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. Lrd. | Branch Office | Trust | Foundation |
| Best use of company? | All products and services | Manuf/ export trading | To get pub. 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? | 1 month | 3 months | 2 months | 2 months | 3 months | 2 months | 3 months |
| How long to supply co. reg / 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 |
| 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$12,330 | 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 | 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 |
| WH tax on payments to foreign s/holders? | 15% | 15% | 15% | 15% | 15% | 15% | 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 | 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 | 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 |
| Expatriate to local staff ratio? | 37 local to 1 expat |
| 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.
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.
- 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:
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
- Public Officer: Yes
Key facts
- Corporate tax rate: 28%
- Corporate tax base: Worldwide
- Shelf companies: Available
- Main company type: Private limited company
Healy Consultants’ video on South Africa business setup
Contact the presenter: Henry James Beck, Client Engagements Manager, Healy Consultants Group PLC
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Useful links for South Africa
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