Doing business in South Africa 2013

Moore Stephens International PREC ISE . PROVEN . PERFORMANCE .

Doing business in South Africa 2013

The Moore Stephens South Africa Doing Business In series of guides have been prepared by Moore Stephens member firms in the relevant

country in order to provide general information for persons contemplating doing business with or in the country concerned and/or

individuals intending to live and work in that country temporarily or permanently.

Doing Business in South Africa has been written by Moore Stephens South Africa. In addition to background facts about South Africa, it

includes relevant information on business operations and taxation matters. This Guide is intended to assist organisations that are considering

establishing a business in South Africa either as a separate entity or as a subsidiary of an existing foreign company. It will also be helpful to

anyone planning to come to South Africa to work and live there either on secondment or as a permanent life choice.

Unless otherwise noted, the information contained in this Guide is believed to be accurate as of 1 June 2013. However, general publications

of this nature cannot be used and are not intended to be used as a substitute for professional guidance specific to the reader’s particular

circumstances.

Moore Stephens South Africa provides the Regional Executive Office for the South African Region of Moore Stephens International. Founded

in 1907, Moore Stephens International is one of the world’s major accounting and consulting networks comprising 299 independently

owned and managed firms and 624 offices in 101 countries around the world.

Our member firms’ objective is simple: to be viewed as the first point of contact for all our clients’ financial, advisory and compliance needs.

We achieve this by providing sensible advice and tailored solutions to help our clients’ commercial and personal goals. Moore Stephens

member firms across the globe share common values: integrity, personal service, quality, knowledge and a global view.

October 2013

Introduction

Doing business in South Africa 2013

1. South Africa at a glance 1

Geography, population, language & religion, climate 1

The nine official languages, along with the percentage

spoken as a home language 1

Climate 1

Politics & government 1

Currency, time zone, weights & measures 2

General economic outlook 2

Natural resources 2

2. Doing business 3

Main forms of business organisation 3

Company 3

Forming a company 3

Partnerships 6

Types of Partnerships 6

Labour relations & working conditions 6

Trade unions 6

Social security, pensions & health care system 6

Work permits, residence permits, visas etc. 7

South African Foreign Trade Relations 7

Broad Based Black Economic Empowerment (B-BBEE) 8

History and legal framework 8

Exempted small & micro-enterprises (ESME) 8

Qualifying small enterprises (QSE) 9

Start-up Enterprises 9

Equity Equivalent Program for Multinationals

(EE Program) 9

B-BBEE Sector Charters 9

3. Finance and investment 10

Business regulation 10

Banking & finance 10

Exchange controls 10

Incentives to investment 11

Foreign investment incentives 11

Tax incentives 11

Other (Trade & Investment) 11

4. The accounting and audit environment 12

Accounting regulations 12

Audit requirements 13

5. Overview of the tax system 14

Main taxes 14

Tax authorities 14

South African Tax Guide 14

6. Social security contributions 14

7. Moore Stephens in South Africa 15

Appendix 1: Double tax treaties 16

Comprehensive Treaties in force 16

Africa 16

Rest of the World 16

Comprehensive Treaties ratified in South Africa 18

Treaties ratified in the other county 18

Treaties signed, but not ratified 18

Treaties in process of negotiation or finalised but

not yet signed 19

Africa 19

Rest of the World 19

Current list of Air and Sea Agreements 19

Agreements terminated 19

Current list of Estate Duty Agreements 19

Agreements Terminated 19

Agreements In Force 19

Appendix 2: Moore Stephens

around the world 20

Bibliography 21

Contents

1Moore Stephens International

Doing business in South Africa 2013

Geography, population, language & religion, climateSouth Africa is located at the southern tip of the continent of Africa, with 4,862 km of land boundaries, bordering the countries Botswana,

Lesotho, Mozambique, Namibia, Swaziland and Zimbabwe.

South Africa covers an area of 1,219,090 km², which consists of 1,214,470 km² land and 4,620 km² of water. This includes the Prince

Edward Islands (Marion Island and Prince Edward Island).

The country has nine provinces: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North-West and

the Western Cape. The major cities are Johannesburg, Pretoria, Cape Town and Durban, situated in the Gauteng, Western Cape and

Kwa-Zulu Natal Provinces respectively.

Geographic coordinates: 29 00 S, 24 00 E

South Africa’s total population is 51,770,560 (based on the 2011 census), with the ethnic groups being (Stats SA):

Black African 79.2%

Coloured 8.9%

Indian/Asian 2.5%

White 8.9%

Other 0.5%

South Africa has nine official languages. However, English is widely spoken and recognised as the business language.

The nine official languages, along with the percentage spoken as a home languageIsiZulu (official) 22.7%

IsiXhosa (official) 16.0%

Afrikaans (official) 13.5%

Sepedi (official) 9.1%

English (official) 9.6%

Setswana (official) 8.0%

Sesotho (official) 7.6%

Xitsonga (official) 4.5%

siSwati (official) 2.5%

Tshivenda (official) 2.4%

isiNdebele (official) 2.1%

Sign language 0.5%

Other 1.6% (2011 census (Stats SA))

ClimateSouth Africa’s climate is mostly semi-arid, but subtropical along the east coast with overall sunny days and cool nights.

Politics & governmentSouth Africa has a bicameral Parliament, consisting of the National Council of Provinces (90 seats; 10 members elected by each of the nine

provincial legislatures for five-year terms; has special powers to protect regional interests, including the safeguarding of cultural and linguistic

traditions among ethnic minorities) and the National Assembly (400 seats; members elected by popular vote under a system of proportional

representation to serve five-year terms).

1. South Africa at a glance

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The last elections for the National Assembly and National Council of Provinces were held on 22 April 2009 (next to be held in April 2014),

with the seats comprising, by party – ANC 264, DA 67, COPE 30, IFP 18, other 21.

The current chief of state (2013) and head of government is Jacob Zuma, with the Deputy President being Kgalema Motlanthe. The

National Assembly elects the president for a five-year term (eligible for a second term); elections were last held on 6 May 2009 (next to

be held in 2014).

The country’s administrative capital is Pretoria, while Cape Town is the legislative capital and Bloemfontein is the judicial capital.

The legal system comprises a mixed system of Roman-Dutch civil law, English common law and customary law. (Factbook)

Currency, time zone, weights & measuresThe South African currency is the Rand, which is divided into 100 cents and is represented by the international abbreviation ZAR.

South Africa operates on the South Africa Standard Time (SAST), which is equal to GMT/UTC +2:00.

This is also equal to the Central Africa Time Zone (CAT). South Africa does not observe daylight-saving time.

The country uses the metric system of weights, measures and temperatures.

General economic outlookThe period 2008/09 saw a decrease in employment, trade and overall performance in the aftermath of the deepest recession the country

had seen in 17 years.

Although global FDI has not seen a spectacular increase since the onset of the global economic slowdown, South Africa and other emerging

economies have again begun tasting success as investors’ risk appetite for emerging economies continues to increase. This is evidenced by

the fact that since the beginning of 2010 alone, almost R72billion worth of cash inflows into the Johannesburg Stock Exchange (JSE) have

been recorded in the share capital and Mergers and Acquisitions (M&As) categories. This performance may be attributed to effective

economic policies and positive domestic sentiment.(Trade & Investment)

Natural resourcesSouth Africa has an abundance of natural resources, including gold, chromium, antimony, coal, iron ore, manganese, nickel, phosphates, tin,

rare earth elements, uranium, gem diamonds, platinum, copper, vanadium, salt, natural gas. (Factbook)

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2. Doing business

Main forms of business organisationCompany

The Companies Act (no. 71 of 2008) allows two types of companies

to be formed and incorporated, namely profit companies and

non-profit companies.

A profit company is—

a) a state-owned company; or

b) a private company if—

a. it is not a state-owned company; and

b. its Memorandum of Incorporation—

i. prohibits it from offering any of its securities to

the public; and

ii. restricts the transferability of its securities;

c) a personal liability company if—

a. it meets the criteria for a private company; and

b. its Memorandum of Incorporation states that it is a

personal liability company; or

d) a public company, in any other case.

Owing to the minimal annual formalities required, foreign investors,

commonly use private companies. The Directors need not be South

African residents or nationals.

Public companies are formed to raise funds by offering shares to the public and there is no limit to the number of shareholders. At least one

shareholder and three directors are required to form a public company.

Forming a company

Foreign companies wishing to establish local branch in South Africa must register the branch as an external company with the Registrar of

Companies within 21 days of establishing an office.

The registration procedure for a public or private company involves a detailed process and due to the complexities of the procedures

involved, the services of attorneys are recommended for use in the registration process.

The following process summarises the steps to be taken in ensuring the running of a business entity from registration to operation and

complying with employment legislations. Different documents require completion and different fees are charged depending on the size of

the business entity. Small enterprises are also required to file tax returns with SARS, to declare their revenue and tax liability, even if they

have been exempted. (Trade & Investment)

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Procedure Requirements Est. Time

Reserve a company name with the Registrar of companies and pay fees

The company name can be reserved electronically on the CIPC website. Once the CIPC has approved the proposed company name, the reservation is valid for 2 months, extended by a period of 1 month, within which the company can be incorporated.

The agent must have a credit balance on their account for the name reservation application to be processed.

CIPC officials assign a tracking number to the electronic name reservation and process it in that order.

The applicant would be required by CIPC to open an agent account for debiting fees payable in connection with that lodgement and future lodgements.

3 – 5 days

Lodge Company formation A certificate to commence business is required by law before a company can legally trade or raise finance. The form CM46 – certificate to commence business, is submitted together with the formation documentation. The Registrar will incorporate the company once all of the following documents are submitted simultaneously:

A copy of CIPC letter advising that the name has been approved and reserved;

One signed set of the certificate of incorporation;

Memorandum of Incorporation, together with the necessary signatories’ pages. The MOI must reflect the lodgement fees payable, which is calculated, based on the authorised share capital of the company.

The Registrar will allocate a registration number to the company and will release the MOI, certificate of incorporation and certificate to commence.

A statement by each Director indicating there is adequate capital in the company for the purpose of the company’s business must be completed by the Directors of the company and lodged with CIPC.

5 – 7 days

Open a bank account In order to open a bank account, the applicant needs to provide proof of entity Directorship and original company documents.

1 – 2 days

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Register with the office of the local South African Revenue Service (SARS) for income tax, VAT and employee withholding tax (PAYE and SITE).

Businesses with annual taxable income in excess of R1 million needs to register for VAT. Once a company is incorporated, the relevant SARS office is advised and an income tax number is allocated to the entity.

The company also has to register as an employer by means of an EMP 101e form that caters for the necessary registration of all withholding taxes applicable to the taxpayer, including Pay as You Earn, (PAYE i.e.: employee tax) or SITE (inclusive of employee tax), Unemployment Insurance Fund (UIF) and Skills Development Levy (SDL) according to S4 of the Income Tax At (ITA).

12 days

Register with SARS or the Department of Labour for Unemployment Insurance and any other obligations.

In terms of Section 10 of the Unemployment Insurance Contributions Act (UICA), where an employer is liable to pay contributions, the employer must register with SARS or the UIF office (whichever is applicable to such employer) for the payment of the contributions.

Registration with UI Commissioner’s office: The following employers must register at the UI Commissioner for purposes of paying UIF contributions:

• An employer who is not required to register

for employees’ tax purposes at SARS;

• An employer who has not registered

voluntarily as an employer for employees’ tax

purposes at SARS; and

• An employer who is not liable for the

payment of Skills Development Levy.

Registration with SARS:

Any employer who is liable to register with SARS for the payment of employees’ tax and/or Skills Development Levy or has voluntarily registered with SARS for employees’ tax purposes is also required to register with SARS for purposes of paying UIF contributions.

NB. An employer does not have any discretion as to whether to register with either the UI Commissioner or SARS. The liability of the employer to register and pay employees’ tax and/or Skills Development Levy will determine with whom an employer must be registered for UIF purposes.

4 days, or simultaneously with above procedure

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Partnerships

With a normal partnership, the partners have joint and several liability for the debts of the partnership. This means that each partner is

responsible, in the first instance, for his or her share of the debts, but will have further liability for any share of such debts which has not

been paid by the other partners.

Partnership documents are generally private.

A partnership will be dissolved if one of the partners dies, leaves or is declared personally insolvent.

The Partnership is not a “person” for tax purposes and tax is thus payable in the hands of the partners.

Types of Partnerships

• General Partnership: partners are liable jointly and severable for the debts of the partnership

• Anonymous Partnerships: the anonymous partner is not known to the public and liable to the partners for the pro rata share

• Limited Partnership: the partner is a financial participant with a restricted liability-similar to a shareholder in a company. He shares in the

profits and losses, but his liability is restricted to his specific contribution or an agreed amount.

Labour relations & working conditionsTwo of the most important labour regulations in South Africa are the Labour Relations Act, 1995 (No. 66 of 1995) and all its subsequent

amendments, and the Basic conditions of Employment Act, 1997 (No. 75 of 1997). Other laws include the Skills Development Act, 1998

(No. 97 of 1998), the Skills Development Levies Act, 1999 (No. 9 of 1999), the Employment Equity Act, 1998 (No. 55 of 1998), the

Occupation Health and Safety Act, 1993 (No. 85 of 1993) and the Compensation of Occupational Injuries and Diseases Amendment Act,

1993 (No. 181 of 1993). These laws have been introduced to:

• Regulate the relationship between employers and employees;

• Provide basic employment standards for employees;

• Advance historically disadvantaged employees in the workplace;

• Improve the skills of employees and

• Provide for compensation for disablement caused by occupational injuries or diseases. (Trade & Investment).

Trade unions

There is an active trade union movement in South Africa, but union membership varies widely between different industries.

Employers can neither prohibit their employees from joining a trade union nor require them to do so. Neither can they require that

employees wishing to join a trade union join a specific organisation, or discriminate on the ground of trade union membership.

Social security, pensions & health care system

South Africa does not have a system of social security in place.

A state pension is available to certain individuals, if their financial situation is below a certain level.

In most circumstances, employees are allowed to belong to a workplace pension or belong to a private pension fund.

The majority of employees belong to a private medical aid.

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Work permits, residence permits, visas etc.

Non-South African residents wishing to seek or take up

employment in South Africa need to obtain a work permit. Work

permits are issued only to foreigners, where South African citizens

with the relevant skills are not available for appointment. These

permits are open-ended and applications must be made at any

regional office of the Department of Home Affairs or nearest South

African embassy, mission or consulate abroad.

Work permits may be granted on various grounds:

• General work permits are valid for the duration of the contract of

employment.

• Exceptional Skills work permits where applicants are required to

produce a letter from a foreign or South African organ of State,

or from an established South African academic, cultural or

business body, confirming the applicant’s exceptional skills or

qualifications. Applicants also need to provide a letter of

motivation indicating that the applicant’s exceptional skills will be

to the benefit of the South African environment in which they

intend to operate.

• Intra-company transfer work permitswhere multi-national

companies may decide to transfer an existing employee from a

foreign branch to a branch in South Africa. These are valid for

two years only and cannot be renewed or extended.

• Companies with a proven ongoing need for foreign employees can

obtain corporate work permits. This permit is issued not to the

individual worker, but to the employer and allows him/her to employ a specific number of foreigners in specific positions on an ongoing

basis.

• Business permits are available to foreigners who are contemplating investing in the South African economy by establishing a business or

by investing in an existing business in the country. The applicant will be required to invest a prescribed financial capital contribution. (Trade

& Investment)

South African Foreign Trade RelationsSouth Africa is engaging with key developed markets in order to actively maintain and expand its relations with traditional trading partners.

The country is also developing bilateral trade relations with key markets in Africa, South America and Asia. These economies offer vast

export opportunities to South Africa, not only due to their rapid growth but also due to the unique opportunities available in terms of

investment, joint ventures and technology transfers offered by these markets, due to the complementarities that emerge from comparable

levels of industrial development in these countries.

In order to maintain and expand trade relationships with established markets, as well as new developing markets, the country enjoys a

number of favourable access conditions that include the following:

• EU Trade, Development and Co-operation Agreement – The agreement covers trade relations, development co-operation, economic

co-operation and numerous other fields. Under this agreement, the EU will liberalise 95% of its imports from South Africa after a

phase-down period ending on 01 January 2010. In return, South Africa will grant duty free access to 86% of imports from the EU, after a

phase-down period ending on 01 January 2012.

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• The Southern African Development Community Trade Agreement – The SADCTA FTA was launched in 2008 between eleven of the

fourteen member countries. The implication of this is that producers and consumers in these will pay no import tariff on an estimated

85% of all trade in goods and services between these countries.

• African Growth and Opportunity Act – AGOA builds on existing United States programmes designed to increase trade and investment

between the United States and developing countries. The Act expands benefits available under the Generalised System of Preference

(GSP), which offers duty-free treatment to imports of selected products from specific beneficiary countries.

• European Free Trade Association – A free trade area, as agreed with the European Free Trade Association (EFTA), comprising Iceland,

Liechtenstein, Norway and Switzerland, came into effect in May 2008.

• Southern Common Market (Mercado Común del Sur) – The SACU-MERCOSUR PTA establishes fixed preference margins between the

parties on a number of goods. (Trade & Investment)

Broad Based Black Economic Empowerment (B-BBEE)B-BBEE is a government policy aimed at the economic transformation of South Africa through the increased participation of previously

disadvantaged people at all levels of the economy.

History and legal framework

In 2003, a strategy for Broad-Based Black Economic Empowerment was released. This strategy was followed by the Broad-Based Black

Economic Empowerment Act No. 53 of 2003 (“B-BBEE act”).

The B-BBEE Act is enforced by requiring all organs of state and public entities to take B-BBEE status into account when:

• determining qualification criteria for the granting of licences and concessions,

• developing and implementing a preferential procurement policy,

• determining qualification criteria for the sale of state-owned enterprises, and

• developing criteria for entering into partnerships with the private sector.

The procurement chain ensures the B-BBEE actfilters through to the private sector.

The B-BBEE act is an enabling legislative framework that allows for the development of the Codes of Good Practice (“Code”). The Code

provides a standard framework for the measurement of B-BBEE across all sectors of the economy. The Code utilises a score-card to measure

the level of compliance, utilising several elements such as ownership, management control, skills development and enterprise & supplier

development. The different elements are explained in the B-BBEE Codes of Good Practice guides.

Entities have to apply for a scorecard, valid for 12 months, with an accredited verification agency, such as Moore Stephens.

Exempted small & micro-enterprises (ESME)

This category consists of companies that are exempt from measurement of a B-BBEE score. ESME are automatically allocated a B-BBEE

recognition of a Level 4 contributor. ESME with a black ownership percentage of 50% or more are promoted to a Level 3 contributor.

The B-BBEE Code qualifies businesses with an annual total turnover of R5 million or less as ESME.

However, certain charters have reduced turnover requirements. Most noteworthy:

• Tourism & Hospitality charter: R2.5 million

• Construction Charter: R1.5 million for Build Environment Professional related enterprises that provide services related but not limited to

consulting engineering, architecture and quality surveying. Contractors with annual turnover R5 millionand less will however qualify

as ESME.

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Qualifying small enterprises (QSE)

Qualifying Small Enterprises (QSE) are defined by the Code as companies with an annual total turnover of between R 5 million and R35

million. The code provided relief to QSE by requiring them to comply with only four of the elements on the QSE scorecard. The QSE

scorecard differs from the generic scorecard in that each element counts equally as 25%, thereby enabling a QSE to choose any four elective

elements to make up 100% compliance.

Start-up Enterprises

Start-up Enterprises may be measured as ESME for their first year following formation or incorporation, regardless of their expected total

revenue. However, where a start-up tender for a contract with a value between R5 million and R35 million, they have to comply with the

QSE scorecard, and for a contract with a value above R35 million, with the generic scorecard.

Equity Equivalent Program for Multinationals (EE Program)

The Codes of Good Practice require that all entities operating in the South African economy make a contribution towards the objectives of

B-BBEE. It is, however, acknowledged that there may exist multinationals that have global practices preventing them from complying with

the ownership element of B-BBEE through the traditional sale of shares to black South Africans. In this instance, and provided that it can be

proven that such entities do not enter into any ownership partnership arrangements in other countries globally, the codes have made

provision for the recognition of contributions in lieu of such sale of equity. Such contributions are referred to as Equity Equivalent (EE)

contributions. Such EE contributions towards the ownership element of B-BBEE made by multinationals will be measurable against 25% of

the value of their operations in South Africa.

Refer to the Guidelines on the EEP for more information.

B-BBEE Sector Charters

In February 2007, the dti gazetted the Black Economic Empowerment (BEE) Codes of Good Practice, in terms of which a number of

Transformation Sector Charters (also referred to as Sector Charters) were introduced, vetted and analysed for compliance, as per the

stipulations of either Section 9 or 12 of the B-BBEE Act, No. 53 of 2003.

A measured entity that falls within the scope of a particular Section 9(1) Sector Code must be measured or verified on the basis of the Sector

Code and no longer on the basis of the B-BBEE Codes of Good Practice. Refer to B-BBEE Sector Charters for a list of Sector Codes gazetted.

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Business regulationRegulations governing the conduct of business in various sectors of the economy exist. These sectors include banks and other financial

institutions, medicine, manufacturing, mining, energy and transport. Quality and the standard of corporate operation are also regulated to

ensure sustainable economic growth.

Some of the regulatory bodies responsible for these objectives include:

• Financial Services Board (FSB)

• Securities Regulation Panel (SRP)

• South African National Accreditation System (SANAS)

• South African Bureau of Standards (SABS)

• South Africa’s Constitution – the National Regulator for Compulsory Specifications (NRCS) protects the right of the public to health, safety

and environmental protection.

• National Energy Regulator (NERSA)

• Competition Commission (COMPCOM)

• Financial Surveillance Department (formerly Exchange Control Department) of the South African Reserve Bank (SARB)

• National Nuclear Regulator (NNR)

Intellectual Property Regulations – South Africa has a developed system of intellectual property (IP) law covering patents, industrial designs,

copyright and trademarks. The South African IP law has been amended and consolidated in accordance with the agreement on Trade-Related

Aspects of Intellectual Property Rights (TRIPS) requirements and the International Convention for the Protection of Performers, Products of

Phonograms and Broadcasting Organisations. The IP law will cover intellectual property such as patents, designs, copyright and trademarks.

(Trade & Investment)

Banking & financeThe South African banking sector is dominated by a small number

of banks offering banking services to business and personal

customers.

Larger companies may raise funds by issuing bonds through

debt-capital markets. Smaller companies usually raise debt finance

by means of loans and overdrafts from banks. Security will normally

be required.

Exchange controlsThe Financial Surveillance Department (formerly the Exchange

Control Department) of the South African Reserve Bank imposes

exchange controls on South African residents in terms of the

Exchange Control Regulations (1961), issued under the Currency

and Exchanges Act (No. 9 of 1933). The South African government

remains committed to the gradual relaxation of exchange controls,

but the existing exchange controls are strictly enforced, particularly

in the current uncertain financial environment. (Trade & Investment)

3. Finance and investment

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Incentives to investmentForeign investment incentives

Enterprise investment programme – This is an incentive grant which comprises the Manufacturing Investment Programme (MIP) and

Tourism Support Programme (TSP). The incentive is accessible to both local and foreign-owned entities intending to locate their projects in

South Africa.

Foreign investment grant – This is designed for international companies investing in plant, new machinery and equipment in South Africa.

The grant compensates investors for the transportation of new machinery and equipment to South Africa.

Business process outsourcing and off-shoring investment incentive – This comprises an investment grant and a training and skills

support grant towards the cost of company-specific training. The incentive is offered to local and foreign investors who establish projects

that aim to serve offshore clients.

Foreign film and television production incentive – This aims to attract foreign-based film productions to shoot on location in South

Arica. This incentive programme consists of the Large Budget Film and Television Production Rebate Scheme, whereby foreign-owned

qualifying producers are rebated a maximum of 15% of the Qualifying South African production Expenditure, capped at R10 million, for the

production of large-budget films and television productions.(Trade & Investment)

Tax incentives

Section 12i Income Tax Allowance Incentive (ITAI)

Research and development tax incentive programme

Other (Trade & Investment)

Industrial development zone programme

Critical infrastructure programme

Automotive production and development programme

Technology and Human Resources for Industry programme

Support programme for Industrial Innovation

Small Enterprises Development, Agency Technology programme

South African Film and Television Production and Co-Production incentive

Clothing and Textile Competitiveness programme

Production incentive

Export, Marketing and Investment Assistance scheme

Municipal incentives

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4. The accounting and audit environmentAccounting regulationsThe majority of companies are required to apply International Financial Reporting Standards (IFRS) or International Financial Reporting

Standards for Small and Medium Enterprises (IFRS for SMEs).

IFRS is mandatory for companies listed on an Exchange.

Listed companies must also comply with the Listing Rules. These impose some additional financial-reporting requirements on companies, but

primarily include extended requirements in respect of narrative reporting and other matters such as directors’ remuneration.

There is an exemption available for companies with a public interest score (see explanation under audit requirements) below a hundred and

that compile their financial statements internally, to apply a financial reporting standard as determined by the company.

SA GAAP has been withdrawn and is no long available for use, effective periods starting on or after 1 December 2012.

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Doing business in South Africa 2013

Audit requirementsThe requirement to be audited is regulated by the Companies Act, 2008 and Companies Regulations, 2011.

State-owned companies, public companies listed on an exchange, public companies not listed on an exchange and profit companies who

hold assets in excess of R5million in a fiduciary capacity are required to be audited.

Private companies, other than those describe above, are subject to the Public Interest Score calculation.

The Public Interest Score, calculated at the end of each financial year,is the sum of the following:

(a) A number of points equal to the average number of employees of the company during the financial year;

(b) One point for every R 1 million (or portion thereof) in third party liability of the company, at the financial year end;

(c) One point for every R 1 million (or portion thereof) in turnover during the financial year; and

(d) One point for every individual who, at the end of the financial year, is known by the company––

(i) In the case of a profit company, to directly or indirectly have a beneficial interest in any of the company’s issued securities; or

(ii) In the case of a non-profit company, to be a member of the company or a member of an association that is a member of the company.

Category of Companies Financial Reporting Standard Audit / Review Who

Profit companies, other than state-owned or public companies, whose public interest score for the particular financial year is at least 350

One of––

(a) IFRS; or

(b) IFRS for SMEs, provided that the company

meets the scoping requirements outlined in the IFRS for SMEs

Audit Registered Auditor (RA)

Profit companies, other than state-owned or public companies, whose public interest score for the particular financial year is at least 100 but less than 350

One of––

(a) IFRS; or

(b) IFRS for SMEs, provided that the company

meets the scoping requirements outlined in the IFRS for SMEs

(a) Internally compiled – audit. The Section 30(2A) “owner-managed”exemption does NOT apply.

(b) Independently compiled –independent review. If you can apply the Section 30(2A)“owner managed” exemption,there is no review requirement

(a) RA

(b) RA / (CA(SA))

Profit companies, other than state-owned or public companies, whose public interest score for the particular financial year is less than 100, and whose statements are independently compiled

One of––

(a) IFRS; or

(b) IFRS for SMEs, provided that the company

meets the scoping requirements outlined in the IFRS for SME’s

Independent review – If you can apply the Section 30(2A) “owner managed”exemption, there is no review requirement

RA / CA(SA) /

Accounting officer

Profit companies, other than state-owned or public companies, whose public interest score for the particular financial year isless than 100, and whose statements are

internally compiled

The Financial Reporting Standard as determined

by the company for as long as no Financial

Reporting Standards are prescribed

Independent review – If you can apply the Section 30(2A) “owner-managed”exemption, there is no review requirement

RA / CA(SA) /

Accounting officer

There are no specific audit requirements for a partnership or trust.

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5. Overview of the tax system

Main taxesPrincipal taxes include:

• Income Tax, including Corporation tax

• Value-Added Tax (VAT)

• Employees’ Tax (namely Standard Income Tax on Employees (SITE) and Pay As You Earn (PAYE))

• Dividends Tax

• Capital Gains Tax

• Excise Duties

• Stamp Duty Land Tax

• Customs Duties

• Inheritance Tax

Tax authoritiesThe South African Revenue Service (SARS) administers all taxes.

South African Tax GuideA comprehensive guide to Business and Individual taxes can be found in our annual Moore Stephens Tax Guide located at:

http://southafrica.moorestephens.com/Publications.aspx.

6. Social security contributions

South Africa does not currently have a Social Security system in place.

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7. Moore Stephens in South Africa

Moore Stephens South Africa has been operating since 2003 and is part of the Moore Stephens International network (MSIL), which is

one of the leading international accounting and consulting associations in the world. The network currently has has 624 offices, with

299 independent member firms operating in 103 countries. Ranked 11th in South Africa and 12th internationally by the International

Accounting Bulletin, the firm is fast-growing with a modern, innovative and dynamic approach to the profession. A key feature of our

success is the breadth of the services offered. These include Payroll, Internal Audit and Risk Management, Business Advisory Services,

Forensic Services, Tax Compliance, Management Services, JSE Advisory, Corporate Finance, Secretarial, Deceased Estate Administration

and Statutory Audit services.

Moore Stephens strives to be the firstchoice financial and business solutions network in the mid-tier sector in South Africa. We provide an

excellent auditing and business financial advisory service, which is facilitated through the solid, friendly and accessible partnerships built with

our clients. Also through the recruitment of exceptionally talented, skilled and committed staff, who produce top-quality work in a positive

and nurturing work environment.

Clients’ needs are our priority, and we go all out to find the best solutions, and provide excellent service at all times. We have clients in both

the public and private sectors. From sole proprietors to owner-managed companies and listed organisations – Moore Stephens is the first port

of call for all your business requirements.

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Appendix 1: Double tax treaties

Comprehensive Treaties in forceFor ease of reference, these agreements have been categorised alphabetically in two groups, i.e. Africa and the Rest of the World.

Summary of all Treaties for the Avoidance of Double Taxation

Africa

CountryPublication details

Date of Entry into ForceGovernment Gazette Number Publication Date

Algeria GG 21303 21 June 2000 12 June 2000

Botswana GG 26342 12 May 2004 20 April 2004

Democratic Republic of Congo GG 35805 24 October 2012 18 July 2012

Egypt GG 19706 22 January 1999 16 December 1998

Ethiopia GG 28494 10 February 2006 4 January 2006

Ghana GG 29856 18 May 2007 23 April 2007

Lesotho GG 17948 22 April 1997 9 January 1997

Malawi GG 1479 13 August 1971 2 September 1971

Mauritius GG 18111 2 July 1997 20 June 1997

Mozambique GG 31983 13 March 2009 19 February 2009

Namibia GG 19780 19 February 1999 11 April 1999

Nigeria GG 31241 22 July 2008 5 July 2008

Rwanda GG 33475 27 August 2010 3 August 2010

Seychelles GG 25646 30 October 2003 29 July 2002

Seychelles Protocol GG 35396 6 June 2006 15 May 2012

Sierra LeoneProclamations 299 of 1946, 271 of 1954 and 32 of 1961

5 October 1960

Swaziland GG 27637 1 June 2005 8 February 2005

Tanzania GG 30039 4 July 2007 15 June 2007

Tunisia GG 20728 15 December 1999 10 December 1999

Uganda GG 22313 24 May 2001 9 April 2001

ZambiaSee Proclamations 174 of 1956 and 60 of 1960

- 31 August 1956

Zimbabwe GG 1234 24 September 1956 3 September 1965

Rest of the World

CountryPublication details

Date of Entry into ForceGovernment Gazette Number Publication Date

Australia GG 20761 24 December 1999 21 December 1999

Australia Protocol GG 31721 23 December 2008

12 November 2008

Note: The effective date for Article 25A is 1 July 2010

Austria GG 17965 30 April 1997 6 February 1997

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CountryPublication details

Date of Entry into ForceGovernment Gazette Number Publication Date

Austria Protocol GG 35049 28 February 2012 1 March 2012

Belarus GG 25914 15 January 2004 29 December 2003

Belgium GG 19437 2 November 1998 9 October 1998

Brazil GG 29073 28 July 2006 24 July 2006

Bulgaria GG 27517 22 April 2005 27 October 2004

Canada GG 17985 7 May 1997 30 April 1997

China (People’s Republic of) GG 22041 2 February 2001 7 January 2001

Croatia GG 18460 21 November 1997 7 November 1997

Cyprus GG 19683 22 December 1998 8 December 1998

Czech Republic GG 18603 7 January 1998 3 December 1997

Denmark GG 16891 22 December 1995 21 December 1995

Finland GG 16862 1 December 1995 12 December 1995

France GG 16681 27 September 1995 1 November 1995

Germany GG 3898 25 May 1973 28 February 1975

Greece GG 24996 3 March 2003 14 February 2003

GrenadaProclamations 229 of 1946, 271 of 1954 and 32 of 1961

- 5 October 1960

Hungary GG 17438 13 September 1996 5 May 1996

India GG 18545 12 December 1997 28 November 1997

Indonesia GG 19766 16 February 1999 23 November 1998

Iran GG 19637 22 December 1998 23 November 1998

Ireland GG 18552 15 December 1997 5 December 1997

Ireland Protocol GG 35134 22 March 2012 10 February 2012

Israel GG 6577 13 July 1979 27 May 1980

Italy GG 19823 8 March 1999 2 March 1999

Japan GG 18391 27 October 1997 5 November 1997

Korea GG 16918 26 January 1996 7 January 1996

Kuwait GG 29815 20 April 2007 25 April 2006

Luxembourg GG 21852 6 December 2000 8 September 2000

Malaysia GG 29021 13 July 2006 17 March 2006

Malaysia Protocol GG 35190 29 March 2012 6 March 2012

Malta GG 18461 21 November 2997 12 November 1997

Mexico GG 33460 24 August 2010 22 July 2010

Netherlands GG 31797 23 January 2009 28 December 2008

Netherlands Protocol GG 31795 23 January 2009 28 December 2008

New Zealand GG 26798 17 September 2004 23 July 2004

Norway GG 17504 15 October 1996 12 September 1996

Oman GG 25913 15 January 2004 29 December 2003

Pakistan GG 19849 17 March 1999 9 March 1999

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CountryPublication details

Date of Entry into ForceGovernment Gazette Number Publication Date

Poland GG 17201 16 May 1996 5 December 1995

Portugal GG 31720 23 December 2008 22 October 2008

Romania GG 16680 27 September 1995 21 October 1995

Russian Federation GG 21395 20 July 2000 26 June 2000

Saudi Arabia GG 31796 23 January 2009 1 May 2008

Singapore GG 18599 2 January 1998 5 December 1997

Slovak Republic GG 20409 25 August 1999 30 June 1999

Spain GG 30837 12 March 2008 28 December 2007

Sweden GG 16890 27 December 1995 25 December 1995

Sweden Protocol GG 35268 23 April 2012 18 March 2012

Switzerland GG 31967 6 March 2009 27 January 2009

Switzerland (replaced by new treaty entry into force date 27 January 2009)

GG 850 29 September 1967 11 July 1968

Taiwan GG 17408 3 September 1996 12 September 1996

Thailand GG 17409 3 September 1996 27 August 1996

Turkey GG 29464 11 December 2006 6 December 2006

Ukraine GG 27150 10 January 2005 29 December 2004

United Kingdom GG 24335 31 January 2003 17 December 2002

United Kingdom (Protocol) GG 34971 2 February 2012 13 October 2011

United States of America ( USA ) GG 18553 15 December 1997 28 December 1997

Comprehensive Treaties ratified in South AfricaComprehensive Treaties with the following countries have been ratified in South Africa:

Gabon Kenya

Germany (renegotiated) Sudan

Treaties ratified in the other countyOman (Protocol) - 15 November 2011 in Muscat

Treaties signed, but not ratifiedBotswana (Protocol) - 21 May 2013 in Pretoria Malta (Protocol) – 24 August 2012 in Valletta

Chile – 11 July 2012 in Pretoria Mauritius (Renegotiated) - 17 May 2013 in Maputo

India (Protocol) - 26 July 2013 in Pretoria Norway (Protocol) – 16 July 2012 in Pretoria

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Treaties in process of negotiation or finalised but not yet signedFor ease of reference, these agreements have been categorised alphabetically in two groups, i.e. Africa and the Rest of the World.

Africa

Cameroon Morocco Swaziland (Protocol)

Lesotho (renegotiated) Mozambique (Protocol) Zambia (renegotiated)

Madagascar Namibia (renegotiated) Zimbabwe (renegotiated)

Malawi (renegotiated) Senegal

Rest of the World

Bangladesh Hong Kong Serbia

Belgium (Protocol) Indonesia (Protocol) Singapore (renegotiated)

Brazil (Protocol) Isle of Man Sri Lanka

Cuba Kuwait (Protocol) Switzerland (Protocol)

Cyprus (Protocol) Latvia Syria

Czech Republic (Renegotiated) Lithuania Turkey (Protocol)

Estonia Luxembourg (Protocol) United Arab Emirates

Germany (Protocol) Qatar Vietnam

Current list of Air and Sea AgreementsAgreements terminated

Country Date of Termination

Portugal 22 October 2008

Spain 28 December 2008

Current list of Estate Duty AgreementsAgreements Terminated

Country Date of Termination

Sweden 1 January 2005

Agreements In Force

Country Date of Entry into Force

BLS Countries (Botswana, Lesotho, Swaziland)

1 August 1944

United Kingdom 1 January 1978

United States of America (USA) 15 July 1952

Zimbabwe 1 October 1933

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Appendix 2: Moore Stephens around the worldMoore Stephens member firms may be found in 103 countries and territories around the world, with correspondent firms in another three.

*denotes a correspondent firm only

For more details, see www.moorestephens.com under ‘Locations’.

© October 2013, Moore Stephens Europe Ltd, on behalf of Moore Stephens International Ltd

Moore Stephens International Ltd

150 Aldersgate Street

London

EC1A 4AB

United Kingdom

We believe the information contained in this Guide to be correct at the time of going to press, but we cannot accept any responsibility for any loss occasioned to any person as a result of action or refraining from action as a result of any item herein. Printed by Moore Stephens Europe Ltd (MSEL), a member firm of Moore Stephens International Ltd (MSIL). MSEL is a company incorporated in accordance with the laws of England and provides no audit or other professional services to clients. Such services are provided solely by member firms of MSEL in their respective geographic areas. MSEL and its member firms are legally distinct and separate entities owned and managed in each location.

Albania Czech Republic Kuwait Russia

Algeria Denmark Latvia Saudi Arabia

Argentina Dominican Republic Lebanon Serbia

Australia Ecuador Liechtenstein* Seychelles

Austria Egypt Lithuania Singapore

Azerbaijan Estonia* Luxembourg Slovakia

Bahamas Finland Macedonia South Africa

Bahrain France Malta South Korea

Bangladesh Germany Mauritius Spain

Belgium Gibraltar Mexico Sri Lanka*

Belize Greece Monaco Sweden

Bermuda Guatemala Morocco Switzerland

Bolivia Guernsey Netherlands Syria

Brazil Honduras New Zealand Taiwan

British Virgin Islands Hong Kong Nicaragua Thailand

Bulgaria Hungary Norway Tunisia

Burundi India Oman Turkey

Canada Indonesia Pakistan Ukraine

Cayman Islands Iran Panama United Arab Emirates

Chile Ireland Papua New Guinea United Kingdom

China Isle of Man Paraguay United States

Colombia Israel Peru Uruguay

DR Congo Italy Philippines Venezuela

Costa Rica Japan Poland Vietnam

Croatia Jersey Portugal Zambia

Curaçao Jordan Qatar

Cyprus Kazakhstan Romania

Doing business in South Africa 2013

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Co Act, 2008. (n.d.). Companies Act, 2008 (Act No. 71 of 2008).

Department of Trade and Industry. (n.d.). Retrieved from Department of Trade and Industry, Republic of South Africa: http://www.dti.gov.za

Factbook. (n.d.). Retrieved from CIA World Factbook: https://www.cia.gov/library/publications/the-world-factbook/

Stats SA. (n.d.). Statistics South Africa (Stats SA). Retrieved from www.statssa.gov.za.

Trade & Investment. (n.d.). Investment Protocol: Driving Business Responsibly. Department of Economic Development and Tourism, Trade &

Investment KwaZulu-Natal, Durban.

Bibliography

www.moorestephens.com

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