The major part of international trade in South Africa is between a local South African entity and an international trade partner. The rules are simple: the local South African entity is registered with South African customs, and customs can easily access them for regulatory compliance purposes. But what happens when an international entity or foreign individual wants to manage the South African leg of their importing/exporting themselves? In other words, if a foreign entity is the one receiving imports in South Africa or managing exports from South Africa?
This is very common and may have numerous benefits for the foreign entity. Some common examples are: a foreign entity purchases from more than one South African supplier and wants to do its grouping and consolidation before exporting the goods; a foreign entity wants to manage the distribution of its imports in South Africa; a foreign entity is importing goods for a short term commercial project and a foreign individual wants to move personal items of value into or out of South Africa.
Foreign entities or individuals who want to manage their importing into or exporting from South Africa have the following three options:
1. Use an importer or exporter of record service:
An importer or exporter of record is a locally registered importer or exporter who can manage the transaction on your behalf. This local entity is liable for meeting all regulatory requirements, clearing the goods, and paying any taxes, duties, or VAT due. While in transit, the South African government views the importer or exporter of record as the owner of the goods.
Regulatory requirements: No requirements imposed on the foreign entity or individual.
Advantages: It is quick as there are no delays related to getting the foreign entity import and export compliant.
Disadvantages: Invoices need to reflect the name of the importer or exporter of record for customs clearing purposes. Importer or exporter of record fees are generally a percentage of the transaction value or the total taxes.
2. Register the foreign entity as an importer and exporter in South Africa:
A foreign entity or a foreign individual can register as an importer or exporter with South African customs. This will enable the foreign entity to manage all its own import and export transactions, customs clearances, and associated tax payments.
Customs requires a South African customs registered agent to represent the foreign entity or individual at customs. The foreign entity is responsible for the compliance of each transaction. The South African customs registered agent is held financially liable for any non-compliance for up to 5 years after each transaction should customs or SARS not be able to recoup any outstanding payments from the international entity.
Regulatory requirements: The foreign entity/ individual needs to be registered at customs and maintain accurate contact and location details at customs. They need to have a South African customs registered agent representing them at customs.
Advantages: The foreign entity can manage its own import and export transactions, but can also enlist the assistance of their customs registered agent as needed. Other than providing customs with accurate information on each import and export transaction, there are no statutory requirements from SARS.
Disadvantages: The South African customs registered agent carries considerable financial risk for 5 years after each transaction. To mitigate this risk registered agents generally insist that they oversee each transaction for compliance and charge a fee for their services.
3. Open a South African Company:
The company can be registered for import and export, and all trade with South Africa can be managed through the company. The South African company is responsible for the compliance of each international transaction as well as meeting annual South African accounting requirements. The South African company can be linked to a foreign entity through the foreign entity owning shares as is the case with subsidiary companies, or the South African company can be a branch of the foreign company registered in South Africa. More information on opening a South African subsidiary company versus a South African branch company can be found here.
Regulatory requirements: In addition to customs compliance regulations for each import/export transaction, a South African company has annual SARS and CIPC requirements. The minimum CIPC requirement is a South African representative registered at CIPC and the filing of one annual return. The minimum SARS annual requirements are the filing of two provisional tax returns and one annual income tax return.
Advantages: All import and export transactions can be managed independently. South African companies can open a South African bank account, register for VAT, and employ local staff if desired.
Disadvantages: The company must meet annual CIPC and SARS regulatory requirements, pay income tax in South Africa on company profits and subsidiary companies are liable for dividends tax. A South African company is required to maintain at least one office in South Africa.
