DOING BUSINESS IN SOUTH AFRICA IN 2018
For over a decade, Healy Consultants Group PLC has been efficiently and effectively assisting our Clients with establishing a business in South Africa. Our experts serve our Clients with i) South Africa company registration 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 |
| 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$12,330 | 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) | 8% |
| 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
- Setting up a business in South Africa is easy because:
- Incorporating a company 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.
- 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;
- Companies 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 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 73 Double Taxation Agreements and 39 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
- Every signatory of a South African corporate bank account must hold a South African work visa. Although a South African resident director is no longer required by law, Healy Consultants 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 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 71st 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 14th 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 bottomed down to 1.4% in 2017, compared to a whooping 5.3% a decade before;
- 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 from US$282.9 billions in 2010 to almost US$454 billions by the end of 2016, according to World Bank reports;
- These debts put the country’s currency as well as its financial sector to great risk and constant fluctuation.
- Setting up a business in South Africa 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$12,330
- 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
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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