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Foreign Investor: 5 Key Questions to Think About When Registering a Company in South Africa

If you are a foreign investor when registering a company in South Africa, you have a few options in terms of the best vehicle for your specific operation.

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South Africa is currently on a massive investment drive lead by office of the President, this is largely to address a slowing economy while addressing our high unemployment rate. In order to address these challenges it is imperative that both local and foreign organisation invest.

If you are a foreign company looking to invest and operate in South Africa, you can enter the market in a few ways in order to obtain a local presence. An investor must consider the best vehicle for your specific operation.

The recognised formations for operating a business in South Africa follow below. Please note, this insight piece deals specifically with an external company and a private company.

Registering A Company In South Africa: An External Company

In order to register as an external company, the applicants must provide the CIPC with the following:

  • form CoR20.1, duly completed
  • the registration fee of R400
  • a copy of the entity’s foreign Memorandum of Incorporation and registration certificate (or equivalent documents), together with translations (if applicable)
 

Once registered, the CIPC will issue a registration certificate to the external company on form CoR 20.2. The external company may continue trading while it waits for its CoR 20.2 certificate.

An external company is taxed at the flat income tax rate of 28% on South African source income and income attributable to a permanent establishment in South Africa, it is however important to obtain tax advice before hand as the external company may not be party to a dual tax agreement which may result in excessive taxes being paid by the investor.

Registering a Private Company In South Africa

Private companies involve one or more persons, must have at least one director, and may not offer its securities (shares or debentures) to members of the public. A private company must limit transferability of shares, and limit the number of shareholders to 50. Private companies in South Africa’s are taxed at a flat income tax rate but there may be special circumstances where the investor could obtain preferential tax rates during the start-up phase when the business is considered small.

4 Key Questions of a Foreign Investor when registering a Company in South Africa

1
South African business visa requirements are onerous for foreign investors, requiring a minimum investment of R5 million which could be over multiple periods, however you will only qualify for the visa once the full investment is paid.
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While a foreign national can own shares in a South African company, our local banking locals make it difficult to operate due to our FICA requirements which require investors to have a business visa.

2

As a foreign investor, are you required to have local ownership?

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You are not required to have local ownership in your entity. Depending on your operating circumstance it may be beneficial for you to consider South African black ownership which could support your competitiveness in certain sectors where this is a requirement from potential clients and customers.

3

Is there a minimum investment required for a foreign investor when registering a company in South Africa?

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South Africa business visa requirements are onerous for foreign investors, requiring a minimum investment of R5 million which could be over multiple periods, however you will only qualify for the visa once the full investment is paid.
4

Are there requirements to retain South African employees?

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It is recommended that you review each sector’s minimum requirements in order to remain compliant with regards to the percentage of your employees need to be South African.

5

Where do you start? What are the next steps to register c company in South Africa?

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Locating and retaining a reputable firm to help guide you through the various questions and statutory registrations is a great first step. At Kettle Consulting, we have the experience and expertise to present you with clear answers and a clear set of options. Beyond this, we will facilitate your foreign company registration, tax and compliance and all other statutory requirements to ensure your business is off to s strong start.

To get started, get in touch with us via telephone 011 025 1446  or email us at info@kettleconsulting.co.za.

While there are barriers to entry, South Africa presents a large amount of opportunities which off set our red tape. There are multiple agencies reviewing this in the country and we foresee some of these restrictions being removed in the coming years.

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