THE INDEPENDENT FINANCIAL SKILLS PERMIT

 THE INDEPENDENT FINANCIAL SKILLS PERMIT

Starting a business as a foreigner in South Africa can be an arduous task without enlisting professional help. There are a number of ‘hoops’ that must be circumvented and the process can be time-consuming and a distraction from the all-important task of establishing your business.

Below we detail the important aspects of starting a business as a foreigner in South Africa but if you prefer to talk to a human being to discuss your needs.

Importantly and before you commit time and money, you should have an assessment of your circumstances and requirements carried out. Assessments, as with ourselves, we will require an Assessment fee of R450.

Who can apply?

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 in a business, whether they will be working in it or not.

There is also no obligation to invest in 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.

Must there be local ownership?

No 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.

Can I buy into or outright an existing business?

Yes, whichever permit or visa category you select you can do either or indeed set up one from scratch.

Is there a minimum shareholding a foreigner must own?

 A Financially Independent permit holder has no restrictions.

Is there a minimum amount of investment required?

There is no requirement for the holder of the Financially Independent permit to invest any set amount into a business, they are free to invest as little or as much as they desire.

Must I employ South Africans?

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, but a recommendation

Can I apply for permanent residency?

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.

What sort of company must I set up?

Typically, Pty Ltd would be the appropriate company structure.

If I am not working in the business, just investing, do I need a business visa?

Business visas 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.

How do I prove my business concept and my credentials?

When making an application, part of the application’s supporting evidence is the submission of a comprehensive business plan. The business plan's 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 but it’s an advantage if it's available.

Would my business need to be audited?

There are requirements for businesses with a certain turnover to be audited and also others like estate agents are required from a regulatory perspective. There is also an argument for it being good practice so it can be audited

The decision, subject to these rules, is up to the business holder.

Financially Independent Permit South Africa

Previously known as a business permit, a business visa is required by many immigrants to South Africa who have a desire to set up their own businesses in South Africa. Often, they can be thwarted in their attempts due to the regulations surrounding obtaining a business visa, and may need to seek an alternative option. This is where the financially independent permit can come into play.

Why Might You Not Get a Business Visa?

In the first place, it may be unappealing to some business people as the process is normally to first obtain a business visa (issued for a maximum of 3 years) and upon receipt of this then apply for a business visa (permanent residency). Many applicants seek the security of permanent residency from day one of their immigration and are not willing to put up with the risk of investing in a business with only a 3-year visa.

Typical examples of this would be:

  1. Those who seek to open a guest house.
  2. Those who wish to open a service business with few staff.
  3. Those whose business does not demand the current minimum investment.
  4. Applicants invest in a business that is predominantly management-run.
  5. Those applicants cannot meet the business visa criteria.
  6. Those applicants who seek the reassurance of permanent residency from day one of their immigration.
  7. Where the business is more of a hobby or additional income stream.
  8. Where the business activities/industry is provisioned in the DTI undesirable list.
  9. The nature of the business may not be feasible for the employment of South African staff within the first 2 years. The forecast for the business is that you will only have profits from employment in later years.
  10. As a Financially Independent permit is for permanent residency, it will in most cases take longer than a visa (temporary residency application). So, if speed is important to you then a Financially Independent permit may not be appropriate. That said, other visas could well be obtained to cure this ‘speed’ issue.
  11. Costs – A business visa does work out cheaper than a Financially Independent permit, but this does need looking at in more detail.

So, what’s the cost difference?

Generally, you find that there are service fees around half the price for a Financially Independent permit as opposed to a Business Visa. Simply because the permit is much easier to compile and submit. So, in this case, there is a fee-saving.

It is the Department of Home Affairs fees where the extra costs come into play. Application and submission fees remain the same but there is an additional fee payable. For the sake of ease of reference let us call this fee a success fee.

Once your Financially Independent permit has been granted, you will be required to pay a fee of R120,000 to the Department of Home Affairs.

Worth stressing is that this fee is not payable until the permit is granted so it is never at risk.

The net effect could see additional fees of R100,000 but a lot less hassle and the guarantee of permanent residency from day one of your immigration.

Conclusions of Business Visa versus Financially Independent Permit

No one likes paying more than they need to, however, cost is also about time, reassurance, and efficiency.

For many applicants, given the choice and with the knowledge that R100,000 is a small percentage of a total immigration and business setup cost they would rather go the Financially Independent Permit route than that of a Business Visa.

Getting more help Contact Us with your options

Being aware of all your options and the repercussions of any choices you make is essential to making the right decision. Maltech-Africa

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Location: Pretoria, South Africa

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