How a Malaysian Manufacturing Company Used a BVI Holding Structure to Enter Indonesia Without Tax Leakage

When you run a profitable manufacturing business in one Southeast Asian market and want to expand regionally, the structure you choose determines whether you keep your profits or lose them to tax leakage, partner disputes, and regulatory complications.

This case study follows a Malaysian electronic components manufacturer that used a British Virgin Islands holding company to enter the Indonesian market in 2019. The structure allowed them to expand manufacturing capacity, protect intellectual property, avoid double taxation, and maintain control when their Indonesian partner later tried to push them out.

The company name has been changed to TechFab Malaysia, but the structure, challenges, and outcomes are real and applicable to any mid-market manufacturer expanding across Southeast Asia.

The Company: Profitable in Malaysia, Blocked in Indonesia

TechFab Malaysia: The Starting Position

TechFab Malaysia manufactured specialised electronic components for industrial automation systems. Founded in 2009 in Penang, they supplied automotive manufacturers, semiconductor equipment makers, and industrial robotics companies across Malaysia, Singapore, and Thailand.

By 2018, the company had:

• Annual revenue of MYR 85 million (approximately GBP 16 million)

• 180 employees across manufacturing, engineering, and sales

• Two manufacturing facilities in Penang and Johor Bahru

• Strong relationships with Japanese and Taiwanese OEM customers

The business was profitable, well-managed, and ready to scale.

The Indonesia Opportunity

In late 2018, three of TechFab's largest customers announced plans to build new manufacturing plants in Indonesia. Indonesia was rapidly becoming Southeast Asia's alternative manufacturing hub, with government incentives attracting automotive and electronics companies away from higher-cost Malaysia and Thailand.

The customers made it clear: if TechFab wanted to continue supplying them, they needed local presence in Indonesia. Shipping components from Malaysia to Indonesia created:

• 14-21 day lead times (too slow for just-in-time manufacturing)

• 10-15% import duties on finished components

• Currency volatility risk (IDR fluctuations could wipe out margins)

TechFab's Managing Director, Ahmad (not his real name), faced a decision: enter Indonesia now whilst customers were still loyal, or risk losing GBP 4-5 million in annual revenue to Indonesian competitors.

The Indonesia Entry Problem: Four Structural Barriers

Ahmad couldn't simply open a subsidiary in Indonesia and start manufacturing. Indonesian regulations, partner risks, and tax exposure created four specific barriers.

Barrier 1: Foreign Ownership Restrictions

Indonesia's 2018 Negative Investment List restricted foreign ownership in certain manufacturing sectors. Electronic components manufacturing required minimum 50% Indonesian ownership if the company wanted access to local government contracts and incentives.

Ahmad needed an Indonesian partner. But Indonesian corporate law gives minority shareholders significant blocking rights. A 50/50 structure meant deadlock risk if partners disagreed on capital allocation, dividend policy, or expansion strategy.

Barrier 2: Technology and IP Protection

TechFab's competitive advantage came from proprietary manufacturing processes developed over ten years. These processes weren't patented (patents require public disclosure), but were kept as trade secrets.

Setting up manufacturing in Indonesia meant transferring technical drawings, process documentation, and training Indonesian engineers. If the partnership failed, Ahmad risked his Indonesian partner continuing to manufacture using TechFab's IP without authorisation.

Indonesian IP enforcement is weak. Even with non-compete clauses and confidentiality agreements, enforcing those agreements through Indonesian courts would take years and might not succeed.

Barrier 3: Double Taxation Without Treaty Protection

Malaysia and Indonesia have a double taxation avoidance agreement, but it doesn't eliminate tax leakage when profits move between countries.

Here's what would have happened with a direct Malaysian-to-Indonesian subsidiary structure:

• Indonesian subsidiary pays 22% corporate tax on profits in Indonesia

• When Indonesian subsidiary pays dividends to Malaysian parent, Indonesia withholds 10% withholding tax

• Malaysian parent receives dividends and pays Malaysian corporate tax (24%), with foreign tax credit for Indonesian taxes paid

• Total effective tax rate: approximately 35-38% after all layers

For a business targeting EBITDA margins of 18-20%, this tax leakage would cut net margins to single digits.

Barrier 4: Exit Risk and Capital Repatriation

If the Indonesia venture failed or if TechFab wanted to exit after five years, extracting capital from Indonesia would be difficult. Indonesian foreign investment regulations require repatriation approvals, currency controls can delay transfers, and liquidating a JV with a local partner often triggers disputes over asset valuations.

Ahmad needed a structure that allowed clean exit without being held hostage by an Indonesian partner or regulatory delays.

The Solution: BVI Holding Company with Indonesian Operating Subsidiary

After consulting with cross-border tax advisers and corporate lawyers in Singapore, Ahmad established a British Virgin Islands holding company to sit above the Indonesian operating entity.

Structure Design

Layer 1: TechFab Malaysia Sdn Bhd (Malaysian parent company)

• Owned by Ahmad (70%) and two co-founders (15% each)

• Continues to operate Malaysian manufacturing facilities

• Holds 100% ownership of TechFab BVI

Layer 2: TechFab Holdings Ltd (BVI company)

• 100% owned by TechFab Malaysia

• Holds 50% ownership of Indonesian JV

• Licenses manufacturing IP to Indonesian JV through formal IP licensing agreement

• Receives dividends from Indonesian JV and royalty payments for IP usage

Layer 3: PT TechFab Indonesia (Indonesian PT PMA foreign investment company)

• 50% owned by TechFab BVI

• 50% owned by Indonesian partner (local manufacturing investor with experience in electronics)

• Operates Indonesian manufacturing facility

• Pays royalties to TechFab BVI for use of manufacturing processes and technical know-how

This three-layer structure solved all four barriers whilst keeping control with TechFab Malaysia.

Why BVI Specifically?

Ahmad considered several jurisdictions for the holding company: Singapore, Hong Kong, Cayman Islands, and BVI. BVI won for specific reasons relevant to manufacturing JVs in Indonesia.

Tax Neutrality

BVI imposes zero corporate tax, zero capital gains tax, zero withholding tax on dividends paid out, and zero withholding tax on royalties received. This means:

• Dividends from Indonesian JV to BVI company: taxed once in Indonesia (10% withholding), then zero tax in BVI

• Royalties from Indonesian JV to BVI company: taxed in Indonesia (subject to treaty rates), then zero tax in BVI

• When BVI company pays dividends up to Malaysian parent: zero BVI withholding tax

The BVI layer eliminates one full layer of taxation that would exist in a Singapore or Hong Kong structure (both tax corporate income at 17-18%).

Flexible Corporate Governance

BVI corporate law allows extreme flexibility in shareholder agreements. TechFab BVI's articles of association included:

• Drag-along rights (if TechFab Malaysia wants to sell the Indonesian JV, the Indonesian partner must sell at the same valuation)

• Pre-emptive rights (if the Indonesian partner wants to exit, TechFab Malaysia has first right to buy their shares)

• Deadlock resolution mechanisms (if shareholders can't agree on key decisions, the matter goes to binding arbitration in Singapore, not Indonesian courts)

This governance flexibility protected TechFab from partner disputes that commonly derail Southeast Asian JVs.

IP Licensing Structure

BVI law recognises intangible assets (trade secrets, know-how, technical processes) as licensable property. The IP licensing agreement between TechFab BVI and PT TechFab Indonesia was enforceable under both BVI and Indonesian law.

Royalty rates: 5% of Indonesian subsidiary revenue, paid quarterly. This royalty structure achieved two goals:

• Extracted profits from Indonesia in a tax-efficient way (royalties are deductible expenses for the Indonesian entity, reducing its taxable income)

• Created ongoing financial dependency (if the Indonesian partner tried to cut TechFab out, stopping royalty payments would trigger immediate breach of contract and potential shutdown of operations)

The IP remained legally owned by TechFab BVI, licensed (not transferred) to Indonesia. If the partnership failed, TechFab could terminate the license and the Indonesian entity would lose legal right to use the manufacturing processes.

Banking and Investment Access

BVI companies are widely accepted by regional and international banks. TechFab BVI opened accounts at:

• HSBC (Hong Kong and Singapore branches) for regional cash management

• Bank Mandiri (Indonesia) for local Indonesian transactions

Having a BVI holding company made banking straightforward. Indonesian banks recognise BVI entities as legitimate foreign investors, and Tier 1 international banks provide BVI companies with multi-currency accounts and trade finance facilities.

Simplicity and Speed

BVI company formation takes 3-5 business days. The entire structure (BVI company formation, shareholder agreements, IP licensing agreements, Indonesian JV registration) was completed in 11 weeks from decision to operational readiness.

Singapore or Hong Kong holding companies would have required substance requirements (real employees, real office, real business activity in Singapore/Hong Kong) to satisfy tax authorities. BVI requires no substance for pure holding companies, reducing setup complexity and ongoing compliance burden.

Implementation: The First 18 Months (2019-2020)

Here's exactly what happened when TechFab executed the BVI structure and entered Indonesia.

Month 1-3: Structure Formation and Partner Selection

BVI Company Formation (Month 1)
TechFab Malaysia engaged a Singapore-based corporate services firm licensed as a BVI registered agent. Within 5 business days, TechFab Holdings Ltd was incorporated in BVI with:

• Authorised share capital: USD 10 million

• Issued share capital: USD 50,000 (TechFab Malaysia subscribed for 50,000 shares at USD 1 per share)

• Directors: Ahmad and TechFab Malaysia's CFO

• Registered agent: Singapore corporate services firm (BVI law requires all BVI companies to have a registered agent)

Indonesian Partner Due Diligence (Month 1-2)
Ahmad's team identified three potential Indonesian manufacturing partners through industry connections and Malaysian trade mission contacts. Due diligence focused on:

• Manufacturing capability (existing facilities, quality certifications, workforce experience)

• Financial stability (audited accounts, bank references, credit history)

• Reputation (customer references, litigation history, regulatory compliance record)

The selected partner, an Indonesian family-owned electronics contract manufacturer with 25 years operating history, had facilities in Bekasi (West Java) and existing relationships with Japanese automotive OEMs.

Shareholder Agreement Negotiation (Month 2-3)
The shareholder agreement took 6 weeks to finalise. Key negotiated terms:

• Capital contributions: TechFab BVI would inject USD 2 million, Indonesian partner would inject USD 2 million (50/50 equity)

• Board composition: 2 directors appointed by TechFab, 2 directors appointed by Indonesian partner, with chairman rotating annually

• Reserved matters requiring unanimous approval: additional capital calls, dividend policy, sale of company, borrowing above USD 500,000

• Deadlock resolution: If unanimous approval cannot be reached within 60 days, matter goes to Singapore International Arbitration Centre

• IP ownership: All manufacturing IP remains owned by TechFab BVI, licensed to PT TechFab Indonesia under separate licensing agreement

Ahmad ensured the shareholder agreement was governed by Singapore law and subject to Singapore arbitration. This meant disputes would be resolved in a neutral, efficient jurisdiction, not Indonesian courts where local partners typically have advantage.

Month 4-8: Indonesian Entity Formation and Licensing

PT PMA Registration (Month 4-6)
Indonesia requires foreign investment companies (PT PMA) to navigate BKPM (Indonesia Investment Coordinating Board) approval, local permits, and sector-specific licenses. The process took 9 weeks:

• BKPM investment approval (proving the JV met minimum capital requirements and industry criteria)

• NIB (business identification number) from OSS (Indonesia's online single submission system)

• Import licenses (allowing duty-free import of machinery and raw materials during construction phase)

• Environmental permits (required for manufacturing facilities)

TechFab hired a Jakarta-based corporate services firm to handle permits and liaise with Indonesian ministries. This was money well spent, as navigating Indonesian bureaucracy without local expertise can stretch timelines by months.

IP Licensing Agreement (Month 5)
Simultaneously with PT PMA registration, TechFab BVI and PT TechFab Indonesia executed the IP licensing agreement:

• Licensed IP: Manufacturing processes, technical drawings, quality control procedures, and supplier specifications for TechFab's proprietary component designs

• Royalty rate: 5% of PT TechFab Indonesia's quarterly revenue

• Payment terms: Quarterly in arrears, paid to TechFab BVI's HSBC Hong Kong account in USD

• Term: 10 years, automatically renewable unless either party terminates with 12 months' notice

• Termination rights: TechFab BVI could terminate immediately if royalties were unpaid for 60 days or if PT TechFab Indonesia breached confidentiality obligations

The licensing agreement was governed by Singapore law. This meant Indonesian courts would enforce it (Indonesia recognises Singapore court judgments under ASEAN legal frameworks), but disputes would be arbitrated in Singapore, not Indonesia.

Facility Setup and Equipment Transfer (Month 6-8)
PT TechFab Indonesia leased a 3,500 square metre facility in Bekasi Industrial Park. TechFab Malaysia shipped precision manufacturing equipment from its Penang facility to Indonesia (USD 800,000 in machinery), claiming duty-free import under Indonesia's investment incentive scheme.

TechFab engineers spent 8 weeks in Indonesia training the Indonesian workforce (42 operators and 6 engineers initially) on manufacturing processes, quality standards, and equipment operation. All training was documented under the IP licensing agreement as part of TechFab BVI's know-how transfer obligations.

Month 9-12: Operational Ramp-Up

First Production Run (Month 9)
PT TechFab Indonesia produced its first commercial batch in September 2019. Yield rates were lower than Malaysia (78% vs 92% in Malaysia), but acceptable for early-stage operations. TechFab engineers continued to visit monthly to refine processes.

Customer Qualification (Month 10-12)
TechFab's Japanese OEM customers conducted supplier audits of the Indonesian facility. All three customers approved PT TechFab Indonesia as a qualified supplier by December 2019, allowing TechFab to transition supply from Malaysia to Indonesia for Indonesia-destined orders.

Year 2: Revenue Ramp and Profitability

Revenue Growth

• 2020 Q1-Q2: IDR 18 billion (approximately GBP 900,000)

• 2020 Q3-Q4: IDR 32 billion (approximately GBP 1.6 million)

• Full year 2020: IDR 50 billion (approximately GBP 2.5 million)

Profitability
PT TechFab Indonesia reached breakeven in Q3 2020 (6 months after first commercial production). EBITDA margin stabilised at 16% by Q4 2020, slightly below Malaysia's 19% but acceptable for a new facility ramping production.

Royalty Payments
TechFab BVI received IDR 2.5 billion (GBP 125,000) in royalty payments in 2020 (5% of IDR 50 billion revenue). After Indonesian withholding tax on royalties (10%), net royalty income to BVI was IDR 2.25 billion. Because BVI imposes no corporate tax, this income reached TechFab BVI tax-free (other than the 10% Indonesian withholding, which was treaty-protected and lower than the statutory 20% rate).

Crisis Tested: The Partner Dispute (Year 3, 2021)

In mid-2021, the Indonesian partner attempted to push TechFab out of the JV. This became the first real test of whether the BVI structure actually protected TechFab's interests.

The Dispute Trigger

By 2021, PT TechFab Indonesia was generating IDR 85 billion annually (GBP 4.2 million) with healthy EBITDA margins of 18%. The Indonesian partner, seeing the profitability, proposed:

• Stop paying royalties to TechFab BVI (arguing that Indonesian engineers had now mastered the processes and no longer needed TechFab's know-how)

• Buy out TechFab BVI's 50% shareholding at book value (approximately USD 2.2 million, the original capital injection plus retained earnings)

• Continue the supply relationship with TechFab Malaysia as a regular customer (buying components at market rates, not as a JV partner)

Ahmad refused. The royalty payments were contractually obligated, and selling at book value would dramatically undervalue the business (IDR 85 billion revenue with 18% EBITDA suggested a valuation of USD 8-10 million, not USD 2.2 million).

The Indonesian partner escalated: they stopped paying royalties in June 2021, citing "commercial disagreement" and "re-evaluation of IP value".

The BVI Structure Protection

Because the IP licensing agreement was governed by Singapore law and subject to Singapore arbitration, Ahmad's legal team immediately:

• Issued a notice of breach under the licensing agreement (unpaid royalties for 60+ days triggered material breach)

• Threatened termination of the IP license (which would have shut down PT TechFab Indonesia's legal right to manufacture using TechFab's processes)

• Filed for emergency arbitration at Singapore International Arbitration Centre (seeking interim relief to freeze PT TechFab Indonesia's bank accounts until royalties were paid)

Critically, the BVI structure meant Ahmad controlled the IP at the holding company level, not at the Indonesian operating company level.The Indonesian partner owned 50% of PT TechFab Indonesia, but owned 0% of TechFab BVI, which held the IP.

Under Indonesian law, if TechFab BVI terminated the licensing agreement, PT TechFab Indonesia would lose its legal right to use the manufacturing processes. Customers would not accept components manufactured without proper IP licensing (Japanese OEMs require full IP compliance in supplier contracts).

The Indonesian partner's lawyers quickly realised their position was weak. Terminating the license would force PT TechFab Indonesia to shut down operations. Fighting in Singapore arbitration (not Indonesian courts where they had home advantage) would be expensive and likely unsuccessful.

The Settlement

Within 8 weeks, the parties settled:

• Indonesian partner paid all overdue royalties plus interest

• Royalty agreement remained in place with no changes

• TechFab BVI retained its 50% shareholding

• Both parties agreed to a formal exit mechanism: either party could trigger a buy-sell process starting in 2024 (year 5), with independent valuation by a Big 4 accounting firm

Ahmad's position was preserved entirely. The BVI structure, combined with Singapore law governance and IP ownership at the holding company level, made it impossible for the Indonesian partner to push TechFab out without destroying the business.

Results After 5 Years (2019-2024)

By 2024, the BVI structure delivered measurable outcomes across financial, operational, and strategic dimensions.

Financial Performance

PT TechFab Indonesia Revenue Growth

• 2020: IDR 50 billion (year 1)

• 2021: IDR 85 billion (year 2)

• 2022: IDR 128 billion (year 3)

• 2023: IDR 165 billion (year 4)

• 2024: IDR 192 billion (year 5, approximately GBP 9.5 million)

Profitability

• EBITDA margin stabilised at 18-19% by year 3

• Net profit after Indonesian corporate tax (22%): approximately IDR 27 billion annually by year 5 (GBP 1.35 million)

Royalty Payments to TechFab BVI
Over 5 years, TechFab BVI received IDR 31 billion (GBP 1.55 million) in royalty payments (5% of cumulative revenue of IDR 620 billion). After Indonesian withholding tax, net royalties received: IDR 27.9 billion.

Because BVI imposes no tax on this income, TechFab BVI retained 90% of gross royalties (only the 10% Indonesian withholding was lost). In a Singapore or Hong Kong structure, an additional 17-18% corporate tax would have applied, reducing net retention to approximately 74% of gross royalties. Tax savings from BVI structure over 5 years: approximately IDR 5 billion (GBP 250,000).

Dividend Distributions
PT TechFab Indonesia paid dividends to shareholders in years 3-5 (after initial growth capital requirements were met):

• Year 3: IDR 8 billion total (IDR 4 billion to TechFab BVI, IDR 4 billion to Indonesian partner)

• Year 4: IDR 12 billion total (IDR 6 billion to each shareholder)

• Year 5: IDR 15 billion total (IDR 7.5 billion to each shareholder)

Total dividends received by TechFab BVI over 3 years: IDR 17.5 billion (GBP 875,000). Indonesian withholding tax on dividends: 10%, so net dividends received by BVI: IDR 15.75 billion. Again, no further tax in BVI.

When TechFab BVI distributed these funds up to TechFab Malaysia (the Malaysian parent company), BVI imposed zero withholding tax. TechFab Malaysia paid Malaysian corporate tax on the dividends received (after foreign tax credit for Indonesian taxes already paid), but the BVI layer ensured no additional tax leakage occurred.

Tax Efficiency Summary

Total cash extracted from Indonesia to TechFab group over 5 years:

• Royalties (net): IDR 27.9 billion

• Dividends (net): IDR 15.75 billion

• Total: IDR 43.65 billion (approximately GBP 2.18 million)

Tax paid:

• Indonesian withholding tax on royalties and dividends: IDR 5.25 billion (10% on gross payments)

• BVI tax: Zero

• Effective tax rate on extracted cash: 10.7%

Alternative scenario without BVI structure (direct Malaysian parent to Indonesian subsidiary):

• Same cash extraction, but Singapore/Malaysia tax on royalties and dividends: additional 8-10% after foreign tax credits

• Estimated total effective tax rate: 19-21%

Tax saved by using BVI structure over 5 years: approximately IDR 3.6-4.5 billion (GBP 180,000-225,000).

Operational Outcomes

Manufacturing Capacity
PT TechFab Indonesia grew from 42 operators in year 1 to 128 employees by year 5. Production capacity increased from 12 million components annually (year 1) to 45 million components annually (year 5).

Customer Diversification
Initially serving three Japanese OEM customers, PT TechFab Indonesia added seven new customers by year 5, including European automotive suppliers and American industrial robotics companies establishing Southeast Asian operations.

Quality Improvement
Manufacturing yield rates improved from 78% (year 1) to 91% (year 5), approaching Malaysian facility standards. PT TechFab Indonesia achieved ISO 9001 and IATF 16949 certifications by year 3, allowing it to compete for Tier 1 automotive supply contracts.

Strategic Protection

IP Ownership Maintained
All manufacturing IP remained owned by TechFab BVI throughout the 5-year period. The Indonesian partner never gained ownership of TechFab's proprietary processes, even as Indonesian engineers became proficient in executing them.

Exit Optionality Preserved
The shareholder agreement's buy-sell mechanism became exercisable in 2024. By year 5, independent valuations placed PT TechFab Indonesia's enterprise value at USD 12-14 million (approximately 0.7-0.8x revenue, typical for manufacturing businesses with strong customer relationships).

TechFab's 50% stake was therefore worth USD 6-7 million, compared to the original USD 2 million investment. Ahmad had the option to:

• Sell to the Indonesian partner at fair market value (realising a 3-3.5x return over 5 years)

• Buy out the Indonesian partner (taking 100% ownership of a profitable Indonesian manufacturing platform)

• Continue the 50/50 JV (if the partnership remained functional)

The BVI structure preserved all three options without forcing Ahmad into any particular path.

Partner Relationship Stabilisation

After the 2021 royalty dispute, the relationship between TechFab and the Indonesian partner stabilised. Both parties recognised that cooperation was more profitable than conflict. By year 5, the partners were discussing expansion into a second Indonesian facility in Surabaya (East Java) to serve customers in eastern Indonesia.

Lessons Learned: Ahmad's Reflections

Five years after establishing the BVI structure, Ahmad shared his key insights.

Lesson 1: Structure Decisions Before Expansion

"We almost went direct from Malaysia to Indonesia because we thought the BVI layer was just added complexity. Our tax adviser convinced us otherwise. Setting up the BVI company cost us maybe 6-8 weeks of extra time upfront, but it saved us during the royalty dispute and saved us significant tax over five years. Structure decisions need to happen before you enter the market, not after problems arise".

Lesson 2: IP Ownership at Holding Company Level

"The single most important decision was keeping IP ownership at the BVI level, not transferring it to the Indonesian entity. When our partner tried to stop paying royalties, we could threaten to shut down their license. If the IP had been transferred to Indonesia, we would have had no leverage. Manufacturing JVs in Southeast Asia always carry partner risk. Control the IP, control the outcome".

Lesson 3: Singapore Law Governance

"Indonesian courts favour Indonesian parties. We negotiated Singapore law and Singapore arbitration for all agreements. During the royalty dispute, our Indonesian partner's lawyers told them they couldn't win in Singapore arbitration. That forced settlement. Never agree to local law governance for cross-border JVs. Always pick a neutral jurisdiction with strong commercial courts".

Lesson 4: Royalty Payments Extract Value Continuously

"Dividends require both shareholders to agree. Royalties only require the licensing agreement, which we controlled. Even when our partner wanted to push us out, they couldn't stop the royalty obligations without breaching the licensing agreement. Royalties are a better mechanism than dividends for extracting value from JVs where you don't have majority control".

Lesson 5: Tax Efficiency Compounds Over Time

"The BVI structure saved us about GBP 250,000 in tax over five years. That might not sound enormous, but it's 11% of the total cash we extracted from Indonesia. We reinvested that saved tax into expanding the Indonesian facility, which generated additional revenue. Tax efficiency compounds when you're in growth mode".

When Does BVI Make Sense for Manufacturing Regional Expansion?

Not every manufacturer needs a BVI holding structure. Here's how to assess whether it fits.

You Likely Benefit If:

• You're expanding from one Southeast Asian country to another (Malaysia to Indonesia, Singapore to Vietnam, Thailand to Philippines)

• You're entering into a JV with a local partner who will own 30-50% of the local entity

• Your business depends on proprietary manufacturing processes, formulations, or technical know-how that you want to protect

• You plan to extract profits regularly (annual dividends or royalty payments back to your home country)

• You want neutral jurisdiction governance for shareholder agreements (not local courts where your partner has advantage)

• Your target annual revenue in the new market is at least USD 3-5 million within 3-5 years (otherwise the structure complexity may outweigh benefits)

Simpler Alternatives May Work If:

• You're opening a 100% owned subsidiary with no local partners (BVI holding still provides tax efficiency, but governance benefits are less critical)

• Your business has no proprietary IP worth protecting (commodity manufacturing, distribution, simple assembly)

• Your home country has a strong double taxation treaty with the target country that already minimises tax leakage

• You're testing the market with a small pilot operation (under USD 1 million initial investment)

Rule of thumb: BVI holding structures make economic sense when you're making a serious multi-year commitment to a new market (USD 2 million+ investment), working with local partners you don't fully trust, and expecting to generate USD 5-10 million+ annual revenue within 5 years.

Other Southeast Asian Expansion Paths

TechFab's BVI-Indonesia structure is replicable for other regional expansion scenarios.

BVI Holding for Vietnam Manufacturing

A Singaporean electronics manufacturer used the same structure to enter Vietnam in 2020. The BVI holding company licensed manufacturing IP to a Vietnamese JV, extracted royalties tax-efficiently, and maintained exit optionality when evaluating whether to expand or sell after three years.

BVI Holding for Philippines Distribution

A Thai FMCG company used a BVI holding structure to enter the Philippines via a distribution JV with a Manila-based logistics partner. The BVI company owned brand rights and licensed them to the Philippine entity, receiving royalties on sales whilst the local partner handled distribution.

BVI Holding for Multi-Country Rollout

A Malaysian industrial equipment manufacturer used one BVI holding company to own subsidiaries in Indonesia, Vietnam, and the Philippines simultaneously. The BVI company centralised treasury management, IP ownership, and regional strategy whilst each country operated independently at the local level.

What Happens Next

Manufacturers expanding regionally across Southeast Asia use BVI holding company structures to protect IP, minimise tax leakage, and maintain control when working with local partners.

We hold active licences as BVI registered agents and work with mid-market manufacturers, distributors, and industrial companies across the region. We help assess whether BVI structures fit your expansion plans, design holding company and JV structures, and implement them properly.

Book a free 20-minute regional expansion strategy audit. We'll review your expansion plans, assess your partner risks and tax exposure, and explain whether a BVI holding structure makes sense for your situation. No sales pressure. If direct subsidiary formation is simpler, we'll tell you straight.

Book Your Free Regional Expansion Strategy Audit

Exploring different structures? Read about How Family Offices Use Cayman Trusts for Multi-Generational Wealth Protection or learn about BVI Structures for Series B Tech Fundraising.