DOING BUSINESS IN SOUTH AFRICA IN 2021
For almost two decades decade, Healy Consultants Group PLC assists our Clients to start a business in South Africa, including i) company registration and multi-currency corporate bank account opening and ii) accounting and tax considerations and iii) regulatory license and Government grants and iv) office rental and employee recruitment.
| Compare different South Africa entities | LLC | Free zone LLC | PLC | Joint Venture | Branch office | Trust | Foundation |
|---|---|---|---|---|---|---|---|
| Also known as | Pty. Ltd. | IDZ Pty. Ltd. | Ltd. | Pty. Ltd. | Branch Office | Trust | Foundation |
| Best use of company? | All products and services | Manuf/ export trading | Secure public funding | Trading | Specific projects | Tax planning | Tax Planning |
| How soon to invoice Clients? | 2 weeks | 2 months | 1 month | 1 month | 2 months | No | No |
| How soon can you hire staff? | 2 weeks | 2 months | 1 month | 1 month | 2 months | No | 2 months |
| How soon can you sign a lease agreement? | 2 weeks | 2 months | 1 month | 1 month | 2 months | 1 month | 2 months |
| How long to supply corporate bank a/c? | 6 weeks | 6 weeks | 8 weeks | 8 weeks | 8 weeks | 8 weeks | 8 weeks |
| How long to supply co. reg / tax numbers? | 1 month | 2 months | 1 month | 1 month | 2 months | 1 month | 2 months |
| Corporate tax rate on annual net profits? | 28% | 15% | 28% | 28% | 28% | 18%-45% | 28% |
| Limited liability entity? | Yes | Yes | Yes | Yes | No | No | No |
| Government grants available? | Yes | Yes | Yes | Yes | Yes | No | No |
| Res. director/partner/ legal rep. required? | No | No | No | No | Yes | No | No |
| Must appoint a South African resident Public Officer? | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Minimum paid up share capital? | US$1 | US$1 | US$1 | none | none | none | none |
| Can bid for Government contracts? | Yes | Yes | Yes | Yes | Yes | No | No |
| Corporate bank account location? | Nedbank | Absa Bank | Old Mutual Bank | Standard Bank | Nedbank | Absa Bank | Citibank SA |
| Can secure trade finance? | Yes | Yes | Yes | Yes | Yes | No | No |
| VAT payable on sales to local customers? | 15% | 15% | 15% | 15% | 15% | N/A | N/A |
| Average total business set up costs? | US$12,480 | US$9,630 | US$18,680 | US$9,630 | US$15,480 | US$17,930 | US$9,530 |
| Average total engagement period? | 2 months | 4 months | 3 months | 3 months | 4 months | 3 months | 4 months |
| Accounting and tax considerations | LLC | Free zone LLC | PLC | Joint Venture | Branch office | Trust | Foundation |
|---|---|---|---|---|---|---|---|
| Statutory corporate tax payable? | 28% | 15% | 28% | 0% | 28% | 18%-45% | 28% |
| Legally tax exempt if properly structured? | No | No | No | No | Yes | No | No |
| Group HQ tax incentives? | Yes | Yes | Yes | No | Yes | Yes | Yes |
| Must appoint an auditor? | No | No | Yes | No | No | No | No |
| WH tax on payments to foreign s/holders? | 20% | 20% | 20% | 20% | 20% | 20% | N/A |
| Company Registration | LLC | Free zone LLC | PLC | Joint Venture | Branch office | Trust | Foundation |
| Res. director/partner/ legal rep. required? | No | No | No | No | Yes | No | No |
| Must appoint a South African resident public officer? | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Min. number of shareholders/partners? | 1 | 1 | 1 | 2 | Parent company | None | None |
| Maximum shareholding for foreigners? | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
| Minimum statutory paid up share capital? | US$1 | US$1 | US$1 | US$1 | none | none | none |
| Shelf companies available? | Yes | Yes | Yes | No | No | No | No |
| Time to incorporate a new entity? | 2 weeks | 2 months | 2 months | 1 month | 2 months | 1 month | 2 months |
| Can easily convert to a PLC? | Yes | Yes | Yes | No | No | No | No |
| Can have preference shareholders? | Yes | Yes | Yes | Yes | No | No | No |
| Business Considerations | LLC | Free zone LLC | PLC | Joint Venture | Branch office | Trust | Foundation |
| Good entity for trademark registration? | Yes | Yes | Yes | No | Yes | No | No |
| Can secure an import and export license? | Yes | Yes | Yes | Yes | Yes | No | No |
| Govt approval required for foreign owners? | No |
| Must file an annual tax return? | Yes |
| Must file annual financial statements? | Yes |
| Access to double taxation treaties? | Yes |
| Security deposit kept with government? | No |
| Public register of shareholders and directors? | Yes |
| Sponsorship by a local citizen required? | No |
| Our Client must travel to South Africa? | No |
| Temp. physical office solutions available? | Yes |
| You need a local resident as bank signatory? | No |
| Can be wholly foreign owned? | Yes |
| The entity will likely be regulated by? | CIPC |
| Minimum number of directors/managers? | 1 |
| Bi-monthly VAT reporting to the Government? | Yes |
| Sign office lease during incorporation? | No |
| S/holder/director docs attested/translated? | No |
| Foreign director needs personal tax no.? | No |
| Foreign director needs a residence visa? | No |
| Maximum number of staff allowed? | No maximum number for any entity |
| Residence visa for business owner? | Yes |
| Other useful information | |
| What will be included in my customer sales invoice? | Click link |
| This country has signed free trade agreements? | Yes |
| This country is a member of WIPO/TRIPS? | Yes |
| This country is a member of the ICSID? | No |
| Average custom duties suffered? | 18.74% |
| Govt foreign investment approval required? | No |
| Average monthly office rental? (US$/sq m) | US$30 |
| Minimum statutory monthly salary? | US$270 |
| Average US$ salary for local skilled staff? | US$700 |
| US$ deposit interest rate? (1 year average) | 1.6% |
| Overseas remittance currency controls? | Yes |
| Banking considerations | |
| Multi-currency bank accounts available? | Yes |
| Corporate visa debit cards available? | Yes |
| Quality of e-banking platform? | Very good |
| Crowd funding available in this country? | Yes |
South Africa business setup summary
Press the link headings below to read detailed, relevant, up to date information.
Advantages and Disadvantages
Advantages of South African company registration
- Company registration in South Africa is straightforward and inexpensive because:
- Registering an LLC company in South Africa requires a minimum paid-up share capital of US$1;
- Company incorporation can be completed within 2 weeks;
- Only one director and one shareholder are needed, and can be any nationality.
- The South African government supports Research and Development (R&D) companies including:
- R&D projects with initial investment of 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. Projects with investment higher than US$2,000,000 are eligible for grants worth at least US$1,000,000;
- Foreign-registered companies in South Africa investing in R&D projects relating to science and technology can receive government refunds worth 150% of the operating expenditure incurred;
- The Capital Projects Feasibility Programme (CPFP) provides grants between ZAR100,000 and ZAR5,000,000 (US$6,900 to US$344,830) to eligible companies;
- The SEDA Technology Programme (STP) grant provides financial assistance to eligible small companies when i) purchasing tools, machinery and equipment up to ZAR800,000 (US$55,175) or ii) paying for employee training and business development services up to ZAR200,000 (US$13,795);
- See this webpage for more detailed information on South Africa government support.
- South African registered businesses enjoy several non-R&D incentives including:
- Dividends and capital gains received from foreign companies are exempt from corporate tax if the local company holds at least a 10% stake in the foreign company repatriating the funds;
- Companies investing in tourism and manufacturing can receive monetary grants of between 15% and 30% of the total investment amount, up to US$2,07 million;
- Companies setting up Business Process Outsourcing (BPO) operations in South Africa are eligible for grants of up to US$8,550 for every job created;
- South Africa has signed more than 100 Double Taxation Agreements and well as 50 Bilateral Investment Agreements to reduce withholding taxes on foreign payments and customs duties on imports/exports.
- South Africa offers the best entry point into the wider African market. Most companies use it to test the waters before making a fully-fledged commitment into Africa.
- South Africa has a modern and well-developed transport infrastructure, with Africa’s most extensive air and rail networks.
- Africa relies heavily on ships and ports to facilitate intercontinental trade. South Arica not only has Africa’s largest ports, but also provides a natural stopover on key shipping routes between Europe, the Americas, Asia, and Australia.
- Southern African Customs Union (SACU) countries, led by South Africa, have reformed and simplified their common tariff structure. Tariff rates have been reduced from a simple average of more than 20% to 5.8%.
Disadvantages of South African company registration
- A resident Public Officer must be appointed to all companies, which incurs additional expense for an investor. If required, Healy Consultants’ Public Officer fee amounts to US$2,950 per annum.
- South Africa is a high tax country with i) 28% corporate tax; ii) 15% VAT; iii) 18% capital gains for companies; iv) 1% asset tax; v) up to 15% withholding tax; vi) 19% average import duty and vii) 8% transfer duty on immovable property;
- It is difficult to find qualified labour in South Africa because:
- A South African resident business faces bureaucratic hurdles including:
- Repatriation of profits to a foreign country requires prior approval from the Central Bank (SARB);
- Labour unions interfere with simple employer-employee relationships, making it harder to hire or fire employees;
- South Africa is considered corrupt by global standards.
- 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, with the world’s fifth highest murder rate;
- South Africa is a risky investment destination because:
- The macroeconomic weakness exacerbated by the commodity-crash at the end of the commodity super-cycle;
- The economy has suffered years of fiscal and current account deficits relying on external debts. The economy’s total external debt was almost US$177.676 billion by the end of 2019;
- In early 2020, South Africa was downgraded to full junk status by Moodys.
- Tax filling is South Africa is complex and time consuming, especially corporate income tax and unemployment insurance (UIC) filings. Our Clients may have to make up to nine different payments in a financial year.
- Company registration in South Africa is straightforward and inexpensive because:
Best uses for a South Africa company
- South Africa is an excellent place to set up a manufacturing and distribution company because:
- Incorporating in one of South Africa’s five 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;
- Investments in construction for industrial projects are eligible for grants of between 10% and 30% of total development costs;
- 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 less.
- South Africa is an excellent place to set up a manufacturing and distribution company because:
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Useful links for South Africa
E-marketing development project form
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