SEYCHELLES, HAVING GAINED independence from Britain in 1976, is an independent country within the Commonwealth. Its northern Indian Ocean location (GMT+4) has proven to be a significant advantage in servicing the European, Asian and African markets. Since its commencement in 1994 the Seychelles offshore financial services industry has grown substantially and Seychelles is now well and truly on the offshore ‘map’. The tax exempt Seychelles international business company (IBC) has enjoyed significant success – there were 4,200 new IBC registrations in 2004, 7,097 new registrations in 2005 and the jurisdiction is well on track to exceed 8,000 registrations for 2006.
The success of the Seychelles IBC has led the jurisdiction into more value added areas of offshore business, including CSLs, Protected Cell Companies, Limited Partnerships and Mutual Funds.
The ‘CSL’ (Company Special Licence) is a low-tax domestic company and, as a ‘tax resident’ of Seychelles, may access Seychelles double taxation avoidance agreements (DTAs). Seychelles enjoys particularly (fiscally) favourable DTAs with China and Indonesia, and CSLs are being deployed as intermediary holding companies for foreign ‘parents’ to facilitate tax-efficient holding of investments in both those and other countries.
The Seychelles International Trust, a versatile trust with strong asset protection features, is gaining significant market attention.
The International Trusts Act 1994 includes specific asset protection provisions (beyond that offered by general insolvency law) protecting dispositions to a trust from challenge from creditors of the settlor, and a two-year statute of limitation exists for creditor claims. Specific provision is also made for exclusion of foreign forced heirship laws. While ‘registration’ is provided for, there is no fi ling of the trust deed, or of settlor or beneficiary details with the Registry.
There is also growing interest in and demand for Seychelles Protected Cell Companies which are particularly useful for insurance and mutual fund applications.
Another value-added Seychelles offshore ‘product’ proving popular is the Limited Partnership which facilitates tax planning opportunities, in that they may receive income from sources outside of Seychelles and distribute such income to foreign partners without incurring a Seychelles tax liability. Limited partnerships can be usefully deployed in international joint venture activities, to facilitate management equity participation in international groups and are increasingly used in hedge fund and mutual fund structures.
In addition, and following growing global demand, Seychelles will soon enact an innovative new Mutual Fund Act, providing a strong yet market-attractive regulatory frame work for professional, private and public funds (and which will be particularly attractive for hedge funds).
Why have Seychelles IBCs out-sold most other IBC jurisdictions over the last three years? A key factor has been value for money: there is a low annual government licence fee of US$100 if authorised capital is US$100,000 or less.
Another vital factor has been the fast speed of incorporations and name approvals. Seychelles IBCs also enjoy nil Seychelles taxation on foreign income, and there is no public filing or disclosure of details of shareholders/owners or directors. The ease of administration is also attractive – there is no requirement for Seychelles IBCs to file financial accounts or an annual company return in Seychelles. The minimum number of directors is one, and corporate directors are permissible. Similarly, the minimum number of shareholders is one, and corporate shareholders are permissible.
Seychelles IBCs are acceptable to international banks – Seychelles is not on any OECD or FATF blacklists and has in place modern anti-money laundering laws. Seychelles is a stable and independent country, not a territory of a European state and consequently is not subject to EU directives.
IBC Amendment Bill 2007
Anticipated amendments to the IBC legislation are listed.
The CSL (Company Special Licence) is a Seychelles domestic company (incorporated under the Companies Act 1972), which is granted a special licence under the Companies (Special Licence) Act 2003 (the Act). It has strong appeal, particularly to international groups, as a vehicle for ‘permitted uses’ including use as an international holding company, a headquarters company, a franchise company, a services company and holding intellectual property.
The CSL is liable to Seychelles business tax at the rate of 1.5 per cent on its worldwide taxable 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). Taxable income means assessable (gross) income less allowable deductions.
CSLs also benefit from exemptions from Seychelles withholding taxes on dividends, interest and royalties; and from stamp duty on property transfers, share transfers and other business transactions.
Being a tax resident of Seychelles, the CSL (unlike the IBC) has access to Seychelles’ growing network of double taxation avoidance agreements – including with China, Indonesia, Malaysia, Thailand, Vietnam and South Africa.
A CSL is required to have a minimum of two directors (who must be natural persons). Although there is no mandatory resident director requirement, this is essential for structures where a CSL seeks to access and benefit under a Seychelles double taxation avoidance agreement.
CSLs are required to prepare and file annual audited accounts (which are not publicly accessible), and must have an AGM and file an annual company return.
The use of nominee shareholders is permitted. While shareholder and beneficial ownership details are required to be disclosed to the Government Registry, such information is subject to strict confidentiality obligations on the registrar and is not accessible by public search.
CSL Amendment Bill 2007
Anticipated amendments to the CSL legislation include a reduction in the minimum shareholder requirement from two to one. The legislative amendments are also expected to add the ability for a CSL to convert into an IBC. It is also expected that the Bill will extend the guaranteed concessions period from 10 years to 20 years – for investor certainty and confidence.
Seychelles’ growing success as an offshore financial centre has been facilitated through striking the right balance between sound regulatory practice and pleasing the market-place. Seychelles has also sensibly pursued a policy of continuous review and strengthening of financial services laws and policy, involving the monitoring of overseas markets and regular communication between the government and the private sector. With Seychelles’ offshore industry growth continuing to gather momentum, expect to hear a lot more about Seychelles!
Simon Mitchell, LLb, Managing Director,Mayfair Trust Group Limited, Seychelles