Seychelles: Double Tax Treaties
Table of Treaty Rates
According to the Seychelles International Business Authority, the Seychelles has Double Tax Agreements in force with the following countries: Bahrain, Barbados, Botswana, China, Cyprus, Indonesia, Malaysia, Mauritius, Oman, Qatar, South Africa, Thailand, the United Arab Emirates, Vietnam and Zambia.
Double Tax Agreements with the following countries have been signed but are not in force: Belgium, Bermuda, Ethiopia, Kuwait, Lesotho, Luxembourg, Malawi, Monaco, Sri Lanka and Zimbabwe.
Negotiations have been concluded with Egypt, Kenya, Morocco, Mozambique, Namibia, Pakistan, Portugal, Tunisia and Swaziland.
The Government sees such treaties as being an important part of its scheme to develop as a key financial hub in the Indian Ocean, and is actively seeking to expand its tax treaty network.
In August 2010, the Seychelles signed its first Tax Information Exchange Agreement, with the Netherlands which entered into force on May 14, 2012, along with TIEAs with Denmark, Guernsey, Iceland, Norway, Sweden and the Faroe Islands.
After Indonesia threatened to abrogate its DTA with the Seychelles, alleging 'round-tripping' by Indonesian companies, in March, 2006, the Seychelles Association of Offshore Practitioners and Registered Agents (SAOPRA) said that Indonesia had no legal grounds to do so, at least until 2010.
SAOPRA contended that by virtue of Article 29 of the Indonesia / Seychelles DTA, the DTA is legally binding and could not be ended until 2010 at the earliest. SAOPRA further stated that, notwithstanding inferences to the contrary by the Indonesian Tax Office, Seychelles companies can be resident (and have permanent establishment) in Indonesia (such as if managed by Indonesian residents) and so step outside the terms of the DTA and become fully taxable in Indonesia.
On the other hand, if persons are using Seychelles tax resident companies to hold shares in Indonesian companies and, apart from that, the Seychelles companies conduct no activities in Indonesia (and have a permanent establishment in Seychelles), then the Seychelles companies can lawfully access and rely on the DTA benefits (including reduced Indonesian withholding tax on repatriated dividends and avoidance of Indonesia capital gains tax on sale of the shares).
The Seychelles / Indonesia DTA sets a cap of 10% Indonesian withholding tax on repatriated dividends, interest and royalties (instead of usual rate of 20%). More particularly Article 13(4) provides that no Indonesian capital gains tax applies on disposal of shares in Indonesian companies held by the Seychelles company (ie. gains are taxable in Seychelles, but no tax applies as there is no CGT in Seychelles).
The Seychelles / Indo DTA also offers a fiscal advantage over the Singapore / Indo DTA. The principal difference lies in the treatment of the proceeds from the sale of shares in a private Indonesian company. Under the Seychelles DTA, the gain is exempt from tax; there is no exemption under the Singapore DTA. Therefore, if a Singapore company sells the shares of a private Indonesian company, a 5% tax is levied on the gross sales proceeds. This tax is particularly painful if the shares are being sold at a loss since the tax is levied on gross proceeds, not the gain.