Steve Fanny considers the financial services industry in Seychelles and how it has developed over the last 10 years.
Seychelles is now a well-known and respected jurisdiction in the global financial services market. Over the past 10 years, the Seychelles offshore financial services industry has experienced a significant increase in know-how, business volumes and international profile.
A central factor in Seychelles’ rise as an international financial centre has been its strategy of striking an effective balance between sound regulatory practice and the marketplace. Seychelles’ northern Indian Ocean location (GMT+4) has also proved to be a significant advantage in servicing the European, Asian, Middle Eastern and African markets.
The tax-exempt Seychelles International Business Company (IBC) vehicle has enjoyed substantial success, as shown by surging registrations over the past five years – 8,238 new incorporations in 2006, 10,295 in 2007, 13,751 in 2008, 12,408 in 2009 and 84,378 in 2010 (making it now one of the most popular IBC registration jurisdictions in the world).
Seychelles is also steadily developing more value-added areas of offshore business, including trusts, limited partnerships, securities, mutual funds and special license companies (CSL) which are Seychelles tax resident companies able to access Seychelles double taxation avoidance agreements.
International Business Companies (IBC)
An IBC is a limited company licensed by SIBA that undertakes business activities. These companies are, however, exempt from all forms of taxation and have been licensed with the exclusive aim of conducting international business outside Seychelles. IBCs are commonly used for:
Subject to the limit set by its objects, an IBC can generally do anything that a body corporate can do. The Act does however, specifically prohibit an IBC from conducting business as a bank, insurer, reinsurer, or trustee (all three types of offshore businesses are regulated by special legislation) and except as specifically permitted by law, from carrying on any business in Seychelles or owning or leasing immovable property in Seychelles. It is an attractive financial structure that can be converted to other resident companies such as a CSL.
Trusts set up under the International Trust Act, 1994, provide an effective and legitimate means of protecting one’s assets. Various types of trusts may be set up, such as charitable and revocable or irrevocable discretionary trusts. Some features of such trusts include:
Special License Companies (CSL)
The Companies (Special Licenses) Act, 2003, allows a company to take advantage of the Seychelles network of double taxation treaties as it is incorporated under the Companies Act 1972 and considered a tax resident under Seychelles laws. The special provisions afforded under the Act provide it with a measure of confidentiality as well as a low tax status, calculated at 1.5 per cent of gross income. The CSL meets all the criteria of modern legislation mainly in relation to disclosure requirements, which are, however, not accessible by the public.
CSLs are increasingly being used by international listed groups as intermediary holding companies to hold shares and other investments. The attraction for the international groups is that use of a CSL, in conjunction with Double Tax Treaty agreements, provides significant scope for foreign investors to reduce their tax exposure in their respective country.
Key Features of the Seychelles CSL include:
Protected Cell Companies
Protected Cell Companies (PCC) are incorporated under the Companies Act, 1972, which allows companies with specified activities to separate into identifiable cells without having to assume a separate legal entity. Cells within a PCC are protected against liabilities incurred by cells of the same company, and are therefore attractive for a number of business activities. Qualified activities include Offshore Insurance and Mutual Funds businesses, and other Collective Investments.
Limited Partnerships are registered under the Limited Partnership Act, 2003, and are subject to the Seychelles Commercial Code. The Code provides for a general partner, who must be a Seychelles resident, and one or more limited partners. Limited Partnerships are commonly used for joint ventures.
The recently enacted Mutual and Hedge Funds Act, 2007 provides a new legal framework and approach to the licensing of mutual and hedge funds in the Seychelles. Seychelles law allows for companies, unit trusts or partnerships to be licensed as mutual funds, giving fund managers a long list of potential fund vehicles. These companies, unit trusts or partnerships can be constituted in Seychelles or in any one of 31 recognised jurisdictions. An Exempt Foreign Fund status is available to funds that can satisfy the Authority that they are in good legal standing and hold a valid license from one of the recognised jurisdictions, are administered by a Seychelles licensed fund administrator and are either listed on a stock exchange or have a minimum investment of USD 100,000.
The Securities legislation, enacted in 2007, provides the regulatory framework for securities trading within the Seychelles. The laws safeguard investor confidence by licensing and regulating all components of the market and enforcing internationally accepted guidelines. The legislation also provides the legal framework for the setting up of the Seychelles Stock Exchange.
Foundations are the latest addition to the Seychelles portfolio of financial services products. A 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.
Seychelles has maximized its appeal and effectiveness as an offshore financial services centre by striking an effective balance between sound regulatory practice and attractive products. With Seychelles’ financial industry gathering momentum, it is now well placed to serve the international market.
Dr Steve Fanny
Dr Steve Fanny is the Chief Executive Officer of the Seychelles Financial Services Authority (FSA), a post which he held previously when FSA was referred to as SIBA. Prior to his current appointment, he occupied the post of Chairman of the FSA Board of Directors. He holds a number of different professional qualifications in Accounting and Finance and a Masters in Audit Management, and Consultancy specializing in Forensic Accounting and a Doctorate in Islamic Finance with the Swiss Management Centre University.