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Seychelles Announces Changes Made in Preferential Regimes to Comply with BEPS Action 5

On 28 January 2019, the Seychelles Ministry of Finance, Trade Investment and Economic Planning issued a release on the review of preferential tax regimes and changes made to comply with BEPS Action 5. This includes a review of the following:

  • International Business Companies (IBC);
  • Companies (Special Licenses) (CSL);
  • Export Services under the International Trade Zone (ITZ);
  • Offshore banking (Segment 1 banking license);
  • Non-domestic insurance business;
  • Reinsurance business;
  • Securities business under the Securities Act; and
  • Fund Administrator.

In order to bring the regimes in compliance with BEPS Action 5 recommendations, the following legislative amendments have been made as summarized in the release:

(i) The Business Tax Act has been amended to move the Seychelles tax system to a territorial system. Other amendments included the removal of the concessionary tax rate of 3% for offshore banking business and the removal of tax exemption in respect of reinsurance businesses.

(ii) The International Business Companies Act has been amended to allow IBCs to carry on business in Seychelles. The tax exemption clause under the IBC Act has been removed. Only IBCs deriving "Assessable Income" in Seychelles will be required to submit Annual Returns and Audited Accounts (in line with the Companies Ordinance 1972) to the FSA.

(iii) The Companies (Special Licences) Act has been amended to remove the 1.5% business tax concession and withholding tax exemptions applicable to CSLs. However, CSLs incorporated on or before 16 October 2017 may still be able to enjoy these tax concessions and exemption until 30 June 2021 (other limitations apply).

(iv) The licensable Export Services activities under the International Trade Zone Act has been amended to remove the activities falling within the scope of the OECD work on BEPS. Under the revised export services regime, the holder of an Export Services License will not be allowed to provide any service other than repair and reconditioning of goods, warehousing and rental of storage space or logistic services provided that these activities relate to goods physically handled in the zone, in Seychelles.

Export Services operators licensed on or before 16 October 2017 may still be able to enjoy all concessions and exemptions accorded under the International Trade Zone Act until 30 June 2021 provided that the benefits do not extend to assets or activities introduced on or after 17 October 2017.

(v) The Insurance Act has been amended to remove tax exemption provisions applicable to non-domestic insurers. Non-domestic insurers licensed on or before 16 October 2017 may still be able to enjoy these tax concessions and exemption until 30 June 2021 (other limitations apply).

(vi) The Securities Act and Mutual Fund & Hedge Fund Act have been amended to require licensees to meet the minimum substance requirements in order to benefit from the concessionary tax rate afforded under these legislations. The Regulations provides that the substantial activity requirements shall be met if the licensee under the Securities Act and fund administrator undertakes its core income generating activities in Seychelles by employing, a reasonably adequate number of suitably qualified persons to carry out the core activities. The licensees are also expected to incur an adequate amount of operating expenditures for such activities.

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