Vietnam vs Indonesia: Which ASEAN Market Should You Expand Into First?

Two different reasons to be there#

Founders comparing Vietnam vs Indonesia business expansion are often comparing two different strategies without realising it.

Vietnam is a production and services base that happens to have a fast-growing domestic market. Its economy grew 8.02% in 2025 — the fastest in the region — and the World Bank projects 6.3% for 2026, again the best in East Asia and the Pacific. Its 101 million people are young, urbanising and increasingly affluent, but the country's gravitational pull for foreign capital is still manufacturing, software engineering and export-oriented services.

Indonesia is a market. With around 284 million people, the fourth-largest population in the world and a GDP roughly 1.3 trillion US dollars, it is the only ASEAN economy where a purely domestic business can reach real scale. Growth is steadier rather than spectacular — the World Bank projects 5.0% for 2026 — and the regulatory environment is designed to extract local participation from foreign entrants.

If your revenue comes from customers outside the country, the comparison leans Vietnam. If your revenue comes from customers inside it, Indonesia's size is the argument. The rest of this guide is about what each choice costs you to execute.

The setup comparison in one table#

Every row above changed in the past three years. Vietnam's tiered corporate tax and its rules on foreign capital transfers arrived with the October 2025 CIT law; Indonesia cut its paid-up capital requirement by three quarters the same month. Verify against the source before you commit capital.

Capital: Indonesia's threshold is the first filter#

Indonesia's minimum capital rule is where most small foreign entrants stop.

Until October 2025 a PT PMA needed IDR 10 billion of paid-up capital. Minister of Investment Regulation No. 5 of 2025 cut that to IDR 2.5 billion, roughly US$150,000, in line with the risk-based licensing regulation PP 28/2025. That is a material relaxation. But the total investment plan must still exceed IDR 10 billion — roughly US$600,000 — for each business line (KBLI code) at each location, excluding land and buildings. A company registering two unrelated activities plans for IDR 20 billion. The plan is a commitment you report on quarterly through the investment ministry's system, not a figure you write once and forget.

Vietnam has no statutory minimum for most sectors. The licensing authority assesses whether the registered charter capital is adequate for the project described in the IRC application, and in practice a services company registering with a few tens of thousands of US dollars is routinely approved. The capital figure has a second-order effect founders miss: a foreign investor contributing less than VND 3 billion (about US$115,000) is not exempt from Vietnam's work-permit requirement, so a thinly capitalised company makes it harder for its own founder to work there legally.

Ownership: both say 100%, neither means it everywhere#

Both countries permit wholly foreign-owned companies in the majority of sectors, and both keep lists.

Vietnam's conditional sectors track its WTO schedule of commitments: advertising, logistics, tourism, some education and distribution activities carry caps or require a local partner, and anything outside the WTO schedule is assessed case by case. Software, consulting, most manufacturing and trading are open.

Indonesia's Positive Investment List, in force since 2021, replaced a longer negative list and opened many sectors fully. Restrictions concentrate in retail below a certain floor area, some logistics and distribution activities, media, and sectors reserved for micro, small and medium enterprises or requiring partnership with them. Most technology, manufacturing and professional services are open at 100%.

The practical difference is not the lists. It is the multiplier: Indonesia applies its capital thresholds per business line, so a company that wants to both distribute a product and provide services around it registers two KBLI codes and doubles its investment plan. Vietnam registers multiple business lines on one ERC without a capital multiplier.

Tax: a two-point headline gap that treaty rules widen#

Vietnam's standard corporate income tax is 20%. The CIT law in force from 1 October 2025 adds 15% for enterprises with annual revenue up to VND 3 billion and 17% for revenue up to VND 50 billion — but excludes subsidiaries and related companies of groups that do not themselves qualify, so a foreign group's Vietnamese subsidiary should plan on 20%. Newly established foreign-invested enterprises in encouraged sectors and locations continue to receive tax holidays, typically a period of exemption followed by a period at half rate.

Indonesia's standard rate is 22%. Small enterprises with turnover up to IDR 4.8 billion may elect a 0.5% final tax on gross turnover for a limited number of years, and companies with turnover up to IDR 50 billion receive a 50% reduction on the portion of income corresponding to IDR 4.8 billion of turnover. Foreign-owned companies of any size can use these where they qualify.

The larger gap is what happens when profit leaves. Vietnam does not withhold tax on dividends paid to a corporate shareholder. Indonesia withholds 20% on dividends to non-residents, reduced to 10% or 15% under the Indonesia–Singapore treaty depending on the shareholding, and to similar rates under its other treaties. For a Singapore-parented group extracting US$1 million a year, the Indonesian subsidiary hands over US$100,000–150,000 more at the border than the Vietnamese one. That flow is the reason entry structure matters — see below.

VAT is closer than it looks. Vietnam's standard rate is 10%, but the temporary reduction to 8% for most goods and services has been extended through 31 December 2026. Indonesia raised its headline VAT to 12% from 1 January 2025, then applied it on a reduced base so that non-luxury goods and services bear an effective 11%. Neither is a cost to a business that recovers input VAT; both are a cash-flow and compliance burden.

Setup mechanics: Vietnam is a two-certificate process, Indonesia is one portal#

Vietnam. A foreign investor first applies to the provincial Department of Finance (formerly Planning and Investment) for an Investment Registration Certificate describing the project, capital and location. Statutory processing is 15 working days; in practice allow three to four weeks including document legalisation. The Enterprise Registration Certificate follows in three to five working days. Then the seal, tax registration, a direct investment capital account at a Vietnamese bank, capital contribution within 90 days, and any sub-licences the sector needs. A realistic end-to-end timeline for a standard services or trading company is four to eight weeks; conditional sectors take longer because the IRC stage involves ministry consultation.

Indonesia. Since risk-based licensing, a PT PMA is incorporated through a notary (deed of establishment, approval by the Ministry of Law) and licensed through the OSS portal, which issues the Business Identification Number and the sector licences appropriate to the activity's risk level. Low-risk activities are licensed on registration; higher-risk ones need verified standard certificates or full licences. A standard PT PMA is typically bank-ready in three to six weeks. The complexity moves to after incorporation: quarterly investment activity reports, the work and stay permits for any foreign director, and the sector-specific certificates that the risk-based system defers rather than removes.

People: hiring, permits and the resident-officer rule#

Vietnam requires at least one legal representative who resides in Vietnam. A foreign founder can hold the role, but must then obtain a temporary residence card and, unless exempt, a work permit. Companies that cannot station a founder appoint a local legal representative — a role with real personal liability, which is why it is not a nominee arrangement and should not be priced like one.

Indonesia requires at least one director and one commissioner. Foreigners can hold both roles, but a foreign director needs a work permit and limited stay permit, and companies in most sectors are expected to hire and train Indonesian staff alongside expatriate positions. Labour law is protective: termination is procedural and severance is generous by regional standards. Indonesia's minimum wages are set provincially; Jakarta's is above VND-equivalent levels in Hanoi and Ho Chi Minh City, though both remain far below Singapore.

Vietnam's advantage on talent is depth in engineering and manufacturing at a low cost base. Indonesia's is the sheer size of its workforce and its consumer-facing skills. Neither is a substitute for the other.

Repatriation and control#

Vietnam channels foreign capital and profit through the direct investment capital account: contributions come in through it, and dividends and capital go out through it after audited accounts and tax obligations are settled. Profit remittance is annual and documented; it works, but it is not instantaneous.

Indonesia has no capital-account gatekeeping of that kind — dividends can be paid once approved and taxes withheld — but the withholding tax bite is larger and the reporting on investment realisation is heavier.

Why most groups should enter through Singapore#

Almost none of the above argues for entering either market directly from a US, European, Indian or Australian parent.

A Singapore holding company between the founders and the operating subsidiary changes three numbers. It brings the Indonesian dividend withholding rate down from 20% to 10% or 15% under the Indonesia–Singapore treaty. It receives those dividends tax-free in Singapore under the foreign-sourced income exemption, because both Vietnam (20%) and Indonesia (22%) clear Singapore's 15% headline-rate test. And it sits in a jurisdiction where the exit — selling the Vietnamese or Indonesian subsidiary — attracts no capital gains tax. Singapore's own corporate tax is 17% with start-up exemptions, and the comparison with its nearest neighbour is set out in Singapore vs Malaysia for foreign founders. It also gives the group a place to open a bank account in days rather than weeks, hire regional staff on Employment Passes, and sign contracts under a legal system every counterparty accepts.

The structure is explained in full in our guide to holding company structures for Asia. The short version: decide Vietnam or Indonesia on the market; decide Singapore on the structure.

The decision rule#

• Export-oriented manufacturing, software engineering, outsourced services, or a lean market test with under US$200,000: Vietnam. Lower capital hurdle, faster growth, no dividend withholding, and a licensing process that is bureaucratic but predictable.
• Consumer products, fintech, logistics, healthcare or anything where domestic demand is the thesis: Indonesia. The market is four times the size, and the capital and reporting requirements are the price of admission.
• Both, eventually: Singapore parent first, then the market where your first customers are. Sequencing the second entry through a Singapore holding company costs less than restructuring later.
• Neither is the right first move if you have no one able to reside in the country as the legal representative or director. Consider an employer-of-record arrangement to hire locally while you decide — see EOR vs setting up an entity in Asia.

The next step#

Choosing the market is half the decision; executing the setup is the other half, and both Vietnam and Indonesia punish thin documentation, wrong KBLI or business-line choices and under-planned capital. Tell us which market you are leaning toward, where your founders live and how much you intend to commit, and we will introduce you to up to three vetted corporate service providers who set up foreign-owned companies in that market — plus the Singapore holding structure if you want it — within 24 hours, free and with no obligation. Our Vietnam and Indonesia panels are still growing, and we will be straight with you about who we can and cannot cover today.