South Africa’s location, economy, political stability, overall strength in financial services and extensive treaty network make it an ideal location in which to establish a regional holding company.
To facilitate foreign investments into South Africa, an International Headquarter Company (IHC) regime was introduced and came into effect on 1 January 2011. This regime is designed to allow a free flow of funds through South Africa with a minimal tax incidence. It also creates the opportunity for South Africa to act as a gateway into Africa by providing significant incentives to foreigners to route their investments via South Africa.
- An IHC must be a tax resident company with each shareholder holding a minimum of 10% of the capital and voting rights;
- A minimum of 80% of total assets must either be interest in equity shares or intellectual property that is licensed by the IHC to a foreign company in which the IHC holds not less than 10% of the capital and voting rights;
- Not less than 50% of total receipts and accruals must consist of dividends, royalties or interest, proceeds from the disposal of equity shares or intellectual property;
- Foreign subsidiaries of an IHC are not considered to be CFCs and their net income will not be attributed to the headquarter company. In relation to South African resident shareholders who hold more than 50% of the voting rights, the foreign subsidiary will be treated as a controlled foreign company (CFC);
- Any dividends declared by an IHC are exempt from income tax in the hands of the shareholders and are not subject to the Dividends Tax;
- Under the Exchange Control Circular No. 2/2011, IHCs may raise and deploy capital offshore without exchange control approval. An IHC is considered South African resident for all other exchange control functions.
Once a South African entity is incorporated, Sovereign Trust (SA) will provide a ‘domiciliary service’, This will include the provision of company secretarial, registered office and other required services. Re-mailing services are available at modest cost for all companies established by Sovereign.
In addition to providing incorporation, domiciliary and management (directorship) services, a range of ancillary services at competitive prices are available on request. These services include, but are not limited to: provision of dedicated telephone lines; office and personnel assistance; designated staff members (temporary or permanent availability); assistance with office relocation, introduction to real estate agents, government agencies and other third parties.