When an IT company decides to expand internationally, the first questions are usually practical ones.
Where should we incorporate?
Do we need a local office?
Who should we hire?
How much will accounting cost?
Legal questions often come later.
That can be an expensive mistake.
Entering a new market is not simply about opening another legal entity. A company is entering a different legal environment, where the rules governing taxation, data protection, contracts, IP, advertising, licensing and local partnerships may work differently.
This is particularly important for technology businesses.
The same SaaS product can be sold in Ukraine, the EU, Kazakhstan, Kenya or South Africa. The legal model behind that business may still need to be different in each jurisdiction.
So before entering a new market, it is worth answering a number of basic questions.
The first mistake is assuming that operating in another country automatically requires a local legal entity.
It does not.
In some cases, a business can sell its services or SaaS product from its existing company. In others, it may need a subsidiary, branch or another form of local presence.
It depends on the business model.
The legal analysis will be different if a company:
So the first question should not be:
“Where should we incorporate?”
It should be:
“What kind of presence do we actually plan to have in this country?”
The structure should follow from the answer.
The next question is taxation.
And it should not be reduced to the corporate tax rate.
For an international IT business, the analysis may need to cover:
The last point is particularly important.
A company may have no local legal entity while its actual activities in a country create a taxable presence under certain circumstances.
Employees, agents, offices or the activities performed by representatives can all become relevant.
So the assumption:
“We have no local company, therefore we have no local tax exposure”
is not a universal rule.
For a conventional SaaS product, the answer may often be no.
But the picture changes when the product operates in a regulated sector.
For example:
And the product's marketing label does not determine its legal classification.
A company may call itself FinTech while legally operating as:
A useful sequence is therefore:
Business model → Regulatory classification → Licence → Compliance requirements.
First determine what the product actually does from a regulatory perspective. Then assess licensing requirements.
This is one of the easiest issues to underestimate.
A company may already have GDPR compliance, a Privacy Policy and standard Data Processing Agreements.
That does not automatically mean the same framework is sufficient in another market.
Different countries have their own data protection regimes.
South Africa has POPIA. Kenya has its Data Protection Act. Countries in Central Asia have their own rules governing personal data.
There are many similarities between these frameworks.
There are also important differences in:
For an international company, a better approach is:
Global Privacy Framework + Local Gap Assessment.
There is no need to rebuild privacy compliance from scratch for every country.
But copying a European privacy policy and assuming it works everywhere is not a sound strategy either.
This question should be asked before the product is launched.
Imagine the following setup:
The user is in Kazakhstan.
The company is incorporated in Ukraine.
The main cloud infrastructure is in the EU.
Backups are stored in another region.
Developers in several countries have system access.
Does this architecture comply with the local rules?
The answer depends on the jurisdiction and the type of data involved.
That is why data localisation and cross-border data transfers are no longer just privacy-law questions.
They are also product architecture questions.
If legal restrictions are discovered after the product has launched, changing the technical architecture can become significantly more expensive.
To be continued.
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Violetta Loseva
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