Business entities in South Africa
The South Africa Companies Act allows registration of companies by foreigners in most industries, and the business entity most commonly setup by Healy Consultants for our Clients is the limited liability company, locally known as a private company (Pty. Ltd.). The main challenge for registration of a company in South Africa for businessmen living abroad is the need to appoint a local bank signatory. To protect their interest, most of our Clients request Healy Consultants to provide nominee services for such appointment. See our nominee services page for further details or read the page below for detailed information on the different types of business entities available in South Africa.
Doing business in South Africa with a local entity
The South African limited liability company (proprietary limited company)
- A South African limited liability company (locally known as a “proprietary limited company” or Pty. Ltd.) can be setup with 1 director and 1 shareholder, both of whom can be foreigners residing abroad. Furthermore, there is no statutory share capital requirement;
- Nonetheless, a company incorporated in South Africa is be required to appoint a public officer. This individual will be resident in South Africa and may be an employee of the company. He/she will be deemed to be the registered representative of the company in South Africa;
- All LLCs must submit an annual return and financial statements to the Companies and Intellectual Commission (CIPC). It is possible the company may be requested by the CIPC to submitted audited financial statements;
- Best uses for a South African proprietary limited company: The South African Pty. Ltd. is an attractive vehicle for most industries, thanks to its low share capital requirements. It is the type of entity most commonly setup by foreigners and locals alike in South Africa.
The South African free zone company (IDZ company)
- Our Clients may also choose to setup their operations in one of South Africa’s Industrial Development Zones (IDZ). For this purpose, our Clients will need to setup a Pty. Ltd. and open a corporate bank account. Our Client will additionally need to lease space within the IDZ and secure an operating permit. For further information, kindly refer to this free zone section;
- Best uses for a South African free zone company: The South African free zone company is an attractive vehicle for an export oriented manufacturing business. For further information, kindly refer to this free zone section.
The South African public limited company (public limited company)
- Under the Companies Act, this entity is referred to as the “public company”. A PLC may be setup with 3 directors and 1 shareholder, who can be foreigners and non-residents. Furthermore, there is no minimum share capital requirement; however, at incorporation, the company will be required to disclose how it plans to raise its capital;
- Like a Pty. Ltd., a PLC will i) appoint a resident public officer and ii) submit annual returns and tax returns. Additionally, the PLC will i) appoint a resident company secretary and ii) submit audited financial statements;
- Best uses for a South African public limited company: this business entity is recommended when our Client wishes to raise capital from the South African public. However, there is no obligation for the company to be listed on the local stock exchange.
The South African joint venture (joint venture company)
- Foreign companies may enter into joint venture (JV) with a South African company to offer goods/services in South Africa. A JV is generally used if two or more entities need to cooperate on a specific project. The joint venture can be a limited liability company (Pty. Ltd.) but it is also possible not to register one, in which case the partnership will be run as per the terms of the JV contract;
- Best uses for a South African joint venture: a joint venture is recommended when our Client plans to implement a project of a limited duration and already has a reliable joint venture partner in South Africa.
The South African partnership (Partnership)
- While partnerships exist in South Africa, the law does not provide for the possibility to register them with the Commercial Registrar. Moreover, all partners are subject to unlimited liability for the partnership debt and losses and at least one of them must reside in South Africa for the partnership agreement to be valid;
- Best uses for a South African partnership: we do not recommend our Clients to do business in South Africa through a partnership unless they already live in the country.
Doing business in South Africa with a foreign entity
The South African branch office
- In South Africa, this business entity is referred to as the “external company”. This entity is not considered separate from its overseas head office, which is consequently legally liable for all losses incurred by its South African branch;
- The branch registration process will be the same as company incorporation process. For a complete overview of the steps, please refer to this incorporation webpage;
- Like an LLC, the branch will also submit i) annual financial statements to the CIPC and ii) annual tax returns to the South Africa Revenue Service (SARS). The branch will also appoint a resident public officer as the “registered representative”;
- The income from a branch office will be taxed at the corporate tax rate. Furthermore, there will be no additional withholding tax or branch remittance tax on that income;
- Best uses for a South Africa branch office: registering a branch is advisable only in industries subject to high capital requirements (like the banking sector) or if our Clients expect that their customers will more confortable dealing directly with their company, rather than a South African subsidiary.
The South African representative office
There is no representative office in South Africa. Representative offices in this country are actually branches without commercial operations.
Table of comparison between different entity types
|Operations and logistics||LLC||Free Zone Company||PLC||Joint Venture||Partnership||Branch|
|Also known as?||Pty. Ltd.||IDZ Pty. Ltd.||Ltd.||Joint venture Pty. Lrd.||Partnership||Branch office|
|Doing business in South Africa permitted?||Yes||Yes||Yes||Yes||Yes||Yes|
|Allowed to sign contracts with local Clients?||Yes||Yes||Yes||Yes||Yes||Yes|
|Allowed to invoice local Clients?||Yes||No||Yes||Yes||Yes||Yes|
|Can rent local office premises?||Yes||Yes||Yes||Yes||Yes||Yes|
|Allowed to import raw materials?||Yes||Yes||Yes||Yes||Yes||Yes|
|Allowed to export goods?||Yes||Yes||Yes||Yes||Yes||Yes|
|Accounting and tax|
|Corporate tax rate?||28%||0%||28%||28%||0%||28%|
|Corporate bank account?||HSBC South Africa||SCB South Africa||DB South Africa||Standard Bank South Africa||SCB South Africa||SCB South Africa|
|Statutory audit required?||No||No||Yes||No||No||No|
|Annual tax return to be submitted?||Yes||Yes||Yes||Yes||No||Yes|
|Access to DTAAs?||Yes||Yes||Yes||Yes||No||Yes|
|Issued share capital required?||None||None||None||None||None||None|
|Resident director required?||No||No||No||No||Yes||No|
|Resident bank signatory required||Yes||Yes||Yes||Yes||Yes||Yes|
|SA shareholder required?||No||No||No||No||Yes||No|
|Minimum number of directors?||1||1||3||1||1||1|
|Minimum number of shareholders?||1||1||1||1||2||Parent company|
|Individual shareholders allowed?||Yes||Yes||Yes||Yes||Yes||No|
|Corporate director(s) allowed||Yes||Yes||Yes||Yes||No||No|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes||Yes||Yes|
|Public register of shareholders and directors||Yes||Yes||Yes||Yes||No||Yes|
|Can the entity hire expatriate staff?||Yes||Yes||Yes||Yes||No||Yes|
|How long to get work permit approved||1 month||1 month||1 month||1 month||N/A||1 month|
|Fees and timelines|
|How long to set the entity up?||2 weeks||4 weeks||3 weeks||2 weeks||2 weeks||7 weeks|
|How long to open corporate bank account?||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks|
|Estimate of engagement costs||US$12,330||US$9,630||US$10,130||US$9,630||US$11,380||US$10,780|