South Sudan, Africa’s youngest country, is striving to build a diverse economy after decades of war and poverty. The country, though still facing internal conflict, is committed to creating a business-friendly environment to attract international investors, especially in key sectors like oil and gas and power generation.
“The government is well aware of the difficulties that we face as new country, and it is trying to build an economy that has not been existing. The government has been keen at unlocking the potential of the region as an investment-friendly place and is now asking investors to invest in the country,” said Anuol Deng, Managing Partner of Awatkeer Law Chambers.
The South Sudanese government has created a regulatory system to attract these investors, such as the Investment Promotion Act of 2009, which governs investment, and the Taxation Act of 2009, updated in 2016. The Land Act of 2009 makes provision for the security of land ownership, creates a provision for compensation in case of expropriation of land and makes it possible to use land as collateral in business dealings and to access finance from banks. The Companies Act 2012, Partnership Act 2008, partnership regulation 2009 and Agency Act 2008 regulate and promote investment, and manages imports and exports through the South Sudan Business Forum Regulations of 2012, Import and Exports Act of 2012, Drug and Food Control Authority Act of 2012 and Public Financial Management and Accountability Act of 2011
“There is no doubt that the Government of the Republic of South Sudan is keen to cultivate and nurture a conducive investment environment in the country. Consequently, it has put in place necessary procedures and systems to facilitate rapid business setup in the country through the respective ministries and commissions,” Deng said.
The country also offers key opportunities for investors, especially in the energy sector and key infrastructure sectors, such as water and roads.
“South Sudan has the lowest electricity consumption per capita in sub-Saharan Africa, due in part to its underdeveloped energy infrastructure, which has been severely impacted by decades of conflict,” Deng said. “The investment in power generation and transmission infrastructure is considered a priority by the government; however, securing the intensive capital required from both public and private sector financiers remains a critical challenge. This challenge can be overcome by establishing energy projects in South Sudan, and we recommend investors to be encouraged to come and establish energy businesses in South Sudan.”
A Guide to Opening a Business in South Sudan
Prepared by Awatkeer Law Chambers
International Company Registration
If a company wants to come to South Sudan and establish a branch of a parent company, then the company must go through the following process:
Prepare relevant company documents in the home country. These documents must be notarized by their public notarization office and then taken to South Sudan Embassy in that country or to the nearest South Sudan Embassy to that country for verification and authentication. Thereafter, the document will be sent to South Sudan.
The company must appoint a local South Sudanese lawyer who will take these documents to South Sudan Ministry of Foreign Affairs for further verification and authentication before the documents are sent to South Sudan Ministry of Justice to complete the company registration.
The process can take approximately two weeks to two months, depending on the speed from the company side and local lawyer. Apart from lawyers’ fees, the appropriate fee due to the government varies with current inflation.
Process for incorporating as a local company
Reserve the company name
Agency: Business Registry in the Ministry of Justice and Constitutional Development
The entrepreneur submits a standard form with three different business names to check availability of the name. Once the availability is confirmed, the entrepreneur can reserve the name, which will be valid for 30 days. This process is now computerized and can be completed on the spot at the Business Registry in the Ministry of Justice and Constitutional development. The data officer signs the name search form approving the name of the company.
The process of reservation can be completed on the spot or within one day. Fees are paid together with the fees for obtaining the Certificate of Incorporation.
Prepare the company documents with a lawyer
Agency: Law firm
The entrepreneur prepares the Memorandum and Articles of Association. The Business Registry requires entrepreneurs to use a lawyer to draft the Memorandum and Articles of Association, which has to state the objectives of the company; list the shareholders of the company with their shares percentages and postal address of the shareholders. Copies of the passports or nationality identification cards must be attached provided by the shareholders. The lawyer who drafts the paperwork must be an enrolled advocate in the republic of South Sudan and must hold a valid practicing license for that specific year.
Drafting the Memorandum and Articles of Association can be completed within one day and cost approximately $100 or 11,000 SSP at the official rate of Central Bank of South Sudan.
Obtain Letter of No Objection
There are certain sectors of the business where it is mandatory to first obtain letter of no objection from the government before doing anything. Obtaining letter of no object depends on the nature of the business, for example, an entrepreneur with an intention of registering Oil Company can obtain it from Ministry of Petroleum. The following sectors can also issue their own letter of no objection, such as: energy/mining from Ministry of Mining, agriculture from Ministry of Agriculture, education from Ministry of Education, health from Ministry of Health, etc.
This process takes two days. Though it has no charge, a lawyers’ fee will apply if you when working through an attorney.
Pay all the fees to business registry
Agency: Ministry of Justice and Constitutional Development
All fees are paid at once, before submitting the final documents to obtain the certificate of incorporation. The fees are paid to account officer at the Ministry of Justice. The lawyer paying on behalf of the entrepreneur obtains a receipt as proof of payment.
The fees for incorporation have been approved by the Ministry of Finance in 2017. This process can take two to three days and cost approximately $200 or 20,000 SSP at the official rate of Bank of South Sudan. This excludes lawyers’ fees.
Obtain the Certificate of Incorporation from the Business Registry
Agency: Business Registry in the Ministry of Justice
The advocate collects the necessary documents (name search form signed, MoJ and receipt of payment) at the business registry and obtains the Certificate of Incorporation. At the registry, the documents are assigned to one of the legal counselors seated at the business registry. The legal counselors are divided into two sections: some for limited liability companies, and others for business names and partnerships. They check the activities, capital and shareholders of the companies. After approval by the legal counselors, the certificate of registration is printed and signed by the Registrar. The Registrar is the only person who can sign the certificate. Although the company is created as legal entity with its rights like a human, the Ministry of Justice’s policy requires the renewal of the company through annual returns filing. Failure to do so will put your company at risk, including banks denying you certain transactions or your company being denied to sign contracts.
This process can take two to three days, and you need to be aware of lawyers’ fees at this stage.
Obtain an Operation License
Agency: Directorate of Commerce and Supply under Jubek State Ministry of Finance & Public Service
The entrepreneur fills in a form, presents the Certificate of Incorporation, indicates the address of the company headquarters and pays the fees to the Jubek State’s Directorate of Commerce and Supply. An official from the Directorate should visit the office to confirm its whereabouts, but it does not happen in practice.
The process can take two days and cost $50 or SSP 5,000 at the official rate of Central Bank of South Sudan, excluding lawyers’ fees.
Register with the Chamber of Commerce
Agency: Chamber of Commerce
All businesses must register with the Chamber of Commerce in order to obtain tax clearance and conduct certain commercial operations. Additionally, the Chamber of Commerce certificate is required to open a bank account. Only the certificate of incorporation is needed to register with the Chamber of Commerce.
This process takes two days and cost approximately $50 or 5000 SSP at the official rate of Central Bank of South Sudan, excluding lawyers’ fee.
Request for Tax Identification Number (TIN)
Agency: Directorate of Taxation under the National Ministry of Finance
Companies are required to obtain a TIN number from the Directorate of Taxation. The directorate of taxation inspects the location to verify the address. The Ministry of Finance wants to reduce the occurrence of ‘brief-case’ companies (people working at home or from a hotel). This process takes 7 -14 days and has no charge.
Upon obtaining a TIN, all companies are required to pay an amount equal to 20 percent of their monthly rent as a property income tax, as well as business profit tax and Personal Income Tax. Paying personal income tax and business profit tax can be calculated as set forth in Schedule II of the Taxation Act 2009 amended in 2016 (Taxation amendment Act 2016).
Request for Tax Clearance Certificate
Agency: Directorate of Taxation under the National Ministry of Finance
This takes 7-14 days, and has no charge.
Opening bank account for the company
All the above requirements are used in opening company’s bank account.
Obtaining Trading License
Agency: Juba City Council
An application form is filled out, and the companies’ documents are submitted to the Executive Director at the Payam level (Juba City Council).
This takes four days and fees are determine by the City Council, as the requirements and taxes/revenues paid here varies from company to company.
All of the above-mentioned documents are the requirements for obtaining a work permit. That means, without the above documents, an expatriate cannot qualify to obtain a work permit.
Documents from Criminal Investigation Department (CID)
After obtaining all the above documents, expatriates are required to apply to CID for issuance of a certificate of good conduct, for which finger prints are taken. This certificate of good conduct is supported by other documents.
Obtaining these documents take two days and the cost is strictly $500, excluding lawyers’ costs.
Register with the Ministry of Labor
Agency: Ministry of Labor
Part X of the Labor Act of Sudan (1997) establishes that the company must deposit the basic work and penalties regulations with the competent labor office. The Ministry of Labor approves the contract of the company’s employees. Once a year, the Ministry of Labor asks the company to submit the list of its employees.
This process takes one day, and while there is no charge, lawyers’ fee will apply.
Open a separate bank account for social security payments
There is no social security fund or institution in South Sudan, yet. As a temporary measure, the Ministry of Public Labor, Public Service & Human Resource Development of the Government of Southern Sudan issued a circular (Circular J/5/21, March 22, 2010) instructing companies to open a separate bank account to deposit social security payments until a new mechanism is devised.
Following a five-decade civil war in the Sudan ended by a peace agreement and new constitution in 2005, the Republic of South Sudan became the world’s 196th country on 9 July 2011. From 2005, South Sudan effectively had to build a new tax system. Southern Sudan has historically relied on revenues from oil production, with oil generating 98 percent of Southern Sudan’s revenue over the past five years. Further, more than 60 percent of Southern Sudan’s revenues have been collected at checkpoints, which will no longer be feasible as South Sudan progresses economically. With challenges in mind, the former Government of Southern Sudan (as the territory was then called) enacted the Taxation Act 2009, which regulates payment of taxes.
Under the taxation Act of 2009, the former Government of Southern Sudan obtained authority over personal income tax, excise on luxury goods and business profits tax on small and medium-sized enterprises, leaving other taxation rights with the former Government of National Unity. The Act does not provide for large business taxation, VAT or goods and services tax, nor stamp duty, land tax or inheritance tax. This Act, although amended, is still regulating taxes, and only a few sections were amended in 2016 under the Taxation Amendment Act of 2016. Therefore, both the Taxation Act of 2009 and the Taxation Amendment Act of 2016 are still being used together.
When starting a business, the normal procedures mentioned for setting up a company are first met, after which the Taxation Act requires the registered company to register with the taxation office. The initial procedure is to obtain Tax Identification Certificate (TIN). TIN is the tax ID used for paying taxes. After obtaining tax, the company is then required to pay taxes. A payer of incomes subject to withholding taxes is required to withhold tax. Wages, interest, dividends and royalties are subject to withholding tax. Withholding on interest and dividends is final, and on others non-final.
A taxpayer is required to remit withheld tax within 15 days after the last day of each calendar month in which the tax was withheld, and failure to withhold tax from payment is punishable as the taxpayer will be liable to pay tax not withheld, as well as the respective penalties and interest. Besides, no deduction is allowed for the payment which would have otherwise been allowed as deduction while calculating business profit tax.