In August 2021, Seychelles amended the corporate legislation, including the laws on international business companies and foundations. Here we will focus primarily on the amendments to the International Business Companies Act 2016 (IBC Act 2016). However, most of them are also relevant to other types of companies and non-corporate structures.

The corporate tax regime has also been modified. Some companies now have to comply with specific conditions that directly affect the taxation of their foreign income (including passive income). This became a statutory innovation considering that only the income received from sources in Seychelles has been subject to tax up to now.

These legislative changes caused the exclusion of Seychelles from the European Union’s “blacklist” in October 2021.

Company name

The previous version of the IBC Act 2016 prescribed that a company name must include the endings “Limited” (“Ltd”), “Corporation” (“Corp”) or “Incorporated” (“Inc”). Now the list of the endings which indicate the company’s legal form is extended. Besides the abovementioned, a company now may choose to use in its name also the words Limited Liability Company (“LLC”) or Company (“Co”).

Directors

The broad concept of de facto directors has been replaced with the more precise concept of deemed directors. If at any time a company does not have a director, any person who manages or who directs or supervises the management of the business and affairs of the company is deemed to be a director of the company.

Currently, the register of directors of IBCs must contain only the director’s name, the address, the date of appointment and the date of termination of appointment. In addition, the latest amendments require the following details to be specified in the register of directors:

  • date of birth and nationality (for individuals);
  • date of incorporation and registered office address (for legal entities).

Disclosure of beneficial owners

To comply with the OECD and FATF anti-money laundering requirements, the Beneficial Ownership Act 2020 established the requirement for IBCs to submit their beneficial ownership information to their registered agents.

The beneficial owner in relation to a legal person is one or more natural persons who ultimately have a controlling ownership interest in a legal person (10 per cent or more) or who exercises control over the legal person through other means. If no such person exists, the beneficial owner is a natural person or persons who hold the position of a senior managing official of the legal person (regulation 3(1) of Beneficial Ownership Regulations, 2020).

Every company must keep the register of its beneficial owners. It contains the beneficial owner’s full name, date of birth, nationality, address, and the information on nominee shareholders.

A beneficial owner must submit their registrable particulars to the company within 14 days from the date of becoming the beneficial owner.

The register of beneficial owners is not available to the general public. The information contained in the register is confidential. There is an exhaustive list of cases where the company must disclose beneficial ownership information (for example, the information can be requested to prevent, detect or investigate financial crimes).

According to sections 5(6) and 13 of the Beneficial Ownership Act 2020, the registerable particulars of the register of beneficial owners are submitted through the registered agent to the Financial Intelligence Unit (FIU), which maintains the respective database. The FIU officers can use the database for lawful purposes only. The database of beneficiaries is still not in the public domain.

Keeping corporate documents and accounting records

Both a Seychelles company (its director) and a registered agent are responsible for keeping the company’s documents.

A registered agent now must keep in respect of each company:

  • Register of members;
  • Register of directors;
  • Accounting records (received from the company);
  • Financialsummary.

“Accounting records” are defined as the documents related to the company’s assets and liabilities, receipts and expenditures and the sales, purchases and other transactions to which the company is a party. Accounting records include any documents underpinning a transaction (bank statements, receipts, invoices, contracts etc.).

A company must keep its accounting records for at least 7 years from the date of completion of the transactions to which they each relate. In case if a company has been struck off the Register, including through its liquidation or re-domiciliation to other jurisdiction (further – struck off), the registered agent must keep the company’s documentation for 7 years from the date of strike off in Seychelles.

The documents must be kept by the registered agent in Seychelles or, in case of a trust, in the principal place of business of a trustee in Seychelles. The accounting records may be kept either in paper or electronic form. If the original documents are kept outside Seychelles, the company must inform its registered agent of the address of that place in writing. The Seychelles authorities may at any time request the original documents to be provided.

According to the new requirements:

  1. Accounting records relating to transactions or operations in the first half (January to June) of a calendar year must be kept in Seychelles by July of that year;
  2. Accounting records relating to transactions or operations in the second half (July to December) of a calendar year must be kept in Seychelles by January of the following year.

This means that:

  • Accounting records relating to transactions or operations in the past 7 years to 31 December 2021 must be kept in Seychelles by 6 February 2022;
  • Accounting records relating to transactions or operations in the first half (January to June) of 2022 must be kept in Seychelles by July 2022;
  • Accounting records relating to transactions or operations in the second half (July to December) of 2022 must be kept in Seychelles by January 2023.

A company that has been struck off the Register must ensure the availability of its accounting records at its registered office in Seychelles by January or July of the relevant period depending on the date of strike off, or within 3 months from the date of strike-off (whichever comes first).

For example, if a company was dissolved in May, it must make its accounting records available by July. If a company was dissolved in February, the deadline to ensure the availability of its accounting records is May.

For companies, which have been redomiciled to Seychelles, the 7-year term starts from the day of redomiciliation as if the company was first time established in Seychelles. Such companies, however, must comply with record-keeping requirements of the country of initial incorporation of the company.

Besides keeping records, Seychelles companies from now on must keep their financial summary. The financial summary is not equivalent to financial statements. As before, there is no requirement for IBCs to file financial statements in Seychelles. At the same time, section 174 of the IBC Act 2016 provides that the accounting records kept by the company must allow for the financial statements of the company to be prepared.

International Business Companies must prepare their financial summary within 6 months from the end of their financial year and keep it in Seychelles (together with the accounting records and underlying documentation). The financial year is a calendar year unless it is changed by a resolution of directors. A company must notify its registered agent of the change of the company’s financial year within 14 days.

“Holding companies” that are not “large” companies are exempt from the preparation of financial summary provided that the following two conditions are met (section 175 of IBC Act 2016):

  • the company has no trade or business operations of its own but holds interests in other companies or assets;
  • the annual turnover of the company is SCR 50 million (around USD 3.5 million).

Economic substance and tax consequences for companies of certain categories

The existing territorial tax system provides that Seychelles companies (including IBCs) must pay tax in Seychelles on their income received from sources in Seychelles (if any). The new taxation rules for IBCs have been enacted to comply with the OECD requirements.

Section 5 of the Business Tax Act 2009 (as amended by Business Tax (Amendment) Act 2020 of 28 December 2020) differentiates between tax regimes for newly defined “covered companies” and the companies that do not fall under this category. Taxation of the covered companies will depend on whether they have “adequate economic substance” in Seychelles or not.

It is worth reminding that “economic substance” as a legal requirement for companies has already been introduced in many offshore jurisdictions (but not in Seychelles). The economic substance requirement is implemented properly where a company is managed from the country of its incorporation, has local staff and assets and incurs expenses adequate to the nature and size of the business.

The original version (see update below) of the new rules provided that a covered company must have “adequate economic substance” in Seychelles (as a condition to preserve the current territorial tax regime in respect of its foreign passive income) if it satisfies at least two of the following criteria:

  • a balance sheet total in excess of the equivalent, in Seychelles Rupees or other currency, of 20,000,000 euros;
  • net turnover in excess of the equivalent, in Seychelles Rupees or other currency, of 40,000,000 euros;
  • an average number of employees in excess of 250 during the financial year.

A company is regarded as having adequate economic substance if —

  • it has complied with filing requirements under the Companies Act, 1972 or the International Business Companies Act, 2016;
  • it has adequate human resources and premises in Seychelles for holding and managing the investment assets; and
  • (This condition applies only for a company other than a pure equity holding company or a real estate holding company) in respect of any assets the company acquires, holds, or disposes of
    1. it takes necessary strategic decisions; and
    2. it manages and bears principal risks in Seychelles; and
    3. it incurs adequate expenditure relating to the acquisition, holding or disposal, as the case may be.

A “pure equity holding company” means a company that, as its primary function, acquires and holds shares or equitable interests in companies and performs no substantial commercial or investment activity.

A “real estate holding company” means a company that, as its primary function, acquires and holds interests in immovable property.

The fulfilment of these conditions directly affects the taxation of a company. Generally, International Business Companies do not pay tax in Seychelles on their income received from sources outside Seychelles.

In contrast, covered companies that do not have adequate economic substance in Seychelles will be taxed differently. Such companies will pay tax on:

  • income from activities conducted in Seychelles;
  • income from activities conducted outside Seychelles in the absence of a permanent establishment outside Seychelles;
  • all passive income.

The business tax rate on these types of income is:

  • for the first SCR 1 000 000 (USD 73 000) – 25%;
  • for amounts exceeding SRC 1 000 000 – 33%.

If a company has adequate economic substance in Seychelles, it will pay tax on:

  • income from activities conducted in Seychelles;
  • income from activities conducted outside Seychelles in the absence of a permanent establishment outside Seychelles;
  • income from intellectual property rights except for the income from research and development activities in Seychelles.

Such companies will be exempt from tax on:

  • income received from sources outside Seychelles (if there is a permanent establishment of the company outside Seychelles);
  • passive income;
  • income from research and development activities in Seychelles.

IMPORTANT: Business Tax (Amendment of Eleventh Schedule) Regulations, 2021 of 14 September 2021 substantially changed the definition of “covered companies” and thereby the scope of economic substance requirements as a condition for exemption from taxation of foreign passive income.

A company may need to have adequate economic substance (as a condition to preserve the territorial tax regime in respect of its foreign passive income) if it is a member of a multinational group.

A “multinational group” means any group that:

  • includes two or more enterprises, the tax residence of such enterprise or enterprises are in different jurisdictions, or
  • includes an enterprise resident for tax purposes in one jurisdiction and is subject to tax with respect to the business carried out through a permanent establishment in another jurisdiction.

The Government has opted out of using thresholds of balance, turnover and number of employees. Being a part of a multinational group is now a sufficient condition for a company to be recognized as a “covered company”. Therefore, section 5(1A), including its subparagraph on passive income generated outside Seychelles, will apply to any Seychelles company connected with companies in other jurisdictions regardless of its revenue, the value of assets and other figures.

Penalties under the new legislation

Failure to comply with the requirements under the amended legislation may result in penalties accrued for each day of delay.

The penalty for each violation may amount up to USD 5000 and applies in case of failure to perform the duties to:

  • keep the register of members of the company in Seychelles;
  • keep minutes of all meetings of members and copies of all resolutions consented by members in writing for at least 7 years;
  • keep minutes and resolutions of directors in the relevant place;
  • submit the annual return signed on behalf of the company to the company’s registered agent in Seychelles;
  • provide all or part of the company’s records (copies), including in case of request of the authorities;
  • keep in the company’s registered office the reliable accounting records which (a) are sufficient to show and explain the company’s transactions; (b) allow at any time to determine the financial position of the company with reasonable accuracy; (c) allow to prepare the company’s financial statements.

Summary

  1. Information on company beneficial owners remains unavailable to the general public. It is kept only by a registered agent and the Seychelles Financial Intelligence, which is authorised to maintain the beneficial ownership database.
  2. Under the new rules, the accounting records and other company documents must be kept by a registered agent for at least 7 years from the date of completion of the transactions or operations to which they each relate (section 169A of IBC Act 2016). If a company was dissolved or its name was struck off the Register, or the company was redomiciled outside Seychelles, the registered agent continues to keep the company’s records for 7 years from the date of striking off or dissolution.
  3. Companies that are members of a multinational group and do not maintain the adequate economic substance in Seychelles will have to pay tax on their passive income generated outside Seychelles.
  4. Failure to perform the duties prescribed by the IBC Act may entail penalties up to USD 5000 for each violation.
Click to rate this page!
[Total: 0 Average: 0]

Share this

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on vk
VK
Share on skype
Skype
Share on whatsapp
WhatsApp
Share on telegram
Telegram
Share on email
Email
Share on print
Print

Subscribe

Related posts

Leave a Comment

Your email address will not be published. Required fields are marked *

Still have questions? Contact us today

Scroll to Top
We use cookies in order to give you the best possible experience on our website. By continuing to use this site, you agree to our use of cookies.
Accept
Privacy Policy