Nearly a third of Indian startup founders surveyed are considering moving abroad | Hacker News Reader

Nearly a third of Indian startup founders surveyed are considering moving abroad

tech.economictimes.indiatimes.com

68 pointsr_singh37 comments

India is becoming a popular destination for foreigners to chase their startup dreams[1]. Same source.

[1] https://tech.economictimes.indiatimes.com/news/startups/indi...

Most of those startups (like Saavn for example) are also registered and owned abroad (not only in India).

What would be their primary destination of choice, and what are the major factors preventing them from moving?

For us, its Singapore, low taxation rates, what we understand is low compliance and supports online operations. Proximity to India (5 hours by flight) makes it an ideal destination.

Factors Preventing - Nobody in my circle has this setup, making me worried about unknown challenges - Double Taxation issue. I am not clear what will be taxation liability, I have talked to multiple CAs and they all say multiple things - Transfer of IP - We are a product company and one of the CAs warned us that if we move IP of the product to the Singapore entity, it gets tricky to explain as IP was built with an Indian entity. Very gray area about this

So I would assume you would do development in India while HQ-ing the company in Singapore ? Because I think without having business revenue in Singapore, employee costs can be quite high.

What about finding workers and payroll costs?

A lot of India based SaaS companies register in Singapore or USA while keeping their entire dev team (and sometimes even the rest of it: sales, marketing, support, etc) in India.

The incentives being ease of international transactions, capital / debt availability, simpler tax policies.

You'd still need to file taxes in India right?

The company in India only has a fraction of the total revenues and barely any profits, reducing the tax liabilities significantly.

All major costs (payroll, devs, marketing etc.) are in India. The only cost is accounting/compliance which is again it seems is lesser compared to India.

We need to file taxes in India for operations done in India, yeah so that actually means that we are increasing the overhead of compliance (adding Singapore compliance). Benefits are better funding opportunities, lesser taxation and financial tools to work for your startup.

It sounds more like your company having an offshore shell company in a tax haven rather than actually moving. These things can work well for sales outside your home country - most multinationals do something like that.

The article says that the primary choices are USA, UK and Singapore.

I've seen a few companies register in USA, Singapore and Ireland. Primary destination would obviously vary based on the founder preferences, nature of the business, location of customers, etc.

I think the major factors preventing them from moving would be lack of knowledge / fear of the unknown, residing in India with profits accumulating abroad and immigration uncertainties.

What exactly "startup-friendly tax regime" does Singapore have and India doesn't?

https://inc42.com/features/the-curse-of-angel-tax-travelkhan...

In addition to incidents like these, corruption is widespread in India. Exports qualify for GST exemption or refund, but in practice refunds are hard to get (at least without a 5% or more bribe).

5% of how much, though? how much more than 5%?

5% (up to 15%) of the amount to be refunded, which for exporters is all of their GST, which can be up to 28% of the gross value of goods sold.

Just a twitter search for "GST refund bribe" will show a lot of examples.

Scary. Tells you about what a state drunk on its power can do; no wonder India is so big on 'digital transactions' (pushed, interestingly, by the likes of USAID).

Unnecessarily political comment. That too when the Angel Tax, started by the previous government in 2012 (to curb money laundering) (source: https://m.economictimes.com/news/economy/finance/et-in-the-c...), and was ended by this government in 2019 (source: https://techcrunch.com/2019/08/23/india-angel-tax/).

Angel Tax was not 'ended'. There are still many conditions under which it is still applicable, governing both who can invest in a startup and how the startup can spend its money. [1]

A bigger issue which is still applicable today is that long term capital gains tax on startups and other unlisted companies is still 28.5%, while for listed stocks it is 10%. [2]

There are some exemptions announced today for foreign investments until 2024 with a lock-in period of 3 years. [3]

[1] https://yourstory.com/2019/08/angel-tax-startups-angel-inves...

[2] https://www.business-standard.com/article/companies/higher-l...

[3] https://www.livemint.com/budget/news/budget-2020-full-text-o...

I used to run a startup in Singapore, and 0% corporate tax for the first 3 years, 0% capital gains tax, and 0% income tax on local dividends was a pretty sweet deal. (I'm not sure what the current corp tax rates are, but AFAIK the latter two are unchanged.)

I think Singapore does not apply capital gains tax for one. Has a simple corporate tax slab of %17 unlike India.

Another plus point is being able to keep profits in SGD as opposed to INR (which depreciates by 5% per year).

That’s unfortunate.

India should become an economic superpower in the next 25 to 50 years.

That would require broad adoption of Indian products and services outside of India.

They already have the second one.

Unfortunately that's only because they are cheap

Thats exactly what people said of China 15 years ago. Just a bunch of factories good for cheap knockoffs, not a place for high quality stuff. Now they have Tencent, Baidu, Huawei etc and a #2 spot in the global economy.

As someone put it: manufacturing is a ladder.

They also said the same of South Korea (LG, Samsung) and before that, Japan (Sharp, Sony) and Taiwan.

Can you explain further? What does it mean for it to be a ladder?

This is all my own interpretation, but it’s a bootstrapping problem. Feynman complained about a consulting gig he took to try to bootstrap STEM programs in South America. You need mentors to make more mentors. If you can’t send people off to train or coax people in, you’re left with whoever can intuit things on their own and explain them to others. That pair of skills is exceptionally rare.

If you are the first factory in an area, nobody knows what to do. So you make simple stuff with high tolerances as you build a base of skilled labor. and a customer base.

Then you ratchet up, and ratchet up, and get nicer customers and more cash and contacts and make products that require more and more sophisticated processes.

If you’re lucky, you make middle to high end stuff that few other people can before the exchange rate completely fucks you vs the next up and comer.

India is predicted to be #3 by 2050, almost equaling the US:

https://www.theatlantic.com/business/archive/2012/02/the-wor...

It can be a large economy, in part because there are 1.3bn inhabitants, but my point is that people consume services provided by Indian companies largely because they are cheap.

This does not seem true. Indian service sector is very good at its job barring a few bad apples. For example, FinTech industry has done a remarkable job of easing payments. Compare that to Germany where the service sector is just awful. Of course, German competency in manufacturing is far ahead of India right now. It would be great to see both countries fixing up their weak areas in the future.

That may be true but Indian fintech is for domestic use and we are talking about exported services.

It can't. The people's attitude should change first.

If they survive that long...

Yeah yeah, I know, climate change is not real.

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