (SMEs), reinforcing its appeal for businesses with local substance and on-the-ground operations.

• Disadvantages

However, in practice the Thai corporate tax system is still burdened with an administratively complex and source-based tax regime, where a company’s reserved income derives from or arises in Thailand under the Revenue Code. BOI privileges, subject to full compliance with operational, reporting and localisation requirements but without such guarantees of impunity have the potential for ‘reverse liability’ – meaning that privileges granted are subject to reversal under which any failure may impose a back-tax. In addition, tax audits are relatively common, and interpretations of tax legislation may differ between tax authorities, thereby raising the compliance risk for companies with foreign owners. In an environment where Thailand is fast aligning itself with international best practice (including many BEPS initiatives of the OECD), those operating in corporate groups should consider their documentation and compliance around transfer pricing in order to limit exposure should investigations be carried out.

Hong Kong – Corporate Tax Advantages and Disadvantages

• Advantages

Hong Kong applies a profits tax rate of 16.5% on corporations, pursuant to Section 14 of the Inland Revenue Ordinance (Cap. 112), making it one of the most competitive tax regimes used in structuring activities across the ASEAN Region. Hong Kong operates a pure territorial tax system, under which only profits arising in or derived from Hong Kong are taxable. Profits sourced outside Hong Kong remain outside the scope of taxation, provided the taxpayer can substantiate the offshore nature of the income. This framework allows efficient use of Hong Kong as a regional holding, trading, or financing hub, supported by a strong common law system, a predictable regulatory environment, and an extensive network of double taxation agreements with several ASEAN jurisdictions.

It should also be noted that, although Hong Kong is not an ASEAN member state, its attractiveness is bolstered by the ASEAN-Hong Kong, China Free Trade Agreement (AHKFTA), which significantly facilitates access to South-East Asian markets. This legal framework allows companies structured in Hong Kong to benefit from substantial tariff reductions, enhanced investment protection, and greater service mobility across the ASEAN region.

• Disadvantages

In practice the ability to obtain offshore payment exemption has become much more difficult in recent years as IRD is putting significantly more focus on source-of-income claims. Those looking to claim offshore tax treatment must now show real operational substance, decision making and business activities taking place outside of Hong Kong. In addition, Hong Kong has introduced economic substance requirements and enhanced anti-avoidance rules in response to international tax standards, including OECD BEPS initiatives. As a result, purely passive or low-substance structures face increased audit risk, and banking access has become more selective, particularly for entities unable to demonstrate genuine commercial operations and transparent source of funds.

The offshore profits exemption regime has become increasingly substance-driven. Tax authorities now require detailed proof of operational reality outside Hong Kong. Banking access has also become more selective, particularly for structures lacking clear commercial rationale. 

Indonesia – Corporate Tax Advantages and Disadvantages 

• Advantages: Corporations have to pay the standard tax rate of 22%. Publicly listed companies and investments in “pioneer industries” or Special Economic Zones (SEZs) benefit from tax holidays and allowances.
• Disadvantages: The system is complex and compliance-intensive with frequent regulatory updates. Mandatory transfer pricing documentation and frequent tax audits increase administrative costs and dispute risks.

Vietnam – Corporate Tax Advantages and Disadvantages 

• Advantages: Standard corporate tax rate is 20%. Preferential rates (as low as 10%) and tax holidays are available for high-tech projects and export-oriented manufacturing in industrial zones.
• Disadvantages: Tax administration is highly formalistic with strict documentation requirements. Interpretation and enforcement can vary significantly between provinces, creating legal uncertainty and potential delays in tax refunds

Administrative and Regulatory Efficiency in the ASEAN Region 

Effectiveness of Administration and Regulations The on-going long-term sustainability that can be achieved by businesses within ASEAN is dependent on the efficiency in administration and regulations. Uploading time, licensing process, reporting requirements and regulatory certainty can differ dramatically between jurisdictions. These distinctions not only have implications in terms of the costs of doing business and risk surrounding compliance, but also with respect to foreign investment capacity to synergize across activities more effectively.

Singapore – Administrative Advantages and Disadvantages H3

• Advantages

Singapore offers one of the most efficient and transparent administrative frameworks in the ASEAN Region. Company incorporation can generally be completed within a few days through the Accounting and Corporate Regulatory Authority (ACRA), and corporate, tax, and regulatory filings are fully digitalised. Regulatory guidance issued by authorities such as IRAS and the Monetary Authority of Singapore (MAS) is clear, publicly accessible, and consistently applied, providing foreign investors with a high level of legal certainty.

• Disadvantages

They are strict regulators, while also being efficient in the space. Singapore takes a zero-tolerance attitude towards non-compliance, so anything more than accidentally failing to meet basic filing, reporting or governance duties could see fines awarded. As such, even though procedures are simplified, companies still have to have a very strong internal compliance program and cannot count on flouting our requirements or administrative discretion.

Thailand – Administrative Advantages and Disadvantages

• Advantages

While Thailand has seen significant progress in modernising administrative processes, most notably in digital tax filings and online corporate registration at the DBD. BOI-promoted companies have easier licensing, one-stop approvals, and administrative support, helping to alleviate much of the bureaucratic hassle that burdens foreign investors who qualify.

• Disadvantages

Processes may still be distributed, and manual outside-BOI pushed buildings may still be used. Commercial activities may require obtaining licenses from multiple authorities, and the process can take longer than expected. In reality, it’s not always the case that Chinese government departments are consistent with one another in their administrative practices, or that their operational risk is higher than that of foreign-owned enterprises.

Hong Kong – Pros and Cons of Administrative Efficiency 

• Advantages

Hong Kong has an extremely well-run, business-friendly civil service with minimal red tape and manageable corporate compliance requirements. Incorporation of a company and subsequent annual filings with the Companies Registry and IRD are relatively simple, while regulatory requirements also benefit from the stability and predictability of a common law-based system.

• Disadvantages

The past few years have seen increased regulatory focus on AML/KYC and economic substance requirements, resulting in an inflated compliance burden for foreign-owned entities. Some of the content may serve as a basis for enforcement, even if you, at the end of the day, consider your system still efficient (as reflected in higher expectations for holding, trading, and offshore-oriented structures).

Indonesia – Administrative Pros and Cons of the time 

the new administrative 85 school system was void of any form of relationship to local democracy or detailed legislation establishing which groups were entitled to participate in it.

• Advantages

In Indonesia, substantial reforms have been introduced through the Online Single Submission (OSS) system, which centralises the handling of business licenses and investment approvals. Sponsored by the BKPM, this system has increased its transparency and shortened incorporation times (for foreign direct investment).

• Disadvantages

However, despite the above reforms, Indonesia remains a regulated and complex place to do business. Sector-specific restrictions, changes in laws, and differences in the attitudes of central versus regional authorities can still affect foreign investment approval processes. Regulatory turf wars and administrative inconsistency, as a result, remain obstacles for foreign investors.

Vietnam – The Administrative Pros and Cons 

• Advantages

The country actively encourages foreign investment in industrial and economic zones that offer centralised administrative services and simplified licensing. Such zones, it is argued, can offer a more streamlined interface with local agencies, especially for manufacturing and export-based projects.

• Disadvantages

Outside these areas, Vietnam’s bureaucratic model remains very formalistic and requires extensive documentation to be satisfied. Interpretation and enforcement of the regulations can vary across provinces, creating legal ambiguity for foreign-owned operators with national reach. Accordingly, discretionary intervention must be tailored to the prevailing local situation.