FOREIGN SUBSIDIARY BUSINESS SET UP SOUTH AFRICA

 

SET UP A FOREIGN BRANCH IN SOUTH AFRICA

A foreign company may conduct business in South Africa in its own name by establishing a branch office registered as an “external company” or may instead elect to incorporate a wholly-owned subsidiary of the foreign company.

Our multidisciplinary team of consultants and chartered accountants (SA) and attorneys are well-placed to provide your company with a roadmap to operate in South Africa. This includes an initial consultation to determine whether Branch or Subsidiary is more suited for your operations, filing annual returns, and offering complete accounting services.

FOREIGN BRANCH

The Companies Act, of 2008, defines a company that is incorporated outside of South Africa as a “foreign company”. A foreign company is required to register as an “external company” if the foreign company has entered one or more employment contracts within South Africa, or if the foreign company engages in a pattern of activities that would lead to a reasonable conclusion of continuous business conduct in South Africa.

A foreign company or “branch” is registered within the jurisdiction of South Africa although the shareholders and/or directors are situated in the country of origin. It is important to note that an external company registered in South Africa is not a new legal entity; rather, the foreign company remains one and the same legal entity that is merely registered in two countries.

1. The branch must obtain a South African registration number
2. The branch must have a locally registered address in South Africa
3. A South African resident must be appointed and registered with the CIPC and is responsible for the operations and compliance of the South African branch
4. A local auditor must be appointed for the branch. The audit is mainly for income tax purposes and can be used by the international company’s auditors
5. The branch must appoint a resident public officer who will accept documentation on the company’s behalf.

    

Chapter 2, Section 23 of the Companies Act, 2008, lists a series of activities that will be regarded as conducting business. This list includes:

 

1. Holding a meeting(s) of shareholders or board of the foreign company, or otherwise conducting the internal affairs of the company
2. Establishing or maintaining any bank or other financial account
3. Establishing or maintaining offices or agencies for the transfer, exchange, or registration of the foreign company’s own securities
4. Creating or acquiring any debts, mortgages, or security interests in any property
5. Acquiring any interest in intellectual property
6. Entering into contracts of employment

FOREIGN SUBSIDIARY SET UP SOUTH AFRICA

The Companies Act, of 2008, defines a company that is incorporated outside of South Africa as a “foreign company”. As an alternative to establishing an external company or branch, a foreign company may instead choose to incorporate a subsidiary which will be a legal entity separate from its holding company and capable of entering into agreements in its own name without the assistance of the holding company.

FOREIGN SUBSIDIARY

A foreign company can incorporate a subsidiary by either acquiring a shelf company that has already been formed or by incorporating a new private company.

The subsidiary operates in the form of a South African private company

Regular shareholder meetings must be held, however, these meetings need not necessarily be held in South Africa

A local auditor must be appointed for the company. The scope of the audit is unlimited and is mainly for income tax and shareholder purposes

A South African resident must be appointed and registered with the CIPC

There are a number of factors that influence the decision-making process in a subsidiary:

 Ownership structure.

1. Legal structure.
2. Setup requirements.
3. Taxation.
4. Ongoing legal requirements (e.g. Audits).
5. Foreign exchange.

SOUTH AFRICAN BUSINESS PERMIT/ VISA APPLICATION

 The Department of Trade and Industry DTI Is Now Part of the Business Permit Evaluation Process.

THE PROCESS.

There are four parts to the South African business visa application process:

1. Company formation.
2. Writing the business plan.
3. Submitting business documents to the Department of Trade and Industry DTI.
4. Submitting the visa application to the Department of Home Affairs.

The business plan and registrations during the company's formation will form part of the documents submitted to the DTI. (Maltech-Africa will facilitate this process)

The DTI will evaluate all the information to make their recommendation to the Department of Home

Affairs based on whether the DTI deems the business to be in South Africa’s best interest, and that the applicant has the experience and ability to effectively run the business.

 Let’s take a look at what’s involved in each of the four parts:

Starting a new business in South Africa begins with a number of business registrations:

1. Company Registration
2. Income tax registration.
3. Unemployment Insurance Fund (UIF).
4. Compensation Fund for Occupation Injuries and Disease (COIDA).
5. Register with a professional body, board, or council, where applicable.

 Another essential step is setting up banking facilities. As a foreigner, you could find this to be a nightmare. Luckily Maltech can facilitate this quickly and we can help you set up the necessary accounts and transfer money from overseas. You don’t even have to step into a bank!

Maltech will facilitate and deal with all Compliance issues. And prepare the business plan.

NB: Make sure your business has an Interest in Boosting the Economy of South Africa, Township Economy, and empowerment Opportunities in South Africa.

These are the key Elements to Get Recommendations from The DTI when applying for a Business Permit.

 The DTI is now working with the Home Affairs in Recommendations on all Business Permit and their criteria is easier than they used to be.

DEPARTMENT OF LABOUR COMPLIANCE CHECKLIST

1. Make sure your Business no matter how small must comply with all the Department of Labour compliance.
2. National Minimum Wage Act (NMWA).
3. Occupational Health and Safety Act (OHSA).
4. Basic Conditions of Employment Act (BCEA).
5. Unemployment Insurance Act (UIA).
6. Compensation for Occupational Injuries and Diseases Act (COIDA).

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