4.2. International headquarter companies (Capital Transfers)

Subject to registration with the Financial Surveillance Department via an Authorised Dealer for reporting purposes, newly established headquarter companies who meet the following shareholding and asset criteria may invest offshore without restriction:

(a) no shareholder in the headquarter company, whether alone or together with any other company forming part of the same group of companies as a shareholder, may hold less than 10 per cent of the shares and voting rights;

(b) no more than 20 per cent of the headquarter company shares may be directly or indirectly held by South African residents; and

(c) at the end of each financial year, at least 80 per cent of the assets of the holding company must consist of foreign assets.

For the purposes of the requirements in (a) to (c) above, cash, cash equivalents and debt with a term of less than one year should not be taken into account.

Registration with the Financial Surveillance Department will remain valid for as long as the requirements in (a) to (c) above are adhered to for the duration of both the year of assessment and all previous years of assessment.

Reporting of the extent of the foreign investments will be required for statistical purposes which must, inter alia, include the source of funds, new or existing funds, destination and loan funds from local sources. A detailed organogram and the latest available audited financial statements must be submitted to the Financial Surveillance Department via an Authorised Dealer on an annual basis.

Headquarter companies will be treated as non-resident companies other than for their reporting obligations. Transactions by South African entities with headquarter companies will, therefore, be viewed as transactions with non-residents.

Headquarter companies can freely borrow from abroad and such funds may be deployed either locally or offshore. These transactions are regarded as occurring outside South Africa.