Starting a Business as a
foreigner in South Africa
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.
At Sa
Migration Immigration we have assisted hundreds of entrepreneurs with their
ambition to create a business in South Africa and are able to boast of an
unrivalled track record of success, all based on what we believe to be the most
comprehensive service available.
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, feel
free to call us on any of our phone numbers
Where to begin with starting a business as a
foreigner in South Africa
Importantly
and before you commit time and money, you should have an assessment of your circumstances and requirements
carried out. Assessments, as with ourselves, should be free of charge and carry
no obligation.
Very
often, and understandably, people source information on the obvious, in this
case the business visa. There is however a real alternative that should be
considered, if for no other reason to ensure you have made an informed
decision.
Below we
look at the two routes for starting a business as a foreigner in South Africa
and discuss the merits and pitfalls of each.
The different visa’s for starting a business as a
foreigner in South Africa
In order
to be able to set up, invest into and work within a business in South Africa as
an immigrant there are two types of visa you can apply for:
-
Business visa – Traditionally, for anyone
starting a business as a foreigner in South Africa this category has been
the most recommended.
-
Independent
Financial Permit – A
very underused permit category that allows for the holder to commence a
business, but also offers a host of other benefits over the business visa
route.
Who can apply?
Business
visa are for those individuals seeking to invest in a business, or an existing
start up, and who will be working within the business.
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
into a business, whether they will be working in it or not. There is also no
obligation to invest, 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 a
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,
which ever 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?
As a
business visa holder you will need to typically own in excess of 25% of the
business. A Financially Independent permit holder has no restrictions.
Is there a minimum amount of investment required?
For
business visa holders you need to invest ZAR 5 million into the business unless
you qualify for a waiver.
There is
no requirement for the holder of the Financially Independent permit to invest
any set amount into as business, they are free to invest as little or as much
as they desire. Note however, to successfully apply for a Financially
Independent permit, you need to prove a net worth of the equivalent of ZAR12,000,000
(12 million) but these funds do not need to be brought into South Africa.
Can my partner or children work in the business?
Partners
of the business visa holder can work in the business but not for remuneration.
Children would not be able to work in the business unless a work visa was granted
in their own right. If you have children still in education years a study visa would be required.
Partners
of Independent Financial permit holders will need to secure residency in their
own right which would involve a spousal or life partner visa application.
Dependent children would require a study visa.
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.
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
a Pty Ltd would be the appropriate company structure and you can ask us about about the various
business structures here.
I am in a permanent relationship / married to a
South African – do I need a business visa?
Neither a
business visa, not an Independent Financial Permit are required if you have a
South African partner. Starting a business as a foreigner in South Africa with
a South African partner requires you to have either a spousal visa or life
partner visa which you can then endorse
to set up and run a business.
If I am not working in the business, just
investing, do I need a business visa?
Business
visa’s 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 a business visa application, part of the application’s supporting
evidence is the submission of a comprehensive business plan. The business plan 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.
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 prospective. There is
also an argument for it being good practise for all businesses to be audited.
The
decision, subject to these rules, is up to the business holder.
Can I set up an NGO in South Africa as a foreigner?
Yes, non
profits are able to set be up.
How long does the application process take?
There are
two aspects to the application process:
- The compilation of the visa
or permit application.The compilation of the business visa application is
more time consuming as this stage involves not only the Home Affairs
requirements but also supporting documentation such as the company
registration paperwork and the memorandum of incorporation. In addition
other departments such as the Department of Trade and Industry are
involved. Compilation can therefore take 4 – 12 weeks.
- The Financially Independent
application does not involve such third parties and can therefore be
achieved much quicker.The second stage is the submission to the Department
of Home Affairs and the Departments timing can vary from 4 weeks to 12
weeks usually for a business visa.
Here
there can be a potential drawback for applicants for the Financially
Independent as these have historically taken approx 9 months.
Is there any other important distinctions?
But in
summary, whilst the independent financial permit is a lot more flexible and
carries little obligations with it either initially or on an ongoing basis
there are 2 considerations that must be taken into account:
- The timing of your move.
Permanent residency applications (Independent Financial Permits) take
longer to process. If you plan in ample time this can be mitigated.
- The Department of Home
Affairs levies an additional charge for successful applicants of the Independent
Financial permit of ZAR 120,000. This is almost akin to a success fee as
it is only payable if your application is approved.
Making an Application for a
Business Visa
Making an Application for a
Business Visa
This section
deals with making an application for a business
visa in South Africa. A business visa is required by a person who is
seeking to buy into or set up a business in South Africa in which they will be
actively involved (work).
Please
read on for information how you make application for a business visa in South
Africa or should you prefer you can contact one of
our team to discuss your situation. For further information on
business visa you can also view our quick links on the left hand side of this
page.
Getting
assistance with making a business visa application
- You can e-mail
your business visa enquiry here to info@sami.co.za
- Use or office Whtaspp number
+ 282 3738415 to contact us
NOTE:
If you are an existing company based abroad but seeking to expand your
operations into South Africa please mention this with details on the visa that
may be applicable to you.
Who should apply for a Business Visa?
Applications
for business visa, as alluded to above, are for individuals who wish to either
invest into an existing South African business that they will work in, or set
up a new business that will work in.
Business visa versus investor visa
A
business visa should not be confused with an investor
visa. A business visa allows you to work in the business and the
visa is issued for this purpose. An investor visa (which is not offered in
South African immigration) allows immigration through investment of a certain
amount of capital and does not require the immigrant to work.
When applying for a business visa what are the
residency options?
Making an
application for a business visa in South Africa allows you to apply for
temporary residency. Once you are in receipt of temporary residency you can
then apply for permanent residency.
How long can I apply for on my business visa application?
As with
all temporary visa’s, the decision as to the validity period of a business visa
lies with the Department of Home Affairs. In the case of a business visa it
will not be issued for more than 3 years.
When can you apply for permanent residency?
Permanent
residency can be applied of at any stage but it is most normal to make an
application after receiving your business visa for temporary residency.
Where should my business visa application be made?
First
time applications that involve a change of your via status, for example from
tourist to resident, must be made from outside of South Africa. It is only
where there is no residency status change that you can apply in South Africa,
for example renewing an existing temporary visa.
What is the main criteria when making an
application for a business visa in South Africa?
- A completed application form
- A thorough business
plan
- An appropriate
company structure
- Applicable
registrations or undertakings
- Investment amount
for business visa
- Employment of
South African citizens or Permanent residency holders
·
Types of business structures in South Africa
·
Types of
business structures in South Africa
·
The
Companies Act of 2008 relays the appropriate types of business structures in
South Africa pertaining to companies. Whether you are seeking a business
visa, or an endorsement to a visa you will have to select the right business
structure.
·
Sa
Migration Immigration has assisted individuals / companies since 2006 with
advice on the types of business structures in South Africa and with the setting
up thereafter.
·
Types of business structures in South Africa
·
Below we
give you an insight into each of the types of business structure in South
Africa you may consider for your business if setting up operations as a
foreigner. Where there is more information available on the business type
simply click on the headers below.
·
·
Sole Proprietorship
·
A sole
proprietorship, which is often referred to as a sole trader, is a business
structure that is owned and run by one individual.
·
It is
important to note that with a sole proprietorship there is no separation
between the owner and the business structure – the business does not have its
own legal entity. In practise this means the income of the business is all for
the owner, as are the taxes and any liabilities.
·
·
Partnership
·
A
partnership is akin to a coming together of between 2 and 20 people who
contractually agree to operate a profit generating business business together.
They further agree to split any profits as per their agreement and in
proportion to their interests.
·
In
establishing a partnership each partner needs to make a contribution to it and
as per a sole proprietorship the partnership is not a separate legal entity,
leaving partners generally liable for debts
·
.
·
Private Companies
·
Typically
the choice for most foreigners setting up a business in South Africa. This type
of business structure in South Africa does not place any prohibition on foreign
shareholding and only requires one shareholder and one director.
·
The new
Companies Act prohibits a Private Company (Pty Ltd) from offering securities to
the public.
·
Private
companies are seen as separate legal entities and as such are taxed in their
own right and offer the shareholders protection against liabilities.
·
A Pty Ltd
will require reservation of a company name, the completion of a memorandum of incorporation and written consent
of the auditors, if any, to act for the
company.
·
·
Public Companies
·
A public
company is largely set up to offer shares to the general public for the purpose
of capital raising. There is a requirement for a minimum of one shareholder and
three directors.
·
Public
companies are known as Ltd companies and have their own legal identity.
·
Personal Liability Companies
·
If a
company incorporates under section 8(2)(c) of the
Companies Act the terms of its memorandum of incorporation (MOI)
state that the directors and past directors are jointly and severally liable,
together with the company, for any debts and liabilities of the company, as are
or were contracted during their respective periods of office. Typically this
means professions such as attorneys and accountants that make use section
8(2)(c) of the Companies Act.
·
·
State Owned Companies
·
A State
owned company is either a company defined as a “state-owned enterprise” in the Public Finance Management Act 1 of 1999 or a
company owned by a municipality. The majority of the provisions of a public
company will apply to state-owned companies as well.
·
Non-profit Companies (NPC)
·
A non
profit company is incorporated public that is established, as an example, for
some form of cultural or social activities or communal / group interests.
Income is not distributed to any stakeholder from this type of business
structure.
·
·
Foreign and External Companies
·
External
companies are foreign owned companies that are incorporated outside of South
Africa but trade in South Africa. There is a requirement for foreign owned
companies to register as an external company with the CIPC and they may not
offer securities to the South African public.
·
This type
of business structure in South Africa is utilised by foreign companies
wishing to set up a branch in South Africa.
Business Plans for South
Africa
Researching
a business plan, formulating it and ensuring the business plan is
realistic and workable are just some of the key criteria when commencing a new
business.
When such
a business plan is presented as supporting evidence to immigration
authorities its importance becomes even more valid.
A
business plan is a written document that describes the business, the business
objectives, strategies, market segment, forecasts and financial resources.
The functions of a business plan are many but
include:
- Providing a template from
which to run your business
- Measuring the success of
your business
- Setting out financial goals
– short and long term
- Quantifying expansion plans
- Raising capital
- Supporting immigration
applications
- A review document
- Attracting investors, shareholders
and business networking
What should a Business Plan include?
A
business plan is a written statement of the journey your business is going to
take. It should provide details of how you intend to develop the business, who
is going to play a role in this business and how the financial side of the
business will be managed.
Clarity
on these issues is particularly important if you’re looking for finance,
investment or using the business plan to support an immigration application.
Your plan should at least include:
-
An executive
summaryThis
is an overview of the business you want to start. This is essential –
first impressions count! Many people will be influenced by how well the
summary is presented based on the first few pages of your plan.
-
Short description
of the business opportunityThis details who you are, what product or
service you will supply and why, who you will supply the product to and
how.
-
OperationsIncluding such things as
manpower, premises, IT infrastructure, future expansion.
-
Marketing and
sales strategyWho
will buy your service or product and why. How will you promote the service
in terms of product, placement and pricing.
-
FinancialsOne of the most important
aspects of the business plan. These documents and tables translate
everything form the business plan into figures.
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