South Africa (Republic of South Africa, RSA, RSA or SA) today is a modern, resource-rich country with a diversified economy. Registering a business in South Africa by foreign investors is gaining popularity, as the state creates appropriate incentives for this. Having understood the legal requirements and tax nuances, as well as choosing the appropriate organizational and legal form of doing business, one can receive versatile benefits from the establishment of a company in this jurisdiction.
If you are interested in registering a company in South Africa, we invite you to consult with the Lawrange law firm. We will talk about the advantages and “pitfalls” of entrepreneurship in this African state, and also recommend the best type of company. Then our representatives are ready to accompany the process of opening a company up to the registration of a corporate bank account and the full start of work.
Africa is a developing territory, and South Africa is the “gateway” to the market of all countries of the sub-Saharan continent. This is the only representative of Africa in the G20. The peculiarity of the country is multinationality. In particular, eleven languages, including English, are recognized as official, which increases comfort in the case of doing business by foreign citizens.
Notice! In recent decades, South Africa’s economy has grown steadily, and the World Bank calls it an “upper middle income country”. At the same time, mining, tourism, and agriculture are among the priority sectors. The state is the world’s fourth largest producer of diamonds, and is also among the leaders in the production of gold and platinum.
The stability of the economy is supported by a developed financial services sector. In particular, a number of banks, both local and foreign, operate in the country. The exchange rate of the local currency, the South African rand (ZAR) to the US dollar is approximately 1:17.
Benefits of registering a business in South Africa
The following arguments speak in favor of establishing and further developing a business in South Africa:
- The net reputation of the state is the absence of offshore companies in the “black lists”.
- The largest ports on the continent, where ships call on key sea routes between Europe, North and South America, Asia and Australia.
- Availability of modern transport infrastructure.
- Prospects for expansion of commercial activities in the countries of the continent with which South Africa has established close economic ties.
- Legislation and political course, in particular, legal regulation in the field of protection of intellectual property rights complies with international standards.
- Government support for research, development and other innovative activities, including access to grants.
- Tax incentives subject to the established conditions, primarily dividends and capital gains received from a foreign company, are exempt from tax if 10% of the authorized capital of this company belongs to a local company.
- The presence of a large number of Double Taxation Agreements (DTA) – more than 70, as well as investment agreements.
- The availability of registering a company remotely without visiting the country, and then holding the annual meeting of members of the participants is also remote.
Stages of starting a business in South Africa
The requirements and steps for setting up a business in the Republic of South Africa are set out in the Companies Act (dated 2008). The procedures necessary for establishing a business can be completed through the state online resource BizPortal, namely:
- reserve company name,
- register a company
- get a B-BBEE certificate,
- create a domain name
- open a commercial bank account,
- get a tax number from SARS (South African Revenue Service),
- register with the Compensation Fund and the Unemployment Insurance Fund (UIF).
***Notification 1: More details about the B-BBEE (Broad-Based Black Economic Empowerment) certification will be discussed below.
The process of registering a business involves several steps.
Step 1. Preparatory actions.
First you need to decide on the structure of the business, whether it will be a sole proprietorship, partnership or company. The client is consulted by Lawrange JSC experts, a package of necessary documentation is collected and notarized, the name of the company is selected and reserved.
***Notification 2: Under the Companies Act 2008, a company may be registered without a name. A company registered without a reserved name will still receive a registration number, which will automatically become the name. In addition, a company may enter into transactions with a trade (business) name or may apply to add a reserved name at a later date.
Step 2. Registering the business with the Companies and Intellectual Property Commission
An appropriate application is submitted along with a package of documents, based on the results of which the CIPC (Companies and Intellectual Property Commission) issues a certificate of incorporation. Sole proprietorships and partnerships are not registered with the CIPC. For commercial activities in this status, you only need to register with the tax service (SARS) and file tax returns in the prescribed manner.
Step 3. Obtaining a tax number in SARS.
The advantage of registering with CIPC is that the business will automatically register with SARS as well. But if the entrepreneur does not register with the CIPC, then SARS should be contacted separately.
Step 4. Opening a bank account.
After the completion of the incorporation process, applications are submitted to open a bank account. Subject to the correct execution of documents and compliance with the conditions of banking institutions, there are no problems at this stage.
If necessary, such a step as issuing licenses for certain types of activities is additionally carried out.
Available business structure types
According to the Companies Act 2008, business entities in South Africa are divided into several types. For the registration of each individual type, its own requirements for the necessary documentation are presented. The law provides for two main categories of companies – non-profit and for-profit, and all types of business structures fall under these categories. In addition, you can also engage in entrepreneurship on an individual basis.
Non-profit companies are created for the public benefit or for other purposes related to one or more cultural or social activities, public or group interests.
Commercial companies are established for the purpose of making money and can be anything from retail stores to restaurants, insurance companies and real estate companies.
Registration of IP in South Africa
An individual (private) entrepreneur in RSA, as in other jurisdictions, is not considered a legal entity. This form of business involves sole ownership, management and profit. However, the entrepreneur bears personal responsibility for business obligations.
Registering an LLC in South Africa
The analogue of LLC (limited liability company) in South Africa is a private limited liability company Proprietary Limited or Pty Ltd. Among the advantages of this form of doing business is the possibility of attracting investments by increasing the authorized capital, as well as the absence of personal liability of participants for the debts of the company (at the same time, they are subject to some tax obligations). The company must keep accounts and submit annual reports.
To register a company in South Africa in the form of Pty Ltd, you need at least one member and one director. However, there are no residency requirements. However, if they are foreigners living abroad, a registered representative must be appointed. Members may be legal entities, directors may not. In South Africa, Pty Ltd is the most popular business registration option.
PLC registration in South Africa
PLC (Personal liability companies) – companies with personal liability. In such a company, former or current directors may be jointly and severally liable for any wrongdoing committed or debt incurred while in office. But the owner of the company will not bear responsibility. The owner also has the right to decide on the distribution of profits, since a company with a personal liability is not as strictly regulated as other private firms. When registering, the memorandum of association must state that it is a company with personal liability.
Registration of a public company in South Africa
A public company issues securities through an initial public offering (IPO) and its shares are listed on at least the Johannesburg Stock Exchange. The shares of the firm can be sold to the public, which gives more capital to operate.
The authorized capital of such a legal entity consists of shares contributed by shareholders (owners). The amount of capital can be expressed in monetary terms or material assets, as well as intellectual property. The minimum share capital is R100,000 (approximately $5,750). A deposit of 25% is due at the time of registration. The number of directors for such a company is three or more (legal entities and non-residents are allowed).
You will definitely need a resident secretary, an audit committee and an independent auditor. If the firm is established by a non-resident, a “public official” from South Africa must be appointed to control the source of income of this legal entity. The company must keep accounts and submit financial statements for the financial year. Unlike Pty, a public company must hold an annual shareholders meeting. Usually this form of business organization is used when creating holding structures.
Registration of a partnership in South Africa
Limited Partnership (LP) is a business structure with 2 to 20 co-owners who contribute to the business and enter into a partnership agreement. Partners run the business together, pooling funds and skills to achieve a common goal. At the same time, the co-owners are liable for the obligations of the business; not only income, but also losses are shared.
Registration of a small business in South Africa
This type of business can be formalized as a sole proprietorship or partnership. That is, in both cases, the owners are personally liable for the firm’s business obligations.
Registration of a non-profit company in South Africa (non-profit)
A non-profit company (NPC) is founded by three or more persons. Profit is not distributed among the founders and members, but is directed to achieve the set goals (except as permitted by law). Mostly an auditor, secretary or audit committee is not needed. In case of termination of activity by a non-profit company, deregistration, the remaining assets should be transferred to another non-profit organization with similar activities.
Registering a branch in South Africa
If a foreign entrepreneur does not want to establish a subsidiary in South Africa, then a representative office or branch can be registered in this country. The specific choice between these forms depends on the business objectives, and the features of functioning and management will be associated with it. In this case, you must go through the same registration process.
The branch office in South Africa is referred to as an “outside company” and is not a legal entity. It will require a registered representative. The parent company is responsible for the business obligations of the branch. The branch must submit annual financial statements.
Registration of a South African company in the IDZ Free Zone
You can start your business on fairly favorable terms in one of the five industrial development zones – IDZ (industrial development zone), by registering Pty Ltd and opening a corporate bank account. In order to conduct commercial activities in the free zone, it is necessary to rent premises there and obtain an operating permit. Establishing a company in IDZ is a profitable solution for an export-oriented business, as it provides for 100% exemption from customs duties and VAT.
Features of opening a company in South Africa
The best option for registering a business is online through the web resource of the Commission on Companies and Intellectual Property Bizportal.gov.za. You can also register a company through a bank, including Nedbank and First National Bank.
Important! Registering a business in SA is associated with a number of nuances. To achieve success, avoiding wastage of time, the involvement of Lawrange AS experts will help. We provide comprehensive services, including company registration and related activities, such as consulting on SARS, providing accounting services, as well as resolving issues related to the protection of intellectual property (related to trademarks, patents, copyrights).
When opening a company, depending on the chosen organizational and legal form, it is necessary to clearly answer the following questions:
- What should be the minimum number of members and directors?
- What are the requirements for the minimum authorized capital?
- Will a local registered representative be required?
- Will a mandatory audit be required?
- What are the requirements for holding general meetings, filing reports, and so on.
Notice! Businesses with a turnover of more than 10 million rand (about $575,000) in South Africa must go through a special procedure – to obtain a B-BBEE certificate. It’s about the state’s implementation of the Black Economic Empowerment program on a broad basis.
Documents required to register a new company in South Africa
To register a legal entity with the CIPC, you will need:
- a set of documentation for the founders and directors, including proof of address of residence;
- company charter;
- title reservation certificate;
- bank statement not older than three months;
- a document confirming the existence of a registered office.
Corporate tax rate in South Africa is 28%, VAT (VAT) is 15%, capital gains tax is 18%. Some industries (such as mining and long-term insurance) have special corporate tax rates. Depending on the legal form and structure, tax benefits are possible.
In particular, small businesses with a gross income of less than R20 million are taxed at 0% on the first R87,300 of taxable income and 7% on taxable income between R87,300 and R365,000. South Africa has entered into over 70 double tax treaties.
Opening a bank account
Depending on the form of doing business and the direction of activity, the requirements of banks may differ in certain nuances. However, often along with the completed application form, the bank should submit:
- certificate of incorporation;
- constituent documents for the company;
- certified copies of personal documents of the founders and directors;
- confirmed information about the source of income;
- description of the commercial activity.
Notice! Any bank reserves the right to request additional documents and information, in particular, it may be confirmation of the presence of a local office and so on.
In the sufficiently developed banking system of South Africa, according to Lawrange experts, three banks deserve priority attention – Standard Bank, Nedbank and Absa Bank. These institutions cover not only the market of their country, but also go far beyond its borders. The support of representatives of our lawyer association ensures effective communication with bankers, prompt opening of an account, which means the ability to carry out the necessary transactions for business.
A package offer for registering a company in South Africa and opening an account in one of the local banks is only 1650 EUR
At the request of the client, separately paid:
- apostilled set of company documents
- translation of company documents into English or another language with notarization
- sending original documents
The Republic of South Africa is a jurisdiction that has not yet been mastered by foreign investors. Although if you are looking for access to the markets of the African continent, then this is one of the best options. Over the past decades, the country has gained political and economic stability, as well as brought the norms of legislation governing corporate legal relations to international standards.
Among the main advantages of the jurisdiction now are the absence of offshore companies in the “black lists”, an advantageous location at the intersection of a number of trade routes, as well as good prospects for obtaining various tax benefits. If you decide to open a company in South Africa with the support of the Lawrange law firm, you will get a convenient launching pad for the implementation of business projects in various areas.
Can a non-resident register a company in South Africa?
Yes, both owners (participants, shareholders) and directors can be non-residents. However, in such circumstances, legislation often requires the presence of a registered representative.
Is it possible to open a company in South Africa online?
Yes, online registration is possible. The state regulator administers a web resource specially designed for this purpose – BizPortal. With the help of modern online tools, the necessary actions and checks are carried out.
How long does it take to open a company in South Africa?
You can register a turnkey business in a few weeks, including opening a corporate bank account. At the same time, the exact terms depend on the direction of activity, in particular, on the need to obtain special permits and licenses.