SA Company Formation (Non-Resident)
Company Formation and Business Services in South Africa (Non-Resident)
Private Limited Liability Company, managed by just one director and the directors do not need not be South African residents or nationals and one shareholder is required with the minimum capital of ZAR 1.
Branches of foreign companies are accorded legal status in South Africa by virtue of their registration as external companies but are not recognized as separate legal entities – except for exchange control purposes.
South Africa, formally named as the Republic of South Africa, is a country placed at the Southern edge of Africa and with the neighboring countries of Namibia, Botswana and Zimbabwe. The South Africa today is one of the most sophisticated and promising emerging markets globally and it is the economic powerhouse of Africa.
One of the significant reasons for South Africa becoming one of the most popular trade and investment destinations in the world is due to the country guaranteeing that it can meet specific trade and investment requirements of prospective investors.
South Africa has a host of investment incentives and industrial financing interventions that are aimed at encouraging commercial activity and its trade rules favor a further expansion in the country’s growing levels of international trade.
There is a common misconception that individuals or companies that are starting a business in South Africa always require a business visa to be applied for.
- If you are seeking to establish a business which you own in full or part, which you intend to work in whilst living in South Africa, you will need to apply for a business visa and meet the South African business visa requirements.
- Where the business is being set up as part of a wider group. For example an international company that is starting a business in South Africa as a branch or subsidiary of their wider operations. In this case a business visa would not be required.
- Where an individual is investing into a business that is being started in South Africa but is not going to be working in the business. In this case a business visa is not required.
Aside from any business visa requirements, the first step in setting up a business in South Africa is to decide on a company structure. This is of particular importance for foreign owners of businesses as it carries with it tax implications and foreign exchange control implications.
We are able to offer consultations and recommendations from our international tax lawyer to guide you through the selection and registering process.
It is very common for foreign companies starting a business in South Africa to have a requirement to relocate some of their existing staff to South Africa, especially in the set up and early stages. Staff relocated will require a work visa of some description and there are various options for securing these.
Global Immigration Africa has a specialised corporate expertise that advises international businesses on the most appropriate work visa routes for the employees they are relocating to South Africa.
Of course there is little point setting up a business in South Africa if the profit cannot be repatriated abroad. The simple answer is yes you can but the ease of doing so is greatly effected by the structure you choice in the first place. It is paramount importance that you seek expert help at an early stage before decisions are made.
In many cases, due to language, labour costs and time zones the businesses that GIA help with setting up business in South Africa are not income generating but an outsourced function for their international parent. The most obvious example of this being call centres but we have assisted with Marketing, IT and administrative centres to name but a few.
There is no requirement for the business (branch or subsidiary) to create profit and the setting up of the business can purely be on an ‘outsourced function’ function basis.
GIA can assist you with payroll functions, company structures and the inflow of funds to pay payroll and other expenses.
In the case of a South African branch being selected, the branch is registered within the jurisdiction of South Africa, although the shareholding and directors are situated in the country of origin.
The branch obtains a South African registration number.
The international company’s “Memorandum of Incorporation” is also registered in South Africa and the company would have to operate according to the rules laid out by this framework.
A South African resident must be appointed and registered with the corporate registration authority (CIPC). This person is responsible for the operations and compliance of the South African branch.
There is no need for any shareholder meetings since there are no shares issued by this entity. Furthermore, no director meetings are required as long as the entity (branch) does not have any registered directors locally (South Africa).
An auditor must be appointed for the branch. The scope of the audit is limited to the income statement of the South African operations, since there is no balance sheet required. The audit is mainly for income tax purposes. In addition, it can also be used by the international company’s auditors.
The branch will be taxed at a rate of 28% on net profit.
Profit can flow to the international company as soon as all taxes on the profit are paid. When it comes to obtaining local finance, there are certain restrictions on the company’s financing leverage. This limitation is currently 1 to 1, thus 50% financing structure.
This entity operates in the form of a South African private company. Shares are issued by this company and taken up by the international company.
A South African resident must be appointed and registered with the corporate registration authority (CIPC).
Regular shareholder meetings must be held. However, these meetings need not necessarily be held in South Africa, and thus can also take place abroad.
An auditor must be appointed for the company. The scope of the audit is unlimited. The audit is mainly for income tax & shareholder purposes.
The net profit will be taxed at a rate of 28%. Once a dividend is declared (profit taken out of the company), there is a withholding tax of another 15%.
All registered loans from a foreign source (capital invested) can be repaid at any stage. Dividends can be paid and repatriated once all taxes are paid.
There are two issues which need to be considered when making the decision about which entity to use for operating purposes in South Africa. These issues are:
What are you going to do with the profit that the business operations will produce?
- Black Economic Empowerment
In South Africa the Black Economic Empowerment Policy (BEE) has become an important issue when doing business. More and more pressure is being put on corporate South Africa to embrace this policy.
We will be able to assist you in the following areas:
- Advice on the appropriate structure;
- We can be appointed in the interim as local representatives;
- We will be able to set up the branch or local private company;
- We can source an auditor;
- We can set up a postal address;
- We can set up an administration network.
Importantly and before you commit time and money, you should have an assessment of your circumstances and requirements carried out. Assessments, as with ourselves, should be free of charge and carry no obligation.
Very often, and understandably, people source information on the obvious, in this case the business visa. There is however a real alternative that should be considered, if for no other reason to ensure you have made an informed decision.
Below we look at the two routes for starting a business as a foreigner in South Africa and discuss the merits and pitfalls of each.
The different visa’s for starting a business as a foreigner in South Africa
In order to be able to set up, invest into and work within a business in South Africa as an immigrant there are two types of visa you can apply for:
- Business visa – Traditionally, for anyone starting a business as a foreigner in South Africa this category has been the most recommended.
- Independent Financial Permit – A very underused permit category that allows for the holder to commence a business, but also offers a host of other benefits over the business visa route.
Business visa are for those individuals seeking to invest in a business, or an existing start up, and who will be working within the business.
The Independent Financial skills permit is a permit that is not restricted to a certain economic activity. As such it allows the holder total freedom to invest into a business, whether they will be working in it or not. There is also no obligation to invest, or start a business. In short the holder of the Independent permit is free to make their own decision as to whether they run a business, work or even retire.
No a business can be owned and run with 100% foreign ownership. However for those with a local partner this is also fine. This applies to both the business visa and independent financially independent.
Yes, which ever permit or visa category you select you can do either or indeed set up one from scratch.
As a business visa holder you will need to typically own in excess of 25% of the business. A Financially Independent permit holder has no restrictions.
For business visa holders you need to invest ZAR 5 million into the business unless you qualify for a waiver.
There is no requirement for the holder of the Financially Independent permit to invest any set amount into as business, they are free to invest as little or as much as they desire. Note however, to successfully apply for a Financially Independent permit, you need to prove a net worth of the equivalent of ZAR12,000,000 (12 million) but these funds do not need to be brought into South Africa.
Partners of the business visa holder can work in the business but not for remuneration. Children would not be able to work in the business unless a work visa was granted in their own right. If you have children still in education years a study visa would be required.
Partners of Independent Financial permit holders will need to secure residency in their own right which would involve a spousal or life partner visa application. Dependent children would require a study visa.
There is a requirement that employees are at least 60% South Africans (citizens or permanent residency holders). These must be employed on a permanent basis in the business if you hold a business visa. There are no such requirements for the Independent Financial permit holder.
Starting a business as a foreigner in South Africa, via the business visa route, would first mean obtaining temporary residency. Once in receipt of this, permanent residency can be applied for.
Independent Financial permit applicants may only apply for permanent residency. This of course has its attractions but the disadvantage can be that permanent residency takes longer for the Department to process.
Typically a Pty Ltd would be the appropriate company structure.
Neither a business visa, not an Independent Financial Permit are required if you have a South African partner. Starting a business as a foreigner in South Africa with a South African partner requires you to have either a spousal visa or life partner visa which you can then endorse to set up and run a business.
Business visa’s are designed for the holder to work in the business. Foreign investors do not require a business visa. Any foreigner may own a business with no restriction. However should they intend to work within the business or come to live in South Africa a visa would be required.
When making a business visa application, part of the application’s supporting evidence is the submission of a comprehensive business plan. The business plan purpose is twofold – one, and in the traditional sense, to prove the business will be successful, and two, to highlight some of the home affairs requirements.
There is no requirement for a Financial Independent application to submit a business plan.
There are requirements for businesses with a certain turnover to be audited and also others like estate agents are required from a regulatory prospective. There is also an argument for it being good practise for all businesses to be audited.
The decision, subject to these rules, is up to the business holder.
Yes, non profits are able to set be up
There are two aspects to the application process:
- The compilation of the visa or permit application. The compilation of the business visa application is more time consuming as this stage involves not only the Home Affairs requirements but also supporting documentation such as the company registration paperwork and the memorandum of incorporation. In addition other departments such as the Department of Trade and Industry are involved. Compilation can therefore take 4 – 12 weeks.
- The Financially Independent application does not involve such third parties and can therefore be achieved much quicker. The second stage is the submission to the Department of Home Affairs and the Departments timing can vary from 4 weeks to 12 weeks usually for a business visa.
Here there can be a potential drawback for applicants for the Financially Independent as these have historically taken approx 9 months.
You can see here for a summary breakdown of the business visa versus the Independent Financial Permit. But in summary, whilst the independent financial permit is a lot more flexible and carries little obligations with it either initially or on an ongoing basis there are 2 considerations that must be taken into account:
- The timing of your move. Permanent residency applications (Independent Financial Permits) take longer to process. If you plan in ample time this can be mitigated.
- The Department of Home Affairs levies an additional charge for successful applicants of the Independent Financial permit of ZAR 120,000. This is almost akin to a success fee as it is only payable if your application is approved.
When it comes to starting a business as a foreigner in South Africa there is no company better placed to assist than GIA. Our service does not just focus on the correct visa or permit but offers a fusion of skills; company formations, tax, business plans, insurances and many others.
Our in-house team means you don’t have to worry, we take care of all aspects of the process, leaving you to concentrate on the important parts of your migration, the settling in and your business.
Whilst most immigration companies boast of an ability to provide corporate solutions few back it up with dedicated resources and expertise.
More often than not the same client managers and administration staff are left to deal with individual clients as well as corporates – both are equally important to GIA but we realise their need base is very different.
- Dedicated client and account managers whose knowledge base is focused on corporates solutions
- A dedicated administration team providing efficient and standard driven communication and feedback
- A state of the art purpose built client management system providing ‘live’ feedback and case up dates
Its no wonder GIA are favoured by in excess of 150 companies in South Africa as well as being the preferred contractor to 3 of the top 5 relocation companies worldwide.
We offer a full range of visas and can submit applications not just throughout South Africa but worldwide.
- Corporate visa – for employees with a need to hire in excess of 5 individuals or renew 5 visa in the next 5 years
- Critical Skills Work Visa
– If the employee you intend to recruit matches a position on the the critical skills list, you may consider the critical skills work visa critical skills work.
- Intra- company transfer – for employers relocating staff from abroad to their South Africa operations
- General work visa – for employees who have adhoc needs to recruit foreign skills in the event local talent cannot be secured
- Business visa – for short term foreign employees that are required that will not be remunerated in South Africa.
If you employ or are thinking of employing foreign staff, GIA will provide you with the advice and service you need.
- We do all paperwork on forming the company in South Africa
- Formation is completely remote
- Can act as Secretary or Treasury
- Provide nominee Directors/Shareholders
- Assist with opening a bank account
- Registration for Taxes, VAT
- Develop a website for your business
- Create a logo of your brand
- Provide with full company administration services
- Arrange a mailing address for your business
- Arrange a virtual office for your company
- Telephone answering service
- Book keeping, audit & reporting
- Preparing and submitting VAT return
- Dealing with local authority
- Trademark registration