Your first consideration when planning to start a business or investment in South Africa is the vehicle or method most suitable to the venture. Similar to elsewhere, the structure of your business will depend on a number of variables:
- The amount of participants at the company;
- Control and management policies;
- limited liability for the participants;
- requirement of perpetual succession;
- income tax considerations.
These variables determine which investment method and Company construction are best for your business, for instance:
- A branch or subsidiary of a foreign registered or outside company;
- A company — a regional public or private company;
- A partnership — either unlimited or limited;
- A close company (not an option for new businesses );
- a business trust;
- the sole proprietor.
Foreign registered firms in South Africa
If you’re contemplating setting up an offshore firm , there are numerous things you should keep in mind.
Offshore incorporation is a simple process in financial centers around the world. They supply a wide assortment of benefits to the organization and business principles.
Firstly, the business may register a South African subsidiary. Alternatively, the business may enroll as an external company in terms of section 23 of the organizations Act.
If not one of the incorporators have a South African visa, then enrolling a local subsidiary can prove to be problematic. It might be better to go for an outside firm structure for the South African operations.
The incorporators of external businesses don’t require South African visas to enroll in the external business.
When is a business conducting business in South Africa? The new organizations Act stipulates that company occurs only when the business is a party to an employment contract or when it seems to be operating in South Africa.
These actions are, in their own, not enough to warrant recognition as conducting business in South Africa:
- Shareholder meetings, board meetings, or otherwise conducting the provider’s internal affairs within the country;
- Keeping a bank account in the country;
- Having offices in the country for the transfer, exchange, or enrollment of the business’s own securities;
- Creating or obtaining any debts within the nation, or any mortgages or security interests in any neighborhood property;
- securing or accumulating any debt, or enforcing any local mortgage or security interest; and
- Acquiring interest in any house.
An external company
The outside company may convert to a regional private company, subject to certain requirements. An outside firm pays taxes at a flat rate of 33 percent but no STC is payable. Additionally, 50% of capital gain is also considerable taxable income (effective capital gains tax rate of 16.5percent ).
How to register an external company in South Africa
In order to enroll as an outside company, the applicants should provide the CIPC with the following:
- form CoR20.1, duly completed;
- the enrollment fee of R400;
- a copy of the entity’s foreign Memorandum of Incorporation and registration certificate (or equivalent documents), along with translations (if necessary).
Once enrolled, the CIPC will issue a registration certificate to the outside company on form CoR 20.2. The outside company may continue trading while it waits for its CoR 20.2 certification.
Foreign nationals should seek expert advice when considering external businesses, as South Africa doesn’t have double taxation treaties with all nations. If the country of origin of the foreign entity isn’t a party to a double taxation treaty with South Africa, then the outside company might wind up paying income tax twice on the same earnings, which will generally be fatal to the entity’s prospects of success.
Starting a business in South Africa: Company types
You could even decide to begin and register a company in South Africa. The organizations Act 71 of 2008, as amended by Act 3 of 2011, governs the creation of organizations in South Africa. The most elementary categorisation is the division between organizations for non-profit and profit businesses.
Non-profit organizations (NPC)
Non-profit businesses are for the benefit of the general public. A minimum of three individuals are essential for incorporation and there are no securities to move to the general public. Contrary to popular belief, non-profit businesses may generate a profit but these gains can’t return to shareholders.
Businesses for profit fall in the following categories:
- state-owned businesses
- private businesses
- personal liability businesses
- public businesses.
The unifying characteristic of private businesses is they intend to create financial returns for investors. Beyond that, each has the following fundamental unique attributes, listed below.
A member of the government owns these firms.
Private businesses involve one or more individuals, must have at least one manager, and might not offer its securities (stocks or debentures) to members of the general public. Once enrolled, private businesses have'(Proprietary) Limited’ or'(Pty) Ltd.’ after their name.
A private company must restrict transferability of shares, and restrict the amount of investors to 50. A private company doesn’t have to file financial statements with the Registrar of associations (CIPC).
Personal liability associations involve one or more persons and must have a minimum of one director; directors of those organizations (whether present or past ) are jointly and severally liable for any debts and obligations incurred by the provider. These business types are registered by professionals such as accountants, engineers and lawyers. Once registered, the thing’s name is followed by Inc.’ or Integrated’.
In the previous organizations (1973), these kinds of organizations were known as Section 53(b) organizations.
Public organizations are permitted to offer their shares to the general public. Once registered, the provider’s name is followed by Limited’ or Ltd.’. Though a minimum number of members is normally required (approximately seven members), the most number of members or the transferability of shares of a public company isn’t limited. Only public associations can list on the JSE Limited, nevertheless.
This notion was introduced in 1985 and was supposed to supply a simpler and less expensive corporate entity for one businessperson or a small group up to a maximum of 10 entrepreneurs. A closed corporation isn’t subject to the same legal requirements as a business (by way of instance, it’s not required to have annual financial statements audited or to hold annual general meetings) and it exists separately from its members that enjoy limited liability.
Prospective business owners are able to select this option provided the close corporation was registered before 1 May 2011, as near companies fell away under the latest organizations Act.
Other types of organizations
Beyond the above mentioned business types, prospective small business owners can also select from company trusts, unincorporated partnerships, joint ventures and sole proprietorships.
Corporate visas in South Africa – what changed?
Previously, company visas were recommended to a lot of South African organizations that had to attract foreign workers into the country en masse.
Business employee certificates are now available for a maximum period of 3 decades and the employee’s spouse and children are not eligible for visas by expansion. For the employee’s family to accompany them to South Africa, the dependents will need to independently qualify for their own visas. The changes will cause many corporate visa holders to reassess the way they use their corporate visas as well as the corresponding corporate employee certificates, however. The quantity of investment and training into the worker has to be weighed up against the employee’s three-year maximum tenure. In engineering and technology, where a substantial investment into training employees is necessary, the corporate employee certification visa may not prove workable. Rather, organisations in these areas should consider intra-company and crucial skills .
sector that’s excellent for corporate visas is farming. Seasonal workers from neighboring states complement local labour shortages.
Before beginning your business, you need to get a trusted lawyer. Obtaining legal advice can allow you to determine any tax breaks available in addition to help you navigate through the bureaucratic process awaiting you.
Following is a brief collection of various incentives available to companies in South Africa.
Various tax incentives are available, such as depreciation allowances in respect of capital resources. Hotel buildings amortize more than 20 years.
Credit possibilities are accessible in the Industrial Development Corporation for the exporting of capital goods and services from South Africa.
The country will, in actuality, partially compensate exporters for certain costs incurred in respect of activities aimed at developing export markets. Assistance in the shape of a grant is available in the Department of Trade and Industry for certain sectors with a view to creating new export markets.
Provisions also exist for rebates or claw-back of particular duties applicable to imported goods, raw materials and components used in manufactured exported goods.
Employer of Record Services in Africa: www.employerofrecord-africa.com