South Africa Info
Joined: 23 Feb 2007
Posts: 16
Home Country: southafrica
|
 Posted: Tue Mar 13, 2007 11:29 am Post subject: DOING BUSINESS IN SOUTH AFRICA / SOUTH AFRICA BUSINESS GUIDE |
 |
|
DOING BUSINESS IN SOUTH AFRICA
STARTING A BUSINESS
STANDARDIZED COMPANY
Legal Form: Private Limited Liability Company
Minimum Capital Requirement: 1
City: Johannesburg
Registration Requirements:
Procedure 1. Prepare and certify documentation
Time to complete: 7 days
Cost to complete: ZAR 50
Comment: It is not possible to lodge the required documents oneself unless one is the subscriber to the Memorandum of Association. In terms of section 63(3) of the Companies Act a subscriber to the Memorandum of Association or a duly authorized attorney (or his/her clerk) may lodge such formation documentation. One is compelled to utilize an agent attend thereto, which will result in further expenses. The average lodgment fee is R500 but varies from agent to agent.
The attorney or a similar agent needs to verify the client's particulars according to the Financial Intelligence Centre Act of 2001. Cost can vary, depending on whether one uses the standard Table B Articles of Association contained in Schedule 1 of the Companies Act or a lawyer's fully drafted document.
Procedure 2. Pay all duties.
Time to complete: 1 day
Cost to complete: no charge
Comment: Payment of the required duties can be made at Cipro's cash office, by credit card or by direct deposit into Cipro's bank account
Procedure 3. Reserve a company name with the Registrar of Companies
Time to complete: 3 days (electronic lodgments - The lodgment of a name reservation application in person at Cipro's office may take longer.)
Cost to complete: ZAR 50
Comment: The use of revenue stamps has been discontinued. The office of Cipro has a cash office where payments can be made and the receipt is then attached to the documentation. Payment can also be made by credit card or by direct deposit into Cipro's bank account; copies of such receipts must be attached to the documentation. The fee for the name reservation can be paid at Cipro's cash office, by credit card or by direct deposit into Cipro's bank account.
Once a name has been approved by Cipro the name reservation is valid for two months in which period the company should be incorporated. One can, however, apply for the extension of a name reservation for a further period of two months by lodging a further name reservation application and paying a further R50 for such application. The lodgment of a name reservation in person at Cipro's office may take longer.
Procedure 4. Lodges formation documentation with Cipro in Pretoria, Gauteng Province, South Africa for registration
Time to complete: 7 days
Cost to complete: ZAR 60 (registration fee) + ZAR 350 (stamp tax) + 0.5% of capital + ZAR 60 (certificate to commence business) + ZAR 50
Comment: Bank into Cipro's bank account. A certificate to commence business is required by law (s172 of the Companies Act) before a company can legally trade or raise finance. The form CM46 - certificate to commence business is submitted together with the formation documentation. This document cannot be "applied for" once the name has been reserved, the Registrar will only incorporate the company if all the required documentation is submitted simultaneously.
The following documents must be submitted:
- A copy of Cipro's letter advising that the name has been approved and reserved by them.
- One original set of the certificate of incorporation, Memorandum and Articles of Association together with the necessary signatories pages. The memorandum of association must reflect the stamp duty payable which is calculated on the authorized share capital of the company, being a flat rate of R350 plus R5 for every R1,000 or part thereof or, in the event of the company having shares of no par value, R5 for each 1,000 shares or part thereof. The minimum stamp duty payable on a formation of a company is R415.
Copies of the Memorandum and Articles of Association certified by a notary public as true copies in terms of s 63(1) of the Companies Act. These documents must be bound, together with the certificate of incorporation (the certificate of incorporation being the first page, the notary's certification page next and then the complete set of Memorandum and Articles of Association). Each page of the Memorandum and Articles of Association must reflect the notary's seal.
Original powers of attorney, one from each subscriber.
Form CM22 (notice of registered office and postal address) in duplicate.
Form CM29 (information pertaining to a company secretary).
Form CM31 (consent to the appointment of the auditor) in duplicate. Every South African company must appoint a South African auditor.
-Forms CM27 - (consent to the appointment, one for each director).
Form CM46 (the certificate to commence business) together with R60 in revenue stamps.
The procedure takes from 4 to 10 days.
The Registrar will attend to the recording of the registration by allocating a registration number to the company and will release the notarially certified set of the Memorandum and Articles of Association, certificate of incorporation and certificate to commence business, one form CM22 and CM31 and the tear-off portion of form CM29 to the applicant/agent.
Procedure 5. Open a bank account
Time to complete: 1 day
Cost to complete: no charge
Comment: Certified copies of the company's formation documentation must be furnished to the bank.
Procedure 6. Register with the office of the local receiver of revenue (SARS) for income tax, VAT, and employee withholding tax (PAYE and SITE).
Time to complete: 12 days
Cost to complete: no charge
Comment: Business with annual taxable income of more than R300,000 needs to register for VAT.
The application for the registration of VAT is done on a VAT101 form. This takes approximately 10 working days. Cipro and the South African Revenue Service are linked electronically. Once a company is incorporated the relevant South African Revenue Service office is advised and an income tax number is allocated to such entity. A form EMP1 is required for PAYE (employee tax) and SITE (inclusive of employee tax), only payable if an employee earns more than R60 000.00 per annum. No separate registration required for SITE. With regards to VAT applications, SARS now assesses the viability of the business as part of the registration process
The company must appoint a public officer in terms of section 101 of the Income Tax Act and must advise the relevant SARS office of the full name, residential and postal address of such person. This person must be resident in South Africa.
Procedure 7*. Register with the Department of Labour for Unemployment Insurance.
Time to complete: 7 days (simultaneous with procedure 6)
Cost to complete: no charge
Comment: Application forms for UIF is UI8 and UI19. Registration forms can be obtained from SARS's website, the address is www.sars.gov.za. The UI8 is the application which must be submitted by the company. Once the application is approved a reference number will be issued, whereafter the UI19, which discloses the number of employees and their salaries, must be submitted.
Procedure 8*. Register with the relevant Metropolitan Council for local revenue/salary levy.
Time to complete: 14 days (simultaneous with procedure 6)
Cost to complete: no charge
Comment: The certificate for registration is received in 2-3 weeks. This is called "regional council levies" and is payable to the relevant Metropolitan Council (where the company's registered office is situated). The application forms are RSC4 and RSC6. Once the council has reviewed the application the certificate for registration is posted to the company's registered postal address or registered office.
Procedure 9*. Register with The Compensation Fund of South Africa according to the Compensation for Occupational Injuries and Diseases Act.
Time to complete: 1 day (trivial), (simultaneous with procedure 6)
Cost to complete: no charge
Comment: Registration forms can be obtained from the Department of Labour's website, the address is www.labour.gov.za. Businesses do not have to wait for the approval of registration to start operation.
The service levy/registration fee is calculated according to a rating of the company's type of business. Payment can be made by cheque or direct deposit into the Department's bank account. The relevant form is a WAS2 and written notification will be sent once the completed application has been examined.
Note: Procedures sometimes take place simultaneously. Instances of this are marked with an asterisk (*).
FORMS OF BUSINESS ORGANISATION
A business may be conducted by individuals, partnerships, trusts, close corporations, South African companies, or branches of foreign companies.
A close corporation is governed by the Close Corporations Act. It may have only individuals as members and, thus, is not usually a suitable vehicle for foreign investors.
A South African company may be public (name ends in "Limited") or private (name ends in "(Proprietary) Limited"). Both private and public companies are governed by the Companies Act. There is no minimum equity capital requirement for companies.
The private company is the most common vehicle for operating a business in South Africa. It may have only one member and director. There need not be any South African resident directors.
A subsidiary of a foreign company is regarded as a South African company. The legal liability of the parent company is limited to the amount of capital committed (together with any guarantees provided).
A branch of a foreign company is regarded as an "external company" if it establishes a place of business or owns immovable property in South Africa, and must register as such.
The legal liabilities of a branch are not limited to the extent of its South African assets.
Both a South African company and a branch operation are subject to the provisions of the Companies Act.
A branch is obliged to lodge a certified copy of its Memorandum and Articles of Association (or other instrument defining its constitution) with the Registrar of Companies, as well as a sworn translation into English where appropriate.
Two primary requirements for a branch are:
1. an annual audit, and
2. financial statements must be lodged with the Registrar of Companies. (Financial statements must also be lodged for a company as a whole. Exemptions, renewable every two years, may be obtained in certain circumstances).
Locally registered private companies are also required to be audited but are not required to lodge their annual financial statements with the Registrar of Companies. In certain instances it may be more beneficial to register a South African company, for an enhanced image and easier access to credit facilities. It may also be an advantage when obtaining Government contracts.
TAXATION
Corporate tax
Main rate: 29%
Resident companies are taxed on their worldwide income; non-resident companies are taxed only on South African-source income. A company is resident if it is incorporated, established or formed in South Africa or its place of effective management is in South Africa. The tax rate is 29%, and the secondary tax on companies (STC) is imposed at 12.5% on distributions. Dividends paid within a group of companies (70% holding) are exempt from STC, subject to election. The tax rate for foreign companies operating through a branch or agency in South Africa is 34%. Special rules apply to gold mining and insurance companies.
Individual tax
Progressive rates to 40%
Resident individuals are taxed on their worldwide income; non-residents are taxed only on their South African-source income. An individual is resident if present in South Africa for more than 91 days in the relevant tax year and the five preceding years, and for more than 915 days in the aggregate in the preceding five tax years. A person is also resident if “ordinarily resident”, ie if the person’s settled home or main residence is in South Africa. Income tax is charged at progressive rates to 40%. Dividends received by a resident individual from a South African company are generally exempt.
Capital gains
Gains are taxed in part as income
Capital gains tax is charged at the normal corporate or individual tax rates on 50% of the gain realised by a company and 25% of the gain realised by an individual. Non-residents are only liable for capital gains tax on the disposal of immovable property in South Africa, the disposal of shares in a real property company or the disposal of assets by a permanent establishment in South Africa. Individuals are exempt from gains on the sale of their primary residence, up to a value of ZAR 1.5m.
Indirect tax
VAT standard rate: 14%
Value-added tax (VAT) applies to most transactions at the 14% standard rate. Zero-rating applies to exports, international transport, some basic foodstuffs, some farming goods and certain fuels. Exemptions include some financial services, residential rents, domestic passenger transport and educational services.
Registration is compulsory for businesses with a turnover above ZAR 300,000.
Tax administration and compliance
Tax year: Corporations: accounting year; Individuals: year to February 28th
Companies make provisional tax payments on a half-yearly basis, the first payment within the first six months of the tax year and the second by the end of the tax year. Companies must submit a tax return within 60 days of the end of their financial year. Employment income of individuals is taxed by withholding; other income is subject to provisional tax payments. Individuals who are required to complete a tax return must submit the return by a date notified to them by the tax commissioner. Final tax payments of companies and individuals are collected by assessment after examination of the tax return.
Additional tax information
Withholding taxes: Dividends and Interest 0%, Royalties 12%. Rates may be reduced by tax treaty.
Tax treaties: South Africa has concluded more than 55 tax treaties.
Dividends: Domestic dividends are not taxable. Foreign dividends are taxable with a participation exemption, where shareholding criteria are met.
Revenue protection: There is transfer-pricing, thin-capitalisation and offshore subsidiary (CFC) legislation.
Groups: There is no provision for group treatment.
Incentives: Preferential corporate tax rate for small business corporations; research and development, employee housing depreciation, urban development and infrastructural development allowances; and public private partnerships allowance.
Other taxes: Capital gains tax, Donations tax, Estate duty, Excise duty, Import duties, Marketable securities tax, Stamp duty, Tax on retirement funds, Transfer duty. |
|
Register
Log in
FAQ
Search
Memberlist
