South Africa’s headquarter
regimeJune 10-11, 2014

Headquarter company regime – at a glanceHigh Level summary► Intended to serve as investment gateway in Africa/rest ofthe world► South African tax resident company► Regarded as non-resident for exchange control, canborrow freely from offshore► Reserve bank reporting► Min 10% shareholder interest► 80% of assets to be foreign investments

Page 2South Africa’s headquarter and treasury company regimes

Headquarter company regime – at a glanceTax relatedForeignS/holder11

A minimum 10% shareholder interest requirement in SA HoldCo

2

SA HoldCo must be a resident (e.g., incorporation). It is not regarded
exchange control resident in certain instances (next slide).
► Although SA HoldCo is a resident, other SA residents cannot transact
tax free with SA HoldCo in terms of the SA tax free roll-over rules► No SA capital gains tax (CGT) if a non-resident shareholder disposesof shares in SA HoldCo► If SA HoldCo shares are disposed of, exemption from securities
transfer tax (i.e. stamp duty)

3

SA HoldCo’s cost of assets must be at least 80% in foreign operations
consisting of –► Equity share investments (at least 10% shareholding)► Loans► Intellectual property (IP)
► Fgn investments are not regarded as controlled foreign companies

4If SA HoldCo’s gross income exceeds ZAR5m, at least 50%
consists of –► Rental, dividends, interest, royalties, service fees, or► Proceeds from disposal of IP/Fgn Sub shares► Foreign dividend exemption in SA► Exemption from SA CGT on disposal of shares in foreign subs

5Withholding taxes on distributions/payments from SA HoldCo to theshareholder(s)► No dividends tax► No interest withholding tax, transfer pricing or thin cap in certain
instances► No royalty withholding tax or transfer pricing in certain instances

5
Distributions/payments

2SA HoldCoSouthAfrica
Distributions/payments

Foreign3

Fgn Subs

4

Relief for start-up headquarter companies in terms of 1, 3 and 4

Page 3

South Africa’s headquarter and treasury company regimes

Headquarter company regime – at a glance
Exchange control related

1Minimum 10% shareholder interest in SA HoldCo (residents limited to 20%
shareholding, direct or indirect, in SA HoldCo)

2

Although SA HoldCo is a resident, it is viewed as non-resident for exchange
control purposes (thus no exchange control permission for investments but
there is certain reporting required)3

At end of each financial year, at least 80% of assets must consist of foreign
assets (cash, cash equivalents and debt with a term of less than one year isdisregarded)

Foreign

S/holder2

SA HoldCo

3

Fgn Subs

1

SouthAfrica

Foreign

Page 4South Africa’s headquarter and treasury company regimes

South African tax system – at a glanceTax related
Summary of South Africa tax system (example for companies)► Corporate tax rate 28% on world wide income (capital gains tax effectiverate: 18.65%)► Dividends tax – 15% (but a headquarter company is exempt)► Royalty withholding tax – 12% (to be increased to 15% effective
1 January 2015) – certain exclusions for headquarter companies► Interest withholding tax – 15% effective 1 January 2015 – certain
exclusions for headquarter companies► Withholding tax on services – 15% effective 1 January 2016
► Value-added tax (14%: standard rate, also 0% e.g., exports or exempt for
activities that are financial services e.g., provide credit)

Foreign

S/holderDistributions/payments

SA HoldCo
SouthAfrica
Distributions/payments

ForeignFgn Subs

Page 5South Africa’s headquarter and treasury company regimes

Double taxation agreements
South Africa with rest of Africa (in force)

►►
►►
►
►
►
►
►
►
►

Algeria
Botswana
DRC
Egypt
Ethiopia
Ghana
Lesotho
Malawi
Mauritius
Mozambique
Namibia

Page 6►
►►
►
►
►
►►►
►

Nigeria
RwandaSeychelles
Sierra Leone
Swaziland
Tanzania
Tunisia
UgandaZambia
Zimbabwe

South Africa’s headquarter and treasury company regimes

Double taxation agreements
South Africa with rest of Africa (in progress)

►►
►
►►►

CameroonGabonKenya
MoroccoSenegal
Sudan

Page 7

South Africa’s headquarter and treasury company regimes

Double taxation agreements
South Africa with rest of the world►
►►►
►
►
►►
►
►
►
►
►
►

Australia►
Austria►
Belarus►Belgium►Brazil►Bulgaria►
Canada►China►
Croatia►
Cyprus►Czech Republic ►Denmark►Finland►France►Page 8Germany
GreeceGrenadaHungary
India
Indonesia
Iran
IrelandIsraelItaly
Japan
Korea
KuwaitLuxembourg

►►►
►►►►
►►►►►►

Malaysia
Malta
MexicoNetherlands
New Zealand
NorwayOman
Pakistan
PolandPortugal
Romania
RussianFederation
Saudi Arabia

South Africa’s headquarter and treasury company regimes

►►►
►►►►
►►►
►

Singapore
Slovak Republic
Spain
SwedenSwitzerland
TaiwanThailandTurkeyUkraineUnited Kingdom
USA