Advantages of South African company registration
- Setting up a business in South Africa is easy because:
- Incorporating an LLC requires a minimum paid-up share capital of US$1. Furthermore, the entire process can be completed within 6 weeks;
- Only one director and one shareholder must be appointed, who can be of nationality. Consequently, a South African LLC can be 100% foreign owned;
- Average monthly office space rentals in South Africa are low at US$1 per sq. ft.
- South African government offers several R&D incentives including:
- R&D projects with initial investment less than US$400,000 are eligible for grants worth US$200,000. Similarly, projects with initial investment between US$400,000 and US$2,000,000 are eligible for grants worth US$500,000. Finally, projects with investment higher than US$2,000,000 are eligible for grants worth at least US$1,000,000;
- Private companies investing in R&D projects relating to science and technology, can receive refunds from the government worth 150% of the operating expenditure incurred;
- Resident companies investing in projects to determine the feasibility of foreign projects which could be implemented in the country to improve trade, are eligible for grants worth up to US$500,000;
- Certain small businesses can apply for grants worth i) US$80,000 to cover the costs of approved tools and machinery and ii) US$20,000 to cover the employee training and business development costs;
- Investments in the automotive industry, to improve the productivity of light motor vehicles, are eligible for grants worth between 20% and 30% of the value of the qualifying investment.
- South Africa resident companies enjoy several non-R&D incentives including:
- Dividends from foreign companies and capital gains from sale of holdings in a foreign company can be corporate tax exempt if the receiving entity holds 10% stake in the foreign entity;
- There are no withholding taxes levied on interest payments made to resident and non-resident companies;
- Companies investing in the tourism and manufacturing sectors can receive monetary grants of up to US$800,000 on investments higher than US$5 million;
- Companies moving machinery into South Africa can apply for a cash grant worth either i) 15% of the value of the equipment or ii) US$2.7 million, whichever is lesser;
- Investments in construction of infrastructure for industrial projects are eligible for grants covering between 10% and 30% of the total development costs;
- Monetary incentives up to US$33,000 per job created will granted to companies who set up business process outsourcing (BPO) operations in South Africa;
- Businesses investing in certain sectors of the South African economy are eligible for benefits including i) monetary grants worth US$300,000 to cover marketing, advertising and publicity costs ii) 80:20 cost sharing grants to finance the project and iii) monetary grants worth US$400,000 to cover travel, accommodation and exhibition costs for new trading businesses;
- South Africa has signed 74 Double Taxation Agreements and 45 Bilateral Investments Agreements to reduce withholding taxes on foreign payments and customs duties on imports/exports.
- South Africa is an excellent place to setup a manufacturing and distribution company because:
- Average monthly industrial space rental is US$0.9 per sq. ft.;
- Average monthly warehouse rental is US$0.5 per sq. ft.;
- The average cost of electricity in South Africa is just US$0.05 per kWh;
- The average monthly wage for skilled labor is merely US$1,800 while for unskilled labor is US$350;
- Incorporating in South Africa’s 4 Industrial Development Zones offers companies i) 100% exemption on custom duties ii) 100% exemption on VAT and iii) up to 30% grants on cost of plants, machinery, equipment, commercial buildings and vehicles;
- South Africa boasts Africa’s best infrastructure comprising of 31,000 km of train network, 8 international airports and 21 seaports facilitating easy mobilization of goods.
Disadvantages of South African company registration
- South Africa is a high tax country because i) corporate tax is 28% ii) VAT is 14% iii) capital gains for companies is 18% iv) assets tax is 1% v) withholding tax is up to 15% vi) average import duty is 19% and vii) transfer duty on immovable property is 8%;
- It is difficult to find qualified labor in South Africa because:
- Only 2% of the population comprises of degree holders;
- Only 39% of the population speaks fluent English, making language a barrier for foreign entrepreneurs.
- A South Africa resident business will face certain bureaucratic hurdles including:
- To successfully obtain a business visa for a foreign national, the company must have capital of at least US$250,000;
- Repatriation of profits to a foreign country will require prior approval from the Central Bank (SARB);
- A South African resident will be required to be the signatory when opening a corporate bank account;
- Labor unions interfere with simple employer-employee relationship, making it harder to hire or fire employees;
- South Africa’s Corruption Perception Index stands unfavorably at 69th out of a total of 174 countries.
- The South African Rand is one of the most volatile currencies in emerging markets, giving uncertainty to the value of foreign investment;
- South Africa is one of the world’s most dangerous countries to live in. It ranks as the 14th most homicidal country in the world.
Why invest in South Africa?
For additional information on South Africa company registration services, you can email us at email@example.com or phone us at (+65) 6735 0120. Address: E8 Somerset Office Estate, 971 Kudu Av, Allens NEK X 27, Roodepoort, Gauteng, South Africa.