Global Incorporation Guide feature - The Seychelles
Global Incorporation Guide [GIG] Editorial
February 12, 2019
With a low-tax regime which was recently given the all clear by the OECD as part of its BEPS “harmful taxes” initiative, the Seychelles is an ideal jurisdiction in which to form an international business company. What’s more, the government is also actively promoting foreign investment in certain sectors of the economy with an array of tax incentives.
Introduction to the Seychelles
Situated in the Indian Ocean to the northeast of Madagascar, the Seychelles is probably better known as an up-market tourist destination rather than as a regional business and finance hub. However, with the support of successive governments, the jurisdiction has established itself firmly on the global map as a modern and competitive offshore financial centre.
Advantages of the Seychelles
When looking for the ideal jurisdiction in which to locate an international business company, investors look for several things. These include political stability, legal predictability, regulatory simplicity, and low taxation. The Seychelles offers all of these factors, in addition to a legal framework that is based on English common law, a system that it recognised and favoured by investors the world over. Significantly, the Seychelles was ranked second in sub-Saharan Africa in Transparency International’s most recent Corruption Perceptions Index, with the highest rankings indicating the least corrupt nations.
International Business Companies
The most widely-used vehicle for offshore operations in the Seychelles, the IBC normally takes the form of a private company limited by shares but can also be a limited life company. Statutory requirements are minimal and flexible:
- Only one director and one shareholder are required
- Shareholders, directors and officers need not be resident in the Seychelles and there is no stipulation as to their nationality
- Shareholder and director meetings need not be held in the Seychelles and can be held by telephone or other means of electronic communication
- There is no minimum capital requirement, although shares must be registered and a Seychelles IBC may not issue bearer shares.
- While accounting records must be kept, there is no need for these to be audited.
- A copy of the share register must be kept in the Seychelles. This rule also applies to a register of directors and officers.
- The Memorandum and Articles of Association are the only documents to be held on the public record; beneficial ownership information is known only by the registered agent.
IBC status is granted subject to certain conditions:
- No business may be transacted with residents of the Seychelles
- No ownership interest in real property in the Seychelles is permitted; property may be leased for office use only
- Banking or trust business may be carried on only if an appropriate license is issued
- Likewise, a licence is required to carry on insurance or re-insurance business
- Engaging in the business of company management or providing registered facilities for Seychelles-incorporated companies is not permitted.
IBCs are permitted various activities within the Seychelles without compromising their offshore status under the Act; these include:
- professional contacts with lawyers, accountants etc.
- preparation and maintenance of books and records
- the holding of directors' or shareholders' meetings
- ownership of shares in other Seychelles companies, whether under the Act or the Companies Act 1972
- ownership of Government or Central Bank securities
- ownership of a vessel registered in Seychelles.
There is a flat incorporation and annual renewal fee of USD100, irrespective of the level of share capital, which may be unlimited.
Incorporation typically takes around 24 hours.
Other company forms
Besides local companies and IBCs, legislation in the Seychelles enables the formation of special licence companies, limited partnerships, protected cell companies, trusts and foundations.
The Seychelles has a territorial income tax regime, and provided that an IBC does not trade within the jurisdiction, they are generally exempt from the Business Tax (25 percent on the first SCR1m (approx. USD69,000) and 33 percent on the excess) and from withholding taxes. However, IBCs cannot utilize the Seychelles’ network of double tax avoidance treaties.
Seychelles IBC uses
Seychelles IBCs can be used for many types of business. However, they are most commonly used as international holding or trading companies, international consulting, and reinvoicing. Given its location in the Indian Ocean, the Seychelles is also an ideal platform from which to channel investment into the key emerging markets of Africa, the Middle East, and south Asia.
Besides being a favourable location in which to locate an IBC, there are many opportunities for foreign investors in the economy of the Seychelles itself. In particular, the Government is keen promote the jurisdiction’s tourism (especially adventure tourism), fisheries, energy and information technology sectors. However, there are also numerous other investment opportunities, including in the following industries: education; health care; financial services; infrastructure; civil aviation; and agriculture.
The Seychelles Investment (Economic Activities) Regulations 2014 (SI-71) stipulates the economic activities that are reserved for Seychellois and those in which foreign investors are permitted to participate.According to the Seychelles Investment Board (SIB), any activity not present on the list will be considered by government.
The SI-71 is divided into three main schedules.
- Schedule One includes all the business activities reserved for Seychellois.
- Schedule Two includes activities which a foreigner may be allowed to invest to the extent of the financial limit specified under column (2) of that schedule.
- Schedule Three includes activities that a foreigner may be allowed to invest in subject to an Economic Needs Test (ENT). This test evaluates the economic, social and technologicalbenefits of the project and whether there is a gap that can be filled by allowing non- Seychellois participation.
Any proposed investment project in the Seychelles must first be submitted to the SIB and will be considered by the relevant government agencies.
Tax incentives for direct investment in the Seychelles are mainly restricted to the agriculture, fisheries and tourism sectors and are available to those holding the relevant certificate or license.
Under the Agriculture and Fisheries (Incentives) Act, farming entities and boat owners pay zero percent tax on the first SCR240,000 of taxable income, and a flat rate of 15 percent on the excess. The same rates and thresholds apply to processors of agricultural and fisheries products. Exporters of agricultural and fisheries products also pay zero percent tax on the first SCR240,000, and a flat rate of 10 or 15 percent on the excess, depending on the type of exporter they are.
Special deductions and accelerated rates of deprecation are also available for certain expenditures, including marketing and promotion costs, and capital investments.
Under the Tourism Incentive Act, Business Tax at a flat rate of 15 percent is imposed on taxable income in excess of SCR250,000 (with a zero percent applying to the first SCR250,000) for the following types of business:
- Licensed Accommodation
- Island Resort Hotel Operator
- Casino Operator
- Tour Operator
- Tour Guide
- Water Sport Operator
- Operator of Tourism Leisure Related Activities
- Helicopter Services Operator
- Equestrian Tourism Operator
- Car Hire Operator
Qualifying tourism businesses can also benefit from special deductions for marketing, promotion, and training expenses, as well as accelerated depreciation on capital investments except for land and buildings.
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