Starting a business in South Africa is simple and straightforward. A new business owner needs only to receive approval for the business’s potential name, register the business with the Registrar of Companies, also known as CIPRO, and sign up for South Africa’s social security and tax systems.
Legal Status of Businesses
The Companies Act regulates all South African companies. There are a few choices of legal entities. The Companies and Intellectual Property Office (CIPRO) administers registration of new businesses.
Starting a business in South Africa is simple and straightforward. A new business owner needs only to receive approval for the business’s potential name, register the business with the Registrar of Companies, also known as CIPRO, and sign up for South Africa’s social security and tax systems.
Legal status of businesses
The Companies Act regulates all South African companies. There are a few choices of legal entities. The Companies and Intellectual Property Office (CIPRO) administers registration of new businesses.
Companies
The first step is to reserve a name at CIPRO. A memorandum of the company and consent of its auditors must accompany the application for registration. The process takes 4 to 6 weeks and costs around R3300 excluding VAT. If a foreign company wants to register in South Africa, it must register as an external business with a certified copy of its articles and memorandum or equivalent thereof. A South African diplomatic entity must authenticate it. Foreign business branches are subject to the same laws and regulations as local businesses. The cost is around R2500 excluding VAT.
Private companies may not have more than 50 shareholders while public companies must have at least 2 directors and at least 7 shareholders. It is not a prerequisite to be resident in South Africa. There isn’t a minimum of equity capital required. Any subsidiary of a foreign business is regarded as a South African company but the legal accountability of the parent company is limited to the capital that is invested.
Close Corporations
These business entities must have founding statements. Registration is also done through CIPRO and takes around 4 to 6 weeks to complete. Close corporations may have 1 to 10 members. Most foreign businesses rather register as private companies because of certain limitations on close corporations.
Sole Proprieties and Partnerships
It’s not necessary to register a sole propriety or partnership but you will need to obtain a bank account in order to reserve a name. Sole proprieties are also subject to the same tax regulations, VAT and levies as other legal entities.
Levies and taxes
Businesses that operate or derive their income from within the borders of South Africa are subject to certain levies and taxes. The South African Revenue Services (SARS) manages the tax system. Any business profits derived from business activities in South Africa are taxable. Businesses can select their own financial year-ends. All enterprises must complete annual tax return forms. Provisional tax estimates are conducted and payable twice a year. Branches and agencies of foreign companies are taxed at a rate of 35%. Trusts are taxed 42%. Businesses must pay the following taxes and levies:
Income tax
The country has progressive taxation on all personal income arising from within South Africa. Tax on non-South African inhabitants is determined by the location from where the income is derived.
Value Added Tax (VAT)
A business with a turnover of more than R300 000 a year must register for VAT. Any division of a foreign owned business entity must register for VAT payable at 14%. VAT is an indirect form of taxation payable on goods and services delivered. Enterprises have a VAT cycle of two month.
By AAE Team