A company established abroad can open a representative office in South Africa as a first step towards entering the market in this country. This establishment will only engage in market research and promotional activities and will not be used for commercial purposes or to derive income from South Africa.
Foreign entities interested in company formation in South Africa can consider their options, and advantages when setting up a liaison or representative office with the help of our team. We offer tailored solutions for businesses across many different industries and are able to guide investors and entrepreneurs through choosing the right business form, as well as the general incorporation process.
Our lawyers in South Africa describe the main characteristics of the representative office below. For more in-depth information, as well as answers to other questions, please reach out to our local team.
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Establishing a representative office in South Africa
The decision to open a representative office, sometimes also called a liaison office, is one that allows a business to access the business opportunities in South Africa. It is an important business expansion decision, and it can be the first step before the decision to register a branch or a subsidiary.
Some reasons why South Africa is an ideal location for foreign businesses looking to expand their activities include the following:
- a strategic location;
- diverse economy;
- a favourable business climate;
- skilled workforce;
- English is the official language.
All these attributes make South Africa a gateway to Africa’s markets.
The primary advantages for a foreign company willing to open a representative office in South Africa are the following:
- They establish a physical presence in the South African market;
- They can conduct market research and gather valuable business intelligence;
- They can build relationships with potential customers, partners, and suppliers.
Our South African law firm specialises in company formation matters and will also guide overseas companies interested in taking their first steps towards entering the market.
Apart from company formation matters, our team can also answer questions regarding residency in South Africa, for those representative office appointed individuals, or for other investors interested in their options.
Requirements for representative offices in South Africa
The external company is used by foreign entities interested in establishing a presence from abroad. More specifically, the non-profit external company is the equivalent of the representative office in South Africa. Its characteristics are the following:
- it engages in activities in South Africa over a period of at least six months and will reasonably continue to engage in non-profit activities;
- it signs one or more employment agreements in South Africa;
- it functions under the company incorporation laws governing the parent company;
- it needs to appoint a South African resident as its public officer; this person will be responsible for the representative office’s compliance in South Africa;
- it will be asked to file details on the parent company’s directors, as well as its annual returns.
Foreign companies interested in establishing their South African presence are also able to register an external company that will be used for conducting business. However, in this case, the premises are not the same and the external company used for business purposes would fall under a different category. The foreign company interested in deriving income can also open a private or a public company, to achieve the same business purpose.
If you are considering your options for business expansion and are willing to open a representative office in South Africa, our team can guide you through the needed steps, both before and after the liaison office commences its specific activities.
The non-profit representative office will not engage in commercial activities, thus it will not derive income and will not pay corporate income taxes. Companies that engage in business activities are normally subject to the following taxes in South Africa:
- 27% corporate income tax (reduced from 28%, subject to conditions);
- 15% value-added tax;
- 1% payroll tax (with some exemptions).
Contact us if you are interested in company formation in South Africa and have questions not only about the representative office, but also about the establishment of other business forms, and their taxation and reporting requirements.
Our local team of lawyers will also answer questions about immigration to South Africa.