Seychelles

Offshore Legal and Tax Regimes

The main forms useful for offshore operations in the Seychelles are the International Business Company, the various types of Companies Act company, the Trust, and two new forms introduced in 2003: Special Licence Companies and Limited Partnerships. The International Corporate Service Providers Act, 2003, provides for the licensing of trust management and company formation agents.

Offshore operations may take place within the following forms:

• Limited or Unlimited Companies Act Company
• International Business Company
• Limited Life Company
• Trust
• Special Licence Company (formed under the Companies Act)
• Limited Partnership

Companies formed under the Companies Act 1972 are used by banks, insurance companies and mutual funds, none of which are permitted to use the International Business Company.

Tax Treatment of Offshore Operations

Offshore Seychelles entities are subject to the following fee and tax structures:

International Business Companies pay registration fees as follows:

• $100 for a company with authorised capital up to $100,000
• $1,000 for a company whose authorised capital is over $100,000.

The continuing annual renewal fee for IBC status is the same amount. There is a scale of fees in the International Business Companies Act covering inspection of documents in the Registry, copies of entries, increase of capital etc. etc. The fee levels are fixed for the life of an IBC, whatever subsequent changes may take place to fee levels.

IBCs are exempt from the Business Tax, from withholding taxes and from Stamp Duty; however they pay social security contributions on the salaries of employees unless the IBC is in the International Trade Zone (see below) or the employees are crew members of a ship in international waters.

Offshore (Non-Domestic) Banks pay a license application processing fee of $2,000 and an annual license fee of $15,000.

Banks are exempt from the Business Tax and withholding taxes, from customs duties and from Stamp Duty. They can if they wish elect to pay Business Tax at a rate which is agreed with the Commissioner of Taxes. Banks pay social security contributions in respect of their employees.

Offshore (Non-Domestic) Insurance Companies pay license application processing fees and annual license fees as follows:

• License application processing fee $500 for an offshore license
• Annual license fee $1,500 for either offshore general insurance or offshore life insurance
• Annual license fee $3,000 for both offshore life and general business
• Annual license fee $1,000 for a single-parent captive insurer.

Offshore insurance companies are exempt from the Business Tax, from withholding taxes, from customs duties and from Stamp Duty. They can if they wish elect to pay Business Tax at a rate which is agreed with the Commissioner of Taxes. There is a guarantee of exemption from future taxes for 20 years from the time of registration. Insurance companies pay social security contributions in respect of their employees.

International Free Zone (SITZ) Companies pay annual license fees and application processing fees as follows:

• Redistribution license: $550
• Light Assembly License: $550
• Manufacturing License: $2,700 plus $1,300 initial processing fee
• Processing License: $2,700 plus $1,300 initial processing fee
• Export Services License: $1,500 plus $500 initial processing fee.

These license fees are fixed for the life of a licensed company.

SITZ companies are exempt from the Business Tax, from withholding taxes, from customs duties and from Stamp Duty. SITZ employers are also exempt from the need to pay social security contributions in respect of directors or employees.

International (Offshore) Trusts pay an initial registration fee of $100. Offshore Trusts are exempt from the Business Tax, from withholding taxes and from Stamp Duty.

Limited Partnerships pay a registration fee of US$200. They may receive income from sources outside of Seychelles and distribute such income to foreign partners without incurring a Seychelles tax liability. In addition:

• An LP is exempt from all Seychelles tax or duty on income or profits of the LP
• An LP is exempt from stamp duty on property transfers, share transfers and other business transactions
• An LP is exempt from trades tax on all furniture and equipment imported into Seychelles for office use
• An LP has exemptions under the Social Security Act.

These exemptions granted under the LP Act are guaranteed for twenty years and continue in force thereafter unless otherwise provided for by written law.

Special Licence Companies (CSL) pay a US$200 application fee, an annual licence fee of US$1,000, and a US$200 annual filing fee. They may carry on permitted business inside as well as outside of Seychelles. The CSL entity is a Seychelles domestic company (under the Companies Act 1972), which is granted a special licence under the Companies (Special Licence) Act and has access to Seychelles' steadily expanding network of double taxation avoidance treaties - of particular interest is its DTA with China. In addition:

• A CSL is liable to Seychelles business tax at the rate of 1.5% on its world-wide income (as an exception to the Seychelles territorial tax system, any foreign income derived by a CSL will be deemed to be Seychelles-sourced income)
• A CSL is exempt from withholding taxes on dividends, interest and royalties
• A CSL is exempt from stamp duty on property transfers, share transfers and other business transactions
• A CSL is exempt from trades tax on all furniture and equipment imported into Seychelles for office use
• A CSL has exemptions under the Social Security Ac and from work permit fees for expatriate workers.

These exemptions granted under the CSL Act are guaranteed for ten years and continue in force thereafter unless otherwise provided for by written law.

Taxation of Foreign Employees of Offshore Operations

There are no special rules applying to the foreign or Seychelles employees of offshore operations, other than the exemption from social security contributions applying to the crew of ships and aircraft. The various exemptions from Business Tax and social security contributions described above do not apply to employees. See Domestic Personal Taxes for the general principles of individual taxation in the Seychelles, which also apply to the resident employees of non-resident entities. Taxation of employees through low social security contributions is in fact very light.

Employers however do not only have to pay relatively high social security contributions in respect of employees (it amounts to an income tax in all but name), but for foreign employees they also have to pay the 'Gainful Occupation Permit' fee of SR24,000 per employee per year unless they are a SITZ company.

Exchange Control

N.B. All restrictions on the trading of the Seychelles rupee were removed in November 2008 under an IMF-sponsored economic stabilization programme.

In the Seychelles there is no restriction placed on payment of imports or invisibles, although import permits are required for certain products. Under the Exchange Control (Exemption) (Amendment) Order, 1995, it is illegal to deal in foreign currency other than through an authorised dealer. Since the government has recently maintained a highly over-priced currency rate against the US dollar for the Seychelles rupee, the currency became far from free and 'official' rupees were hard to come by leading to a thriving black market.

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.

Offshore Activities

International Business Companies 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 1942 Companies Law
• ownership of Government or Central Bank securities
• ownership of a vessel registered in Seychelles.

Companies operating within the Seychelles International Trade Zone may apply to the Seychelles International Business Authority, which governs its operations, to conduct trade with Seychelles partners or customers outside the Zone. Income from such activity must be accounted for separately, and will be subject to the Business Tax.

Banks and insurance companies operating offshore under license are prohibited from domestic trading, for which a separate license would be required; however they can undertake local activities broadly similar to those sketched out above for IBCs.

Employment and Residence

In order to work in the Seychelles, a 'Gainful Occupation Permit' is needed, which must be applied for by the employer, and costs SR18,000 per person per year plus a processing fee of SR 600. In addition there are restrictions on the percentage of foreign employees permitted in a company. Only in the SITZ can 100% of the workforce be foreign, and Permits are not required; normally the percentage is quite low, although there are exceptions for some types of offshore entity, and reduced rates of $120 per year apply to permits issued to approved investors under the Investment Promotion Act, who can employ up to 25% foreign staff on that basis, and another 25% at normal rates.

Foreigners cannot own land in the Seychelles without Government approval.