DOING BUSINESS IN SOUTH AFRICA IN 2020
For over a decade, Healy Consultants Group PLC has been efficiently and effectively assisting our Clients with starting a business in South Africa. Our experts provide our Clients with i) company registration services in South Africa; ii) Government compliance; iii) license registrations; iv) visa applications; v) work space rental solutions; and vi) employee recruitment solutions.
South Africa free zones
Accounting and tax regulations
Small business set up
Summary table of South Africa company registration
| Summary | LLC | Free zone LLC | Public limited company | Joint Venture | Branch office | Trust | Foundation |
|---|---|---|---|---|---|---|---|
| Also known as | Pty. Ltd. | IDZ Pty. Ltd. | Ltd. | Pty. Lrd. | Branch Office | Trust | Foundation |
| Best use of company? | All products and services | Manufacturing and export trading | To secure public funding | Trading | Specific projects | Tax planning | Tax Planning |
| How soon can you invoice Clients/sign sales contracts? | 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 account numbers? | 1 month | 3 months | 2 months | 2 months | 3 months | 2 months | 3 months |
| How long to supply company registration/tax numbers? | 2 weeks | 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 |
| Resident director/partner/manager/ legal representative 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$3,800 | none | none | none | none |
| Can bid for Government contracts? | Yes | Yes | Yes | Yes | Yes | No | No |
| Corporate bank account location? | HSBC SA | SCB SA | Deutsche Bank SA | 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 engagement costs? | US$12,530 | US$9,630 | US$15,830 | US$9,630 | US$10,780 | 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 | Public limited company | 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 | Yes | No | Yes | No | Yes | Yes |
| Group HQ tax incentives? | Yes | Yes | Yes | No | Yes | Yes | Yes |
| Must appoint an auditor? | No | No | Yes | No | No | No | No |
| Withholding tax on payments to foreign shareholders? | 15% | 15% | 15% | 15% | 15% | 15% | N/A |
| Company Registration | LLC | Free zone LLC | Public limited company | Joint Venture | Branch office | Trust | Foundation |
| Resident director/partner/manager/ legal representative required? | No | No | No | No | Yes | No | No |
| Must appoint a South African resident public officer? | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Minimum 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$3,800 | 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 | 5 weeks | 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 | Public limited company | 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 |
| Government 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 to be kept with Government? | No |
| Public register of shareholders and directors? | Yes |
| Sponsorship by a local citizen required? | No |
| Our Client needs to travel to South Africa for business set up? | No |
| Temporary 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 |
| Must sign an office lease agreement during incorporation? | No |
| Shareholders & directors documents to be attested/translated? | No |
| Each foreign director needs a personal income tax number? | No |
| Foreign director needs a residence visa? | No |
| Maximum number of staff allowed? | No maximum number for any entity |
| Expatriate to local staff ratio? | 37 local to 1 expat |
| Can secure 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% |
| Government foreign investment approval required? | No |
| Average monthly office rental? (US$ per sq m) | US$30 |
| Minimum statutory monthly salary? | US$270 |
| Average monthly US$ salary for local skilled employees? | 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
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Advantages and Disadvantages
Advantages of South African company registration
- Company registration in South Africa for foreigners is easy because:
- LLC company registration in South Africa requires a minimum paid-up share capital of US$1. Furthermore, the company setup process can be completed within 4 weeks;
- Only one director and one shareholder must be appointed, who can be of any nationality. Consequently, a South African LLC can be 100% foreign owned.
- Entrepreneurs in the crypto-trading businesses can find South Africa an optimum jurisdiction because:
- The Companies Registry, CPIC, does not restrict the registration of crypto-trading business and thus foreign nationals are permitted to remotely register their business and trade globally;
- South Africa does not impose specific licensing requirements for crypto-trading companies. A crypto company can operate without restrictions upon receipt of the standard Certificate of Incorporation;
- Banks in South Africa are friendly to crypto-trading companies. Banks can receive funds from global clients provided the required supporting documents are issued to the bank;
- South African resident companies enjoy several non-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;
- Foreign registered companies in South Africa investing in R&D projects relating to science and technology, can receive refunds from the government worth 150% of the operating expenditure incurred;
- South African businesses investing in projects to determine the feasibility of foreign projects which assist the country 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, aimed towards improving the productivity of light motor vehicles, are eligible for grants ranging between 20% to 30% of the value of the qualifying investment.
- South African registered businesses 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;
- Monetary incentives up to US$33,000 per job created will be 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 100+ Double Taxation Agreements and 50 Bilateral Investment Agreements to reduce withholding taxes on foreign payments and customs duties on imports/exports.
- The Government of South Africa’s National Development Plan aims to alleviate poverty and inequality by the year 2030 whilst having an inclusive growth of the economy.
- This would be realized by expanding the exports, tightening the nation’s link to faster-growing economies, implementing policies that would reduce the cost of incorporating business in South Africa, and encouraging entrepreneurship and novelty;
- The Presidential Infrastructure Coordinating Commission (PICC) has been setup under the NDP to enhance the infrastructure development of South Africa;
- The NDP promises a bright future for all the entrepreneurs who wish to setup their business in South Africa.
Disadvantages of South African company registration
- Although a South African resident director is no longer required by law, Healy Consultants Group PLC recommends that our Clients appoint a local director who will also be the bank signatory. To register a company in South Africa and to open a corporate bank account in a timely manner, most of our Clients request Healy Consultants Group PLC to appoint a nominee resident director. If required, Healy Consultants’ resident director service fee amounts to US$9,950 per annum;
- South Africa is a high tax country because i) corporate tax is 28%; ii) VAT is 15%; iii) capital gains for companies is 18%; iv) asset 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 7% of the population holds a university degree;
- Only 9.6% of the population speaks fluent English, making language a barrier for foreign entrepreneurs.
- A South African resident business will face certain bureaucratic hurdles including:
- Repatriation of profits to a foreign country will require prior approval from the Central Bank (SARB);
- A South African resident business will be required to be the signatory when opening a corporate bank account;
- Labor unions interfere with the simple employer-employee relationship, making it harder to hire or fire employees;
- South Africa’s Corruption Perception Index 73rd out of a total of 180 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 5th most homicidal country in the world;
- There is a developing risky landscape in South Africa.
- The macroeconomic weakness of the economy has exacerbated due to the commodity-crash at the end of the commodity super-cycle;
- The South African GDP growth rate bottomed down to -0.6% in 2019, compared to a whopping 5.3% in 2013;
- The economy has gone through years of fiscal and current account deficits. Thereby, relying on external debts for years. The economy’s total external debt augmented to almost US$177.676 billion by the end of 2019, according to trade economics;
- These debts put the country’s currency as well as its financial sector to great risk and constant fluctuation.
- Foreign entrepreneurs in the cryptocurrency scene may find South Africa quite challenging because:
- Although the South African government does not restrict trading in cryptocurrency, direct proceeds from sale of cryptocurrencies in South Africa cannot be repatriated outside of South Africa in FIAT currency;
- Because there is no license for crypto-business in South Africa, it may be challenging to secure a corporate bank account outside of South Africa, especially for crypto-exchanges;
- Due to lack of regulations and government agencies responsible for the crypto industry, getting formal information re this type of business in South Africa can be challenging.
- Company registration in South Africa for foreigners is easy because:
Best uses for a South Africa company
- South Africa is an excellent place to setup a manufacturing and distribution company because:
- Incorporating in South Africa’s 5 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 of infrastructure for industrial projects are eligible for grants covering between 10% and 30% of the 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 lesser;
- 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.
- South Africa is an excellent place to setup a manufacturing and distribution company because:
Company registration
- Time to incorporate: Four weeks
- Cost to set up: US$12,530
- Minimum capital: US$1
- Physical office required: No
Required appointments
- Shareholders: 1
- Directors: 1
- Company secretary: No
- Resident director: No
Key facts
- Corporate tax rate: 28%
- Corporate tax base: Worldwide
- Shelf companies: Available
- Main company type: Private limited company
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Useful links for South Africa
E-marketing development project form
Healy Consultants Group PLC is beginning a 6 month project to improve our brand, including business web site design, social media activity, mobile apps, SEO organic rankings and adwords advertising.
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