A Unique History and Legal System
The Republic of Seychelles is an archipelago of 115 islands stretching across some 1,200 kilometres in the Indian Ocean. From 1770 to 1811, the islands changed hands several times between the French and British Empires. In 1814, with the signing of the Treaty of Paris, Seychelles became a formal British colony, which it remained until 1976 when the island gained its independence and became a democratic republic. The local economy is driven by tourism, commercial fishing, and a thriving international financial industry; the Seychelles government has put in place several policies which actively foster and promote growth in the financial sector.
The Seychelles is a true melting pot and has a highly educated populace. Due to its unique history, the island has a hybrid legal system, combining both English Common Law and French Napoleonic Code Law. This provides the jurisdiction with a competitive advantage, in allowing it to offer investors a variety of structures such as Trusts, which are common law vehicles, and Foundations, which are civil vehicles. Commercial and financial legislation in the jurisdiction is largely based on English Law. The Seychelles is an established and reputable international financial services centre, offering international businesses and investors a range of sophisticated products that meet the increasingly demanding criteria of flexibility, adaptability and security.
The regulatory environment of the Seychelles has been carefully developed through a partnership between the public and private sectors. This has allowed the island to find the right balance between the international requirements of global best practices, and the needs of international businesses and investors. The regulatory body for international financial services in Seychelles is the Financial Services Authority (FSA).
The history of the financial services sector in Seychelles is a tale of rapid growth and real resilience. Enhanced by a robust regulatory and compliance framework, the island’s wide-reaching domain includes banking, insurance, company registration, trust, foundations, investment funds and securities. Its status as a leading provider of sophisticated international financial services is well justified; this array of financial services is supported by excellent infrastructures, including secure telecommunication infrastructure, and a robust legal and fiscal environment, of political and economic stability. Additionally, the Seychelles enjoys one of the highest standards of living in Africa and, with its ideal climate and quality of life, has drawn and developed a pool of highly talented professionals to deliver expert services to international clients.
Seychelles, like many other well-regulated and respected international financial centres, has long been a jurisdiction of tranquillity and of careful and constructive development. With the adaptation of a territorial taxation system, all companies (including International Business Companies (IBCs) and Companies (Special Licences)), are exempt from any Seychelles’ tax or duty on income or profits, if they do not derive assessable income (i.e. Seychelles- sourced income) in Seychelles.
Among the first legislations enacted in 1994 to introduce the international financial services sector to the Seychelles, were the International Business Company (IBC) Act and the International Trusts Act. The enhanced versatility of the Seychelles’ IBC makes them ideal for any business, from personal services companies, to collective investment schemes, operating either locally or internationally. The Seychelles also operates one of the fastest IBC Registrar in the world, with same day incorporation.
The Seychelles’ trust is provided for by the International Trusts Act, 1994. A trust is created when the owner of assets (the settlor) transfers ownership of those assets to a ‘trustee’ to hold and administer under the terms of a trust deed, for the benefit of one or more beneficiaries, or for charitable or other purposes. As the assets of a trust are not the property of the settlor, trusts are useful vehicles for wealth management purposes, including for holding and protecting family wealth and for ‘outside estate’ succession planning. A Seychelles trust is required to have a Seychelles-resident trustee, licensed by the FSA. A Seychelles trust and its trustee are not liable to tax in Seychelles in respect of the foreign income or profits of the trust.
The growing reputation of Seychelles on the international scene has led to demand for the jurisdiction to develop a greater range of products. This has resulted in the development of new interests.
Companies (Special Licences) (commonly referred to as CSLs) were introduced in 2003 and are permitted to engage in a range of activities, including international holdings, intellectual property licensing, various services, and any other activities approved by the FSA.
Seychelles foundations are provided by the Foundations Act, 2009. Analogous to trusts, the wealth protection and succession planning benefits of a foundation stem from the divestment of ownership of assets, by the founder. When a founder donates assets to the foundation, those assets cease to belong to him or her and the foundation itself becomes the sole legal and beneficial owner of its assets. Unlike a trust (which may only hold property through a trustee), a foundation is a separate legal entity, capable of holding property in its own right. Like a trust, a foundation has beneficiaries, though they have no ownership interest in foundation assets unless a distribution is made to them. A foundation’s council is responsible for carrying out the foundation’s objects and for the management and distribution of its assets. A Seychelles foundation must have a minimum of one councillor, who may be an individual or company. Similar to a trust, a foundation may also appoint a protector. It is not obligatory to appoint a councilor resident in the Seychelles, and the names of councillors, beneficiaries and protectors are not required to be filed with the FSA and are not publicly accessible. A Seychelles foundation is not liable to Seychelles tax in respect of its foreign income or profits. The Foundation Act provides for a two-year claim limitation period, protecting foundation assets from claims by creditors of the founder and excluding the possibility of foreign forced-heirship laws.
The Seychelles Limited Partnership (LP) allows two or more legal persons to form an LP, but the partnership must consist of one or more general partners and one or more limited partners. At least one general partner must be a Seychelles IBC or a CSL. A body corporate may be a general or limited partner and a general partner may hold an interest as a limited partner.
Collective Investment Schemes in the Seychelles are licensed and supervised under the Mutual Fund and Hedge Fund Act, 2008. Seychelles allows for companies, including IBCs, unit trusts and partnerships, to be licensed as private, professional or public funds, giving fund managers a long list of potential fund vehicles. These companies 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 FSA that they are in good legal standing and that hold a valid licence from one of the recognised jurisdictions. An Exempt Foreign Fund must be already licensed in a recognised jurisdiction, administered by a Seychelles licensed fund administrator, and either listed on a stock exchange, or have a minimum investment of USD 100,000.
A Protected Cell Company (PCC) is a Seychelles company that can create one or more cells with segregated assets and liabilities. Each cell, however, does not constitute a separate legal entity. A PCC needs only one set of directors, one company secretary and a registered office. It can be incorporated from the onset as a PCC or converted from an existing company. Creditors to a particular cell only have recourse to the assets of that specific cell and the non-cellular assets of the PCC. PCCs can be incorporated under the Protected Cell Companies Act, 2003, or under the IBC Act, 2016.
The Insurance Act, 2008 modernises the regulatory framework of the Seychelles insurance industry, allowing for greater flexibility within the sector. Provisions are made for the regulation of a wide variety of products, including captive insurance, reinsurance, and short-term and long-term insurance.
The regulatory framework for securities trading within the Seychelles is provided by the Securities Legislation. The legislation safeguards investor confidence by licensing and regulating all components of the market, from the securities exchange, to securities dealers, to investment advisors, enforcing internationally accepted guidelines throughout the industry. Persons holding a licence under the Securities Act, 2007 can benefit from business tax at a rate of 1.5 per cent on their business worldwide taxable income, if the minimum substance requirements are met.
Committed to Compliance
The Seychelles Anti-Money Laundering Act, 1996 and the jurisdiction’s creation of the Financial Intelligence Unit, are good examples of the foresight shown in the country’s financial legislation. Needless to say, the growth of Seychelles’ international financial services sector has been taking place in the shadow of a growing interest in the wealth management industry by various international agencies, such as the OECD and the FATF. On 24 January 2019, the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) recognised that Seychelles meets the requirements of Action 5 of the BEPS standard, following the assessment of eight preferential tax regimes. Seychelles, recognising the inevitability that greater international activities would bring greater international responsibility, has been innovative in developing workable and acceptable policies to uphold its adherence to international norms and best practices.
To support international obligations and gain greater credibility, the Seychelles has committed itself to compliance with several other international organisations; namely, the International Organisation of Securities Commission (IOSCO), Committee of Insurance, Securities, and Non-Banking Authorities (CISNA), Financial Action Task Force (FATF), European Union (EU), and the International Association of Insurance Supervisors (IAIS).
A Jurisdiction for the Future
But what of the future in Seychelles? New legislation aims to develop more value-added products and innovate its existing financial products portfolio. Currently, the Fintech Sandbox Regulation, 2018 is undergoing final consideration. This new vehicle will encourage the delivery of new technological-based, non-bank financial services; specifically investing services and cryptocurrency.
Considering the past and the current position of the Seychelles, the unrelenting ambition of the Seychelles government and the island’s industry practitioners, to expand its current horizons and activities, is perhaps unsurprising. However, in expressing the commercial and financial attributes of the Seychelles, the beauty of the country should not be overlooked, nor the welcome granted to international investors by the multi-cultural and multi-lingual population. The Seychelles is confident that its future expansion will continue to combine enterprise and prudence, and that the jurisdiction will continue to be internationally recognised as a stellar financial services jurisdiction.
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.