Starting a business as a foreigner in South Africa

What foreign entrepreneurs need to know

South Africa is an attractive destination for foreign investors looking to expand their operations or enter new markets. With a young workforce and a growing digital economy, the country is particularly appealing for industries such as tech, marketing and services. However, before starting operations, there are important legal and administrative steps that every foreign entrepreneur must follow.

Registering a company

The most common business structure for foreign investors is a Private Company (Pty) Ltd, which allows 100% foreign ownership. The registration process is administered by the Companies and Intellectual Property Commission (CIPC). This includes name reservation, submitting the Memorandum of Incorporation (MOI), and appointing at least one director.

Once the company is registered, several key steps must be taken to ensure the business is legally compliant and operational.

Tax registration

The company must register with the South African Revenue Service (SARS) as a provisional taxpayer and should also sign up for SARS eFiling. A public officer, who is the tax representative of the company, must be appointed within one month of starting operations (Tax Administration Act 28 of 2011).

VAT registration is compulsory if annual turnover exceeds R1 million. Voluntary registration is permitted for businesses earning over R50,000. VAT is currently levied at 15%.

Employers must register for Pay-As-You-Earn (PAYE) and Standard Income Tax on Employees (SITE). These are monthly tax deductions from employees’ salaries, payable to SARS.

Unemployment Insurance Fund and Occupational Health & Safety

Employers must register with the Unemployment Insurance Fund (UIF), contributing 2% of employee remuneration (1% each from employer and employee). If the annual payroll exceeds R500,000, the company must also contribute 1% of total payroll towards the Skills Development Levy (SDL).

Registration under the Compensation for Occupational Injuries and Diseases Act (COIDA) is mandatory. Employers are also required to ensure a safe working environment under the Occupational Health and Safety Act 85 of 1993.

Banking and compliance with financial regulations

Opening a South African business bank account is essential. Banks will require company registration documents, proof of address, and identification of directors. Depending on the nature of the business, registration with the Financial Intelligence Centre (FIC) may be required to comply with anti-money laundering laws.

B-BBEE

While Broad-Based Black Economic Empowerment (B-BBEE) is not mandatory, it is vital for doing business with government or large corporate clients. Organisations with an annual turnover of R10 million or less can obtain automatic B-BBEE recognition (Level 4) without having to comply with any of the B-BBEE scorecard targets. These entities are referred to as exempted micro enterprises or EMEs. Some industries may also require specific licences or permits, and zoning rights may need to be confirmed for the chosen business premises.

Record keeping

Finally, the company must maintain statutory registers, including records of directors, shareholders and meetings. This is a legal requirement under the Companies Act.

Starting a business as a foreigner? SD Law can help

Starting a business in South Africa as a foreigner is both feasible and rewarding, but it requires compliance with local tax, labour and corporate laws. SD Law can guide you through the process, ensure a smooth setup and make sure you avoid penalties. If you’d like to have an exploratory discussion, contact Simon on 086 099 5146 or email sdippenaar@sdlaw.co.za.

Further reading:

• Joint venture agreements
• Drafting effective contracts
• Due diligence – why it matters
• Protecting intellectual property

SD Law

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