The Seychelles financial sector landscape has been through tremendous change over the last couple of months. These changes were introduced in light of the recent developments vis-à-vis the Organisation for Economic Co-operation and Development (OECD). The measures adopted by the Seychelles Government and the Regulator reflect the country’s determination to contribute actively to transparency on matters of international financial services and taxation.
The International Business Companies (Amendment) Act 2013
With the enactment of the International Business Companies (Amendment) Act 2013, amending the International Business Companies Act 1994 (IBC Act), various changes were made with regard to how International Business Companies (IBCs) operate. The main amendment was the abolishment of bearer shares, which has been seen by the international community as a major breakthrough in terms of transparency.
The International Business Companies (Amendment) Act 2013 came into operation on the 1 January 2014 from when no bearer shares could be issued. Every IBC, which has issued bearer shares prior to the commencement of the new law, shall recall and cancel such shares within six months from the date of commencement and the company shall issue registered shares in substitution for the cancelled bearer shares. Any bearer shares, which have not been recalled and cancelled within that period of six months, shall thereafter be null and void and be without effect for all purposes of the law.
It is now mandatory that a copy of the Share Register, commencing from the date of the registration of the IBC, be kept at the registered office of the IBC.
New penalties have been introduced whereby any IBC that fails to comply with the requirements relating to its accounting records will be liable to pay a penalty of USD$100 and to an additional penalty of USD$25 for each day or part thereof during which the contravention continues.
It is now also possible for the Registrar to serve notice that the name of the IBC be struck off where the IBC fails to comply with a request for information from the Seychelles Revenue Commission or where the IBC fails to pay any penalty imposed by the Registrar under the IBC Act.
A new section has been introduced in the IBC Act requiring an IBC (whether incorporated prior to or after the commencement of the new law) to furnish to the registered agent, a return in the form of a declaration that the IBC is keeping accounting records in accordance with the IBC Act and that such records can be made available through its registered agent and the Share Register located at the registered office is complete and updated.
The Financial Services Authority
In March 2014 the Financial Services Authority (FSA) replaced the Seychelles International Business Authority (SIBA) as the regulator for the non-banking financial services sector in Seychelles. At the rebranding ceremony the Finance Minister announced that the FSA will not be a facilitator but a regulator that will diversify the industry.
The mandate of the FSA is to focus on licensing and compliance. The FSA will not carry out any promotional role, which has been transferred to the Seychelles Investment Board and the FSA will focus mainly on regulation and will not be a service provider. This change was made to ensure that Seychelles continues to meet the requirements of the international regulatory environment.
The FSA is responsible for the licensing, supervision and development of the non-banking financial services industry of the Seychelles including the licensing, registration and regulation of international business companies, foundations, protected cell companies, trusts, limited partnerships, mutual funds, special license companies, insurance companies, amongst others.
This change is believed to be in line with the new trends in international business and the new challenges imposed by the internal regulators.
Double Taxation Agreement with Guernsey
The latest update in the Seychelles Double Taxation Avoidance Agreement environment is the Double Taxation Agreement (DTA) signed with Guernsey on 27 January 2014.
The Seychelles Government believes that the DTA will encourage both jurisdictions to increase bilateral trade and investments. The agreement has provisions regarding taxes to be paid on income generated from investments made between Seychelles and Guernsey. Permanent establishment rules have been established on the different taxes of both countries. The DTA provides for a zero withholding tax rate on dividends and interests and for a maximum of five per cent withholding tax to be imposed on royalties.
The DTA will also enable the tax authorities of Seychelles and Guernsey to exchange taxpayers’ information.
Seychelles has DTAs in force with Monaco, Zambia, Indonesia, South Africa, Botswana, Barbados, China, Cyprus, Malaysia, Mauritius, Oman, Qatar, Thailand, UAE, Vietnam and Zimbabwe.
It is believed that 2014 will be a challenging year for Seychelles’ international financial services sector. Nevertheless, the measures detailed above will help to strengthen compliance with international standards and the industry is confident that the sector will recover. In the last budget, the Finance Minister stated that “Seychelles' financial sector needs a new strategy, the time has come for a fundamental re-thinking of the way forward for this industry”. The Seychelles’ Government will be preparing for a strategic plan for development of the sector, with assistance from the World Bank and the private sector will be invited to participate actively in the preparation of same.
Malcolm Moller, Managing Partner - Mauritius and Seychelles is a member of both the Insurance and Structured Finance Teams of Appleby. He specialises in advising financial institutions on financial regulation, regulatory capital issues, financial institution M&A, insurance related transactions.
Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Hong Kong, Isle of Man, Jersey, Mauritius, Seychelles and Shanghai.