The Democratic Republic of Timor-Leste (the official name of East Timor) is a small island situated in Southeast Asia. After gaining independence from Indonesia in 2002, the country has witnessed steady but slow economic growth. Most of the population of around 1.3 million people is poor. Infrastructure is weak and limited.
East Timor has beautiful beaches, diverse rich culture, and tons of colonial architecture; however, the lack of infrastructure and widespread poverty impedes tourist activities in the country. The state has implemented various social and economic reforms to better the situation, but the results are yet to be seen.
Types of business structures in East Timor
During the past few years, the government of East Timor has brought in several reforms that are attracting local and foreign investments. Factors such as ease of registration, less documentation, and transparency have gained popularity. Here are a few business formats that are particularly in demand.
| S# | Type of business structure | Local name | Min. paid-up capital required |
| 1. | Sole Proprietorship | Proprietáriu nain | No paid-up capital required |
| 2. | Partnership | Parceria | No paid-up capital required |
| 3. | Limited Liability Company (LLC) | Kompañia Responsabilidade Limitada (KRL) | $1,000 |
| 4. | Public Limited Company (PLC) | Kompañia Públika (KP) | $10,000 |
| 5. | Cooperative | Kooperativa | No paid-up capital required |
Sole Proprietary Business
A sole-ownership business is owned and operated by a single person. The individual owner is responsible to bring in the investment, manage operations, and all the debts and liabilities arising from the business. Usually preferred by skilled professionals such as lawyers, advocates, tax experts, retailers, etc.
Partnership
Two or more natural persons share skills and capital in a partnership format. Similar to a sole ownership business, partners are responsible for liabilities in a personal capacity. However, the partners can be categorized as limited partners in which their responsibilities towards debts are limited to their share in the business, while general partners assume full responsibility.
Limited Liability Company
A limited liability company is a formal business structure that provides legal cover to the owners against debts and liabilities. In the event of loss or debt or both, the company is responsible to compensate the customers, stakeholders, authorities, etc. while the owners go scot-free.
Cooperative
A cooperative is generally established to facilitate its owners, referred to as members. The members serve society through the goods and services they offer in general, and the members in particular. The profits gained from the operations are shared among the members in the ratios agreed upon mutually.
Cost of registering a company in East Timor
The registration process of companies in East Timor is simple and inexpensive. Depending on the type of company, nature of business, and location, the cost may vary.
Here are a few costs that should be budgeted:
Sole Proprietorship
The cost of registering a sole proprietorship is relatively low and mainly involves registering for a business license, which can cost around $100 to $200.
Partnership
The cost of registering a partnership is similar to that of a sole proprietorship, which involves obtaining a business license.
Limited Liability Company (LLC)
The cost of registering an LLC is higher than that of a sole proprietorship or partnership. The fees involved in registering an LLC can range from $500 to $1,000, depending on the authorized capital and the professional fees charged by lawyers or consultants.
Public Limited Company (PLC)
The cost of registering a PLC is the highest among the different business structures in East Timor. The fees involved in registering a PLC can range from $1,000 to $2,000 or more, depending on the authorized capital and the professional fees charged by lawyers or consultants.
It is important to note that these costs are only estimates and may vary depending on the specific requirements and circumstances of each individual case. Additionally, there may be ongoing fees and taxes that businesses need to pay after registration.
Cost involved in doing business in East Timor
The cost of doing business in East Timor is subject to change depending on various factors such as the size, nature, business, industry/sector, and location of the business. Here are some of the major costs that businesses may encounter when operating in East Timor:
Labor costs
Labor costs in East Timor are relatively low compared to other countries in the region. The minimum wage in East Timor is currently $170 per month.
Taxes and fees
Businesses in East Timor are subject to various taxes and fees, including corporate income tax, value-added tax (VAT), and customs duties. The corporate income tax rate is 10%, while the VAT rate is 2%.
Infrastructure and utilities
The cost of infrastructure and utilities in East Timor can be high due to the limited availability and high cost of resources such as electricity, water, and telecommunications.
Transportation costs
Transportation costs in East Timor can also be high due to the limited road network and the need to rely on air or sea transportation for imports and exports.
Legal and regulatory compliance costs
Businesses in East Timor are subject to various legal and regulatory requirements, which can involve additional costs for compliance.
It is important to note that these costs are only estimates and may vary depending on the specific circumstances and requirements of each business. Additionally, there may be other costs and challenges that businesses need to consider when operating in East Timor.
Benefits of registering a company in East Timor
East Timor is on the path to economic reforms. A number of incentives provided to businesses; especially foreign-owned companies is one of the attractions for investors. Additionally, flexible tax rates and other such policies are highly conducive to growth.
Here are a few other advantages of registering a company in East Timor:
Strategic location
East Timor is strategically located in Southeast Asia, providing access to important markets such as Indonesia, Australia, and New Zealand.
Natural resources
East Timor has abundant natural resources, including oil and gas reserves, minerals, and agricultural land, providing opportunities for businesses in various sectors.
Low labor costs
Labor costs in East Timor are relatively low compared to other countries in the region, making it an attractive location for businesses that require a large workforce.
Simple registration process
The process of registering a company in East Timor is relatively simple and straightforward, with minimal bureaucratic red tape.
Favorable tax policies
East Timor has a favorable tax regime, with a low corporate income tax rate of 10% and a VAT rate of 2%.
Government support
The government of East Timor is actively promoting foreign investment and has established several programs and incentives to support businesses.
Growing economy
East Timor’s economy is growing rapidly, with increasing opportunities for businesses in various sectors.
