Workforce Payments Guide South Africa

Papaya offers Virtual IBAN accounts (or “wallets”) to hold your funds segregated and safeguarded until payments are ready to be processed. Opening and managing corporate bank accounts can often be complex and time-consuming, requiring extensive checks and due diligence.

Papaya’s Virtual IBAN solution, built on the trusted infrastructure of JPMorgan, streamlines this process-making it faster, easier, and more cost-effective while ensuring your funds are secured.

Delivery Timeline

Supported payment types

Payments Coverage

Salary payments, authorities payments, contractor payments.

3rd Party Payments

Contractor Payments

Papaya Global supports payments to contractors in South Africa. The payout currency may vary based on the receiver’s bank account setup when receiving foreign currencies. Contractors are advised to reach out to their bank to confirm how foreign currencies are handled.

Bank Requirements

SWIFT code

KYC

The KYC (Know Your Customer) process in South Africa is a requirement under the Financial Intelligence Centre Act 38 of 2001 (FICA) as part of compliance measures to combat financial crimes.

The process starts with customer identification, which is done using government-issued identification documents that include the customer’s name, date of birth, and address. Some businesses also require biometric information for identity verification. Other necessary documents include a proof of address and proof of authority if a person is acting on behalf of another.

Customer screening follows identification, where customers are assessed based on their past financial behavior and screened against sanctions, PEP, and adverse media lists. They are then classified into high-risk, medium-risk, and low-risk categories. After a customer is onboarded, their risk profile is constantly monitored by periodically updating user information and evaluating their risk profiles.

The KYC process is an ongoing initiative, with institutions required to have the latest and most accurate information about all their customers. They are compelled under law to enforce strict measures if they do not have accurate and up-to-date information about their customers, which could include freezing the customer’s account.

Institutions like First National Bank (FNB) allow for digital submission of documents for verification which usually takes 48 hours. Failure to comply with the KYC process may result in an account being frozen.

The KYC process is also transitioning towards digital identity verification to maintain high levels of KYC and AML/CFT compliance while enhancing the customer experience. This approach offers several advantages such as bypassing the need for physical locations, speeding up expansion, reducing the cost of doing business, and providing customers with the convenience of signing up online or on mobile.

Payroll payment frequency

Monthly

Banking Regulations

South Africa has a comprehensive regulatory framework governing its banking sector, which can impact cross-border payments and workforce transactions. Here are some key regulations:

Twin Peaks Model: South Africa follows the “twin peaks” model of financial regulation, which includes the Prudential Authority (PA) and the Financial Sector Conduct Authority (FSCA). The PA oversees the prudential regulation of financial institutions, while the FSCA focuses on market conduct regulation.

Banks Act: The Banks Act requires that any entity conducting banking business must be registered as a bank and comply with the regulations set forth in the Act. This includes maintaining adequate capital and adhering to sound risk management practices.

Financial Sector Regulation Act (FSR Act): This Act establishes the PA and FSCA and regulates cooperation between these bodies, the South African Reserve Bank (SARB), the Financial Stability Oversight Committee, the National Credit Regulator, and the Financial Intelligence Centre (FIC).

Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT): South Africa has stringent AML/CFT regulations. Financial institutions must implement measures to detect and report suspicious activities. The FIC supervises compliance with these regulations.

Foreign Exchange Regulations: The SARB regulates foreign exchange transactions. Companies must comply with these regulations when making cross-border payments.

Consumer Protection: The Code of Banking Practice sets minimum standards for banks when dealing with customers, promoting transparency and fostering confidence in the banking system.

International Banks

Local banks in South Africa

Payment Methods

The B2C payment tools available in South Africa include:

• PayFast
• Yoco, Ozow
• Zapper
• SnapScan
• Mobicred
• Peach Payments
• Paygate
• PayGenius
• PayPal
• Netcash
• SiD Payment
• i-Pay
• MyGate
• Sage Pay
• PayU
• PayFlex
• iKhokha
• local credit and debit cards

Other methods include mobile money, bank transfer, digital wallets, and instant electronic funds transfers.

Cryptocurrency

In South Africa, it is possible to pay employees with cryptocurrencies. However, the South African Revenue Service (SARS) treats cryptocurrencies as “assets of an intangible nature” and not legal tender, hence they are subject to taxation.

The tax treatment depends on the nature of the transaction. If the transaction is of a capital nature, capital gains tax applies to your crypto and if it is of a revenue nature, income tax applies.

For crypto profits subject to Capital Gains Tax, individuals pay a maximum effective tax rate of 18% on gains exceeding the R40,000 annual exclusion, depending on their total taxable income. For crypto profits subject to Income Tax, individuals pay between 18% to 45% in tax depending on their total taxable income.

Additionally, the South African Reserve Bank (SARB) does not support companies using cryptocurrencies to pay salaries as it does not consider them as currency. While there are no specific regulations regarding how salaries paid in cryptocurrencies are taxed, SARS has stated that transactions or speculation in cryptocurrencies are subject to the general principles of South African tax law. It is important to note that SARS does not accept payment in cryptocurrencies.

Cryptocurrency users in South Africa need to declare their crypto assets’ gains or losses as part of their taxable income. Failure to do so can result in interest and penalties. Currently, the South African Reserve Bank (SARB) is in the process of developing its own set of rules for the cryptocurrency industry, and until these regulations are fully established, it is illegal for cryptocurrency users to transfer funds abroad.