Estate planning in Seychellen
The Republic of Seychelles consists of 115 islands and is situated between 480 and 1,600 kilometers from the east coast of Africa in the Indian Ocean. Its total surface area amounts to 455 square kilometers and the capital city is Victoria, situated on Mahé, the main island of the Seychelles. At the end of 2010, the population consisted of 86,525 inhabitants. These Seychellois communicate with each other in three official languages: English, Creole and French. Together with Roman Catholicism, the dominant religion, other religions like Protestantism, Hinduism and Islam color the peaceful religious landscape of the Seychelles. The Republic of Seychelles is world-famous for its amazing fauna and flora and feels very strong about conserving and protecting its beautiful ecosystems.
The national currency is Seychelles Rupee and the reference currency in the offshore services sector is United States Dollar. Traditional export products of the Seychelles are frozen and canned fish, cinnamon, vanilla and copra. In order to reduce the dependence on tourism, the government wanted to diversify the various components of national growth. Most recently, the government started to promote the offshore financial sector, through the establishment of the Seychelles International Business Authority (SIBA) and the enactment of several pieces of legislation.
After being successively settled by the French and the British, the Seychelles obtained independence within the British Commonwealth and became a Republic in 1976. Although the Republic of Seychelles was ruled by a single party at the start of its existence, presidential elections are currently organized under a multi-party political system. James Alix Michel, elected for a 5-year term, is the current President and heads a Cabinet of 10 ministers. The Republic of Seychelles currently consists of 25 different political districts and all of them are represented in the National Assembly with one seat. Legislative power is vested in a National Assembly of 34 members, 25 of whom are elected directly based on the results of the National Assembly elections. Parti Lepep, currently led by President Michel, holds 23 seats in the Assembly. The main opposition party, the Seychelles National Party, is led by Wavel Ramkalawan and holds the other 11 seats.
Port Victoria, a well-developed harbor, permits an efficient overseas connection with Africa, Asia, the USA and Europe. Although the islands suffered from the 2004 Indonesian tsunami, they are located outside the cyclone belt meaning that the risk of cyclonic impact is rather small. All this, together with a renewed telecommunications system, makes the Republic of Seychelles an excellent place to conduct business.
Seychelles Personal Taxation
The Income and Non-Monetary Benefit Tax, which replaced the social security tax in July 2010, is paid on employment income by both the employer and the employee. The former is responsible for paying the Non-Monetary Benefit Tax while the latter is responsible for paying the Income Tax. The basic rate of taxable personal income is 18.75% for Seychellois employees and the basic rate for non-Seychellois employees is 10%. The Non-Monetary Benefit Tax payable by the employer equals 20%.
Seychelles Company Taxation
Any individual who earns a Seychelles-source business income, whether from self-employment or as the proprietor of a business or as a partner in business, is obliged to pay Business Tax on his net income. More specifically, the Business Tax Act of 1987 states that both resident and non-resident corporate businesses are obliged to pay business tax on their Seychelles-source income. Non-corporate businesses fall under this obligation as well. A company not incorporated in the Seychelles that conducts business there is considered resident if its central management is located in the Seychelles or if its voting power is controlled by shareholders who reside there. Foreign-source income remains untaxed in the Seychelles and Seychelles-source income on which final withholding tax has been levied also remains untaxed.
Income is defined as all income received by a sole trader, partnership, trust estate or company, less a number of types of exempted income of which the following are some of the main headings:
- the proceeds of rental properties other than dwellings;
- profits from dealing in or selling property;
- fees and commissions in respect of the sale of property or the processing of money loans;
- lease premiums;
- income on which a final withholding tax has been levied.
Seychelles Rates of Business Tax
|For companies and trusts|
|Insurance Threshold (SR)||Rate (%)|
|For sole traders and partnerships|
|Insurance Threshold (SR)||Rate (%)|
|NIL – 150,000||
|From 150,001 to 1m||
Remark: An entity with a Certificate of Approval under the Investment Promotion Act of 1994 may be exempt from part or all of the Business Tax, or may have special deductions or tax credits. Companies in the International Trade Zone also have tax privileges.
Seychelles Calculation of Taxable Base
In the Republic of Seychelles, a normal range of costs are deductible. The basic rule is that expenses are allowed to be deducted when they are made in the course of carrying on business activities. Capital, private and domestic expenses are not deductible.
Seychelles Filing Requirements and Payment of Tax
The tax year is normally the calendar year, ending on 31 December. A tax return must be submitted by the 31st of March following the end of the tax year, along with the signed-off accounts.
Seychelles Withholding Tax
The distinction between residence and non-residence is important with regard to Seychelles-source dividends, interests and royalties. When they are paid to non-residents, this mostly results in withholding tax.
Withholding tax in the Seychelles:
- 15% on dividends paid to non-residents;
- 10% on interests paid to non-residents other than financial institutions (for whom a nil rate applies);
- 15% on royalties paid to residents;
- 15% on certain types of royalties paid to non-residents (copyright, patent, design and trademark royalties are exempt).
In the Seychelles, taxes are to be paid on capital gains, gifts, property and estate. A value-added tax was introduced in 2003 and several items are subject to import duties.
Seychelles Tax Treatment of Offshore Operations
The Seychelles International Business Authority (SIBA) was established in 1995 under the Seychelles International Business Authority Act of 1994. The SIBA is governed by a Board of Directors made up of prominent members from both the public and the private sectors. At the beginning, the SIBA was both acting as a regulator and promoting investment in the Seychelles. Because of these two conflicting activities, the Seychelles Investment Bureau (SIB) was established in July 2004 to take over all the non-regulatory activities of the SIBA.
The SIBA still exists, but today it only acts as a regulatory body, while the SIB took over the role as the first point of contact for all matters relating to investment and business in the Seychelles.
The SIB’s objective is twofold: first, it is responsible for the promotion of investment opportunities in the Seychellois economy. Second, it acts as a central point of contact, connecting three important parties: local entrepreneurs, foreign entrepreneurs and the government. In this way, the SIB assists investors in establishing new businesses and expanding existing businesses. Bureaucracy and time-consuming procedures are restricted to a minimum and the processing of investment proposals is accelerated for the consideration of the government.
Primary Offshore Business Activities
Thanks to the Seychelles’ efficient system, the registration process is simple and straightforward. It is possible to incorporate an IBC within 24 hours. The International Business Companies Act of 1994 regulates the operations of offshore companies.
Key features of the IBC:
- competitive license fees fixed for life;
- no requirement to disclose the identity of the shareholders of an IBC without a court order;
- directors may be elected at the first company board meeting;
- no minimum capital stipulation;
- only one director or shareholder is required;
- all civil proceedings with regard to IBCs may be heard by a judge in Chambers;
- an IBC may own or manage a vessel or aircraft registered in the Seychelles;
- no need to file accounts with the Registrar;
- confidentiality is guaranteed by law.
Protecting a business or personal investments as well as family and loved ones is possible by registering an International Trust at the Seychelles. The guarantees of secrecy, competitive rates and world-class trust legislation provide the ideal framework to ensure financial security.
The trust regulatory framework is provided by the International Trusts Act of 1994. A Seychelles trust may own and trade in other shares, operate bank accounts or even deal in government securities in the country.
Key features of the International Trust:
- one-off registration fee;
- the transfer or disposition by a person creating an International Trust cannot be invalidated by any foreign rule of forced heirship;
- no restrictions on the accumulation of income;
- settlors or trustees themselves can be named as beneficiaries under the trust;
- the law governing an International Trust is the law chosen by the settlor to be the proper law;
- no requirement to mention the names of the settlor and beneficiary, unless the latter is a Seychellois;
- an International Trust is valid and enforceable in the Seychelles;
- information or documents relating to an International Trust can only be disclosed to claim extenuating circumstances with regard to criminal activity.
Protected Cell Companies
Under the Protected Cell Companies Act of 2003, a company incorporated under the Companies Act of 1972 can be authorized to divide into identifiable cells. Each of these cells can have its own cellular assets and thus acquire a certain measure of a clearly identifiable unit, without assuming a separate legal personality.
Key features of the Protected Cell Company:
- incorporation under the Companies Act of 1972 provides tax residency and transparency;
- existing companies may be converted to PCCs;
- ideal for use in umbrella funds and captive insurance structures;
- the company may engage in contracts involving assets attributable to one cell only.
Company Special Licenses (CSLs)
Company Special Licenses, or CSLs, may be incorporated under the Companies Act of 1972 and are subject to the special provisions which provide both confidentiality and low tax status. Unlike many other low tax companies, the CSL satisfies all disclosure requirements that are expected of a modern corporation and enjoys access to all Seychelles Double Tax treaties.
Key features of the Company Special License:
- one-off registration fee;
- an application must be accompanied by the Memorandum and Articles of Association, the names and addresses of the beneficial owners and a written declaration containing the names and addresses of the directors and company secretary;
- accounts, returns and beneficial ownership information must be filed, but these are not made public;
- 1.5% corporate tax with complete exemption from withholding tax and full treaty access;
- a minimum of 2 directors who do not need to reside in the Seychelles;
- corporate directors are not allowed;
- a secretary residing in the Seychelles is required.
A Limited Partnership may be registered under the Limited Partnerships Act of 2003 and is subject to the Commercial Code Act.
Key features of the Limited Partnership:
- at least 1 or more general partners, one of which must be a Seychelles person, and one or more limited partners;
- exemption from stamp duty, exchange control, trades tax (custom duties) on capital goods for use in its office, social security contributions and work permit fees with regard to foreign employees;
- exemptions guaranteed for a period of twenty years from the date of registration;
- annual returns must be filed.
International (Free) Trade Zone Activities
With zero taxes, license fees fixed for life, the ability to import 100% foreign labor, a strategic location in the middle of the Indian Ocean as well as many other attractive features, the Republic of Seychelles is the logical point from which to establish and run an international business.
The International Trade Zone Act of 1995 allows for the licensing of redistribution, manufacturing, management and other specialist services. The Seychelles is ideally located to promote hub and spoke operations from its shores.
Advantages of the Seychelles include:
- a member of the LOME Convention covering preferential import conditions to EEC countries;
- a member of COMESA;
- the deepest sea port of the region;
- strategic location;
- concessions guaranteed by law;
- fast and efficient clearance of imports and exports;
- attractive freight rates for export cargo;
- SIBA offers secure ready-built premises;
- low land leasing costs.
The International Trade Zone Act also features:
- zero taxes;
- one-stop-shop approach;
- license fees fixed for life;
- ability to import foreign labor.
Taxation in the Seychelles is efficient and straightforward, and thorough regulation makes the Seychelles a desirable modern jurisdiction from which to operate unit trusts and other investment vehicles for clients in the Middle East, India, China, the Far East as well as South Africa and markets further afield. The Republic of Seychelles is strategically located as an investment center for the growing wealth around the Indian Ocean.
Fund administration flexibility: Seychelles’ funds may be administered in the Seychelles or in a recognized foreign jurisdiction, under a tax-efficient environment, introduced by the Mutual Fund & Hedge Fund Act 2008. Regulatory requirements have been adapted to suit all types of funds.
Different categories of funds:
- Professional Funds: Hedge fund licenses with less regulatory burden are a contemporary trend.These Professional Funds are characterized by licenses that are restricted to professional investors, individuals and corporate, each making an initial investment of no less than US$100,000 or its equivalent.
- Private Funds: Private Funds form an important category. They cannot have more than 50 investors, possibly a family or an investment club, and are not allowed to invite the public to subscribe. The existence of this type of fund makes the Seychelles ideal for Private Unit Trusts and other investment vehicles.
- Public Funds: These are the funds offered to the public for subscription. They represent an important opportunity for selling units to retail customers in order to enjoy the advantages of being registered in the Seychelles and to enjoy dedicated economic management.
- Exempt Foreign Funds: An interesting feature of the Seychelles is the allowance of foreign funds which are already licensed in a Recognized Jurisdiction (listed in the Act). These foreign funds are granted an exemption from a Seychelles license provided that they are managed by a Seychelles-licensed fund administrator and listed on a stock exchange in a Recognized Jurisdiction, or where the minimum investment by each investor is no less than US$100,000. These Exempt Foreign Funds appeal to established fund managers looking for an attractive and congenial jurisdiction from which to operate their fund.
A single law, the Financial Institutions Act of 2004, regulates both domestic and offshore banking and incorporates the necessary flexibility to encourage substantial growth in the offshore banking sector. The tax treatment of offshore banks is equivalent to that prevalent in some of the most reputable offshore jurisdictions. For example, corporation tax, withholding tax, customs duties, stamp duty and exchange control are non-existent.
- full confidentiality, except in the case of criminal investigations;
- an offshore bank may be administered by an established domestic bank;
- the offshore bank must be either a company limited by shares or an overseas company registered under the domestic Companies Act;
- the minimum paid-up capital is US$ 2 million or its equivalent in any freely convertible currency.
In the instance of double taxation agreements, the bank will pay corporation tax at a rate agreeable to both the offshore banking company and the Commissioner of Taxes.
The Insurance Act contains provisions for the licensing of offshore insurance companies, insurance mangers and principal insurance representatives. It regulates domestic and non-domestic insurance business and provides an excellent legal framework for conducting offshore insurance activities.
The law provides for full confidentiality, except in cases involving criminal investigation. Like its banking counterpart, an offshore insurance company must be either a company limited by shares or an unlimited company incorporated or registered under the Seychelles Company Law.
- the tax treatment of non-domestic insurance companies is similar to that given to offshore banks;
- the present law provides for attractive guarantees against future taxes – twenty years from the date of registration.
Apart from the strategic location and very attractive registration fees, there is a new super marina under development in the Seychelles which will provide the ideal berthing and support facilities for exclusive seagoing vessels.
Registration of ships and yachts is governed by the Merchant Shipping Act of 1992. The present law also provides for consular and diplomatic representatives of the Seychelles abroad to issue provisional certificates of registration to vessels satisfying the ownership and registration criteria.
With the current development of a luxury marina close to Victoria, the attractive registration laws and the year-round stable weather conditions, the Seychelles is the obvious choice for luxury vessel registration.
The Republic of Seychelles is party to a number of international conventions related to shipping, including:
- the Collisions Convention;
- the Load Line Convention;
- the Safety Convention;
- the conventions of the International Maritime Organization.
Foundations are the latest addition to the Seychelles portfolio of financial services. The Seychelles Foundation is a separate legal entity. Once the founder transfers assets to a foundation, those assets become the sole property of that foundation with full legal and beneficial title and do not form part of the founder’s personal estate.
The assets of a Seychelles Foundation cannot include any immovable property in the Seychelles. The foundation may however hold interests in Seychelles IBCs, Limited Partnerships and Seychelles licensed mutual funds. It may also hold an interest or entitlement as a beneficiary under a Seychelles Trust or another Seychelles Foundation.
A Seychelles Foundation may be used for a host of purposes, but it is not intended to engage in commercial activities on a daily basis. However, there are no restrictions on the trading activities of companies wholly or partly owned by the foundation.
The beneficiaries of a foundation have no legal or beneficial interest in the foundation’s assets and these do not become the assets of a beneficiary unless distributed in accordance with the Foundation Charter or Regulations.
A foundation is allowed to appoint a protector, whose role is to oversee the administration of the foundation by the Foundation Council. A founder, beneficiary or councilor may be appointed as a protector, provided that the protector is not the sole councilor or sole beneficiary. The Foundation Council must consist of one or more persons which may include corporate bodies. An application to register a foundation with SIBA must be made through a locally licensed foundation service provider.
Key features of foundations:
- the Foundation Charter establishes the foundation, and administrative provisions may be extended by regulations which are not available for public inspection;
- nominee founders are permitted;
- no requirement to state the name of any beneficiaries in the Foundation Charter;
- a foundation must have initial assets of a value of no less than US$1;
- a foreign foundation may be continued in the Seychelles.