Seychelles: Country and Foreign Investment
Import of Foreign Capital
N.B. All restrictions on the trading of the Seychelles rupee were removed in November 2008 under an IMF-sponsored economic stabilization programme.
In 2001 the government amended exchange control and money and trade taxation laws to tackle the problem of growing black market activity. The amendments closed loopholes in laws such as the Exchange Control Act. Individuals who possess any foreign currency must show evidence that it is obtained from a registered dealer and the rules prohibit the buying and selling foreign currency by authorised dealers at rates above the maximum rate or below the minimum rate determined by the Central Bank as well as prohibiting the export and import of Seychelles currency notes and coins in excess of SCR2,000.
President Michel's 2005 budget speech included measures to lead to a more market-driven economy and reduce domestic costs with the purpose of improving the investment climate in the Seychelles: a series of incentives for the tourism industry; assistance to farmers and fishermen by reducing business tax on their activities and facilitating their access to vital equipment and resources; small businesses to be given better access to foreign exchange and an 'open permit' system; everyone has the possibility of opening foreign exchange accounts locally; removal of the requirement for an import permit for most items, with the exception of a list of restricted items and items for resale; customs procedures at the ports to be streamlined and made more efficient and user-friendly; and reductions in the 'trades tax'.
In his 2007 State of the Nation address, President Michel said that that liberalisation of foreign exchange remained "a fundamental element" of the government's economic reform agenda. "This reform will facilitate economic growth as businesses get more access to financial resources," he said. "Our economy has benefited considerably in the last two years with the implementation of these liberalisation policies. There is a rise of local investments and FDI and there has been increasing growth in tourism and fishing."
As a result of the global financial crisis in 2007/8, all restrictions on the trading of the Seychelles rupee were removed and the currency was allowed to float freely.
In September 2009, the Central Bank of the Seychelles announced the introduction of a new foreign exchange regime under the Foreign Exchange Act 2009.
According to an explanatory note accompanying the new legislation, the 2009 Act repeals and replaces the Exchange Control Act (Cap 76) which enforced a highly regulated and restrictive foreign exchange regime. The Act, unlike its predecessor is more regulatory as opposed to restricting activities of persons. The presence of provisions that may be perceived as impeding on the right of individuals to deal with their moneys is actually an effort to regulate the market and prevent illegal activities which flourished in the past under the Exchange Control Act.
The primary focus of the Act is that the local currency, the Seychelles rupee, is never refused when offered as means of payment. Payments may however be made in foreign currency where stipulated in a written law, or in instances where there is a contractual (written or oral) agreement. In the case of an oral agreement, this would include a payment made in a restaurant, hotel, etc. Where payment is offered in a foreign currency, the person accepting payment may return the money remaining after the transaction in foreign or local currency. Persons who accumulate foreign currency through the receipt of foreign currency payments may choose to retain or sell the foreign currency amounts. In the instance where they wish to sell, they can only do so to an authorised dealer. If this person were to sell to a party other than an authorised dealer then he or she shall be committing an offence by acting as an authorised dealer without a licence.
Section 7 of the Foreign Exchange Act 2009 requires that providers of goods and services who were previously advertising in a foreign currency now advertise their prices in Seychelles Rupees. Traders had until September 30, 2009, to comply with the new law. The Act, however, allows traders targetting markets outside of the Seychelles to advertise their goods and services in both local and foreign currencies.
Other provisions of the Foreign Exchange Act 2009 were already in force when the Central Bank made its announcement, notably section 8, which provides that all payments are to be made in Seychelles in rupees unless payment in foreign currency is stipulated in (a) a written law or (b) is agreed to by the parties either by contract or otherwise. As such all persons have the right to make payment in rupees except in cases as stipulated in (a) and (b). The exchange rates to be utilized by the persons other than banks and bureaux de change who are accepting payment in foreign currency shall be the average traded exchange rate as published by the Central Bank in the Nation on a daily basis as well as on the Central Bank website.
The Central Banks stresses, however, that only banks and bureaux de change are empowered to set exchange rates and any other person who does so acts in contravention of the law and may be liable upon conviction to a fine not exceeding SCR400,000 or to imprisonment not exceeding one year.
The law does not criminalise the occasional exchange of foreign currency between relatives or friends for a sum of Rupees, but it does cover instances where the individual is exchanging foreign currency on a sustained basis and for a profit as this person will be unlawfully acting as an authorised dealer without a licence and be subject to the penalties as provided for in the Act.
Authorised dealers may act as facilitators for payments, receipts or transfers in respect of international transactions which are defined as payments between a resident and nonresident, and targets rather the cross border movement of funds e.g. foreign currency in a bank account in Seychelles being transferred to a foreign bank account overseas, this should only occur via authorised dealers. According to the Central Bank, this provision by consequence is not intended to restrict a resident from making use of his account overseas to make payment or transfer to a non-resident party. The resident is free to use his account in Seychelles and any account outside Seychelles, but where the money is originating from Seychelles then it is a requirement that the medium through which it leaves the Seychelles is an authorised dealer.