Company Formation Seychellen

Company Formation Seychellen  (Offshore IBC)

• Tax planning via a network of international tax advisers and attorneys
• Why form a company in a foreign country with a tax accountant specialized in international tax law?
• Basic Considerations regarding the Formation of Companies in „Zero-Tax Havens“ i.e. in countries that have not entered into Double Taxation Agreements with other countries
• Offshore Company Formation: Tax haven rankings
• Examples for the legal reduction of corporate taxes
• DTA permanent establishment concept – Our services and fees
• Parent companies and their subsidiaries in the European Union
• Beware of cheap founders!

The Republic of the Seychelles is an archipelago of 115 tropical islands located in the Indian Ocean about 1,600 kilometres (1,000 miles) east of Kenya, northeast of Madagascar. Until the 17th century the islands were uninhabited, the territory then became the subject of a struggle between the French and the British which culminated in the Islands being officially ceded to Britain in 1814 and taking the status of a British Colony in 1903. The Seychelles gained its full independence in 1976 and is a member of the Commonwealth.

The legal system in the Seychelles is based on English Common law, French civil law and customary law. The Companies Law 1972, which emulates English law, governs the formation of domestic company types such as the Public company, private company limited by shares or guarantee.

Offshore entities can take several forms i.e. the Limited Life Company, Limited Partnerships or Special Licence Company. Most offshore businesses are International Business Companies (IBC) incorporated under the International Business Companies Act 1994.

Services provided by our Law Firm – or our Partner Network:

• Formation of the company, Apostille, upon request certified translation of the formation documents
• Certificate of Incorporation: The certificate of incorporation is an official document that confirms the name of a registered company, as well as the registration number.
• Certificate of Good Standing
• Ranging from Registered Office to maintaining a business office
• Upon request: Nominee Director (attorney acts as a trustee and acts as the Director of the company during the formation phase) and / or Nominee Shareholder (natural person or legal entity – Law firm acts as a trustee in the form of the shareholder of the company)
• Upon request:  Permanent Nominee Director (Attorney acts as trustee in the capacity of Director of the company during the entire term of the agreement)

Clarification:

A production site, a site for the exploitation of mineral resources or construction works whose duration is greater than 12 months always constitutes the establishment of a place of business in the country of the company’s seat (for example: Belize, BVI, Cayman Islands, Nevis etc….), independent „of the place of managerial supervision” (analogous to Article 5 OECD_Model Convention). Otherwise the taxable permanent establishment is defined via the „place of managerial supervision”.  As a rule this implies, that a person who maintains his ordinary residence in the country of the company’s seat must act as the Director of the company. Either the client or an agent relocates his ordinary residence to the country of the company’s seat and he, himself, acts as the Director of the company or our Law Firm in the country of the company’s seat provides a Nominee Director. Alternative: For example: The Danish client / founder acts as the Director of the company and establishes credibility that he is present in the country of the company’s seat within the course of carrying out the required managerial supervision. Due to the fact that as a rule tax havens (Belize, BVI Cayman Islands, Nevis etc…) do not maintain a public commercial register, the installation of a “Nominee Director in the formation phase” is possible and not necessarily a “permanently present Nominee Director”.

– Upon request: Bearer shares

– Upon request: Liechtenstein Institute as the shareholder of the company

Clarification:

The shareholder or the shareholders are the „Owner” of the company. It can be individuals or companies.  Bearer shares, nominee shareholder or for example a Liechtenstein Institute as a shareholder serve to conceal the true ownership relationships.  Which constellation is best suited, is dependent upon different prerequisites. We would welcome the opportunity to discuss this with you in a personal setting.

– Opening of an account in the name of the company, incl. Online banking and VisaCard (in the case of bearer shares the opening of an account is often only possible, if the client / founder is not present at the opening of the account)

– Upon request: Investment account in Switzerland (Minimum deposit 10,000 CHF)

– To the extent it is a requirement of domestic law: Provision of proof of the exempt status to the authorities (most tax havens differentiate between offshore and onshore companies. Onshore companies are taxed normally, offshore companies – i.e. companies which transact business outside of the country are not taxed. The Cayman Islands is the exception: Real zero-tax haven)

Offshore Company Formation Formalities

The International Business Company usually takes the form of a private company limited by shares and as with most jurisdictions the Seychelles IBC is granted subject to certain stipulations:

• The IBC must refrain from business activities with residents of the Seychelles;
• The IBC must not hold any interest in Seychelles real property but property may be leased for office use only;
• Insurance, re-insurance, Banking or Trust business is permitted only if an appropriate licence is issued;
• An IBC is strictly prohibited from undertaking the business of company management or providing registered facilities for Seychelles-incorporated companies.

There are minimal IBC company formation requirements:

• The minimum number of directors and one shareholders required are one; a director may be a natural person or a body corporate;
• There is no requirement to appoint a Company Secretary but it is the practice to do so, Shareholders, directors and officers need not be resident in the Seychelles and there is no stipulation as to their nationality;
• There is no minimum capital requirement but IBC’s are normally incorporated with an authorized share capital of US$ 5,000 of no par value which is the maximum for the minimum licence fee;
• The permitted classes of shares may be either registered or bearer, shares of no par value, redeemable shares and shares with or without voting rights and may be issued in any currency;
• A registered office address must be maintained within the Seychelles and a local resident appointed as a registered agent;
• There is no requirement to file accounts but records must be kept to reflect the financial position;
• Shareholders and directors meetings need not be held in the Seychelles and can be held by telephone;
• There is no requirement for the disclosure of beneficial ownership. The Memorandum and Articles of Association are the only documents to be held on the public record.

Trusts

There are no domestic Trusts in the Seychelles; the International Trusts Act 1994 allows for the creation of International Trusts only. Such Trusts can be created in writing, by will or by oral declaration; deemed trusts are admitted, as are those resulting from a decision of the Court. The settlor must reside outside the Seychelles for the duration of the trust; at least one trustee must reside in the jurisdiction, an IBC may be a settler. The trust property may not include any Seychelles movable or immovable property. The names of settlors and beneficiaries are confidential under the Act, unless a Court orders disclosure under the Anti-money Laundering Act. The standard perpetuity period is 100 years.

An International Trust is exempt from tax in the Seychelles and a registration fee is payable.

Taxation

In the Seychelles there is no taxation of an individual’s income, but social security contributions are payable by the employer and employee at a rate of up to 40% on income which in effect is an income tax. There are no capital gains taxes, gift, property or estate taxes. VAT was introduced in 2003.

Business tax is levied on all income received by a sole trader, partnership, Trust estate or company on profits derived or deemed to be derived from a source in the Seychelles. IBC’s are exempted from business tax, stamp duty and withholding tax but are liable for Social Security contributions of their employees salaries unless established in the International Trade Zone then the IBC receives an exemption from this tax. All IBC’s must pay an annual renewal licence fee to guarantee IBC status.

Dividends, interest and royalties, which mostly bear withholding tax if paid to non-residents.

Banking

All offshore Banks must be licenced. There are currently five licensed foreign banks in the Seychelles, and two domestic banks.

All licensed offshore (non-domestic) banks are exempted from Seychelles taxes and duties for a 20 year period from the date the licence was granted, although a non-domestic bank may elect to pay business tax in the Seychelles on its taxable income as agreed with the Commissioner of Taxes.

Employment Law

The employment market is quite closely regulated, about 88% of the adult population in the Seychelles is literate and with the increasingly sophisticated requirements of the international businesses much employment legislation is to improve the skill levels and protect the local work-force by restricting the influx of foreign workers.

Geography, People Language and Culture

The Seychelles are approximately 445 sq km (177 sq mi) the three central islands Mahe Praslin and La Digue are granite, while the outlying islands are coral atolls. The climate is tropical and subject to marine influences; there is a cooler season from late May to September and warmer from March to May.

The population is approximately 80,832 (est. July 2004). 90% of the population inhabit the principal Island of Mahe. The capital city is Victoria on the island of Mahe and is one of the smallest capital cities in the world and the only major port in the Seychelles. There is no indigenous culture in the Seychelles as such the ethnic groups are mixed; French, African, Indian, Chinese, and Arab. Seselwa- French/African Creole is the language of 94% of the people, English and French are commonly used and English is the language of government and commerce.

The predominant religion is Roman Catholicism which is practiced by 86% of the population.

The Seychelles has four marine national parks, and more than 150 species of tropical reef fish have been identified. Dolphin and porpoise are common between the islands, shark and barracuda and the Seychelles is renowned for game fishing.

Immigration and Residency

Visas are not required for visitors to Seychelles;on production of as onward ticket, booked accommodation and sufficient funds for your stay, a one month Visitor’s Permit (extendable on application) will be issued. Short-stay visas are issued freely on arrival, although evidence of financial support may be required. For longer stays, it will be necessary to demonstrate adequate financial resources, or to acquire a Gainful Occupation Permit.

Legal and Political System

In the 1960’s political parties developed in the Seychelles and Socialist rule was brought to a close with a new constitution and free elections in 1993. There are three branches of state: the Executive, headed by a President who is the chief of state and head of government and is elected by popular vote for a 5-year term; the Legislative–unicameral National Assembly with 34 seats, 25 directly elected and 9 allocated on a proportional basis. The Judicial branch includes a Court of Appeal and Supreme Court; judges for both courts are appointed by the president. The political parties in the Seychelles are the Democratic Party (DP), Seychelles National Party (SNP), and Seychelles People’s Progressive Front (SPPF).

The most recent presidential elections were held 31 August-2 September 2001. President Rene, who has served since 1977, was re-elected. Seychelles citizens can vote at the age of 17 years.

Economy

The official unit of currency is the Seychelles Rupee (SCR). The black market value of the Seychelles rupee is half the official exchange rate.
Tourism is one of the most important sectors of the economy and accounts for 73% of the GNP. Employment, foreign earnings, construction, banking, and commerce are all dominated by tourism-related industries. Industry accounts for 24% which covers fishing; processing of coconuts and vanilla, coir (coconut fiber) rope, boat building, printing, furniture; beverages and agriculture accounts for 2.4% of GNP.

Legislation relating to offshore and non-resident business

If you require more information on any particular statute please contact us.
Civil Aviation Act 1996
Companies Law 1972
Companies (Special Licence) Act, 2003
Financial Institutions Act 1984
Insurance Act 1994
Insurance (Non-Domestic Insurance Business) Regulations 1996
International Business Companies Act 1994
Interactive Gambling Act 2003
International Corporate Service Providers Act 2003
International Trade Zone Act 1995
International Trade Zone Regulations 1995
International Trusts Act 1994
Investment Promotion Act 1994
Limited Partnership Act, 2003
Merchant Shipping Act 1992
Mutual Assistance in Criminal Matters Act 1995
Mutual Funds Act 1997
Protected Cell Companies Act, 2003
Seychelles International Business Authority Act 1994
Companies (Special Licence) Act, 2003

Seychelles Tax Treatment of Offshore Operations

See Domestic Corporate Taxes for the general principles of Seychelles corporate taxation, which also apply to offshore entities except as indicated below.

Offshore Seychelles entities are subject to the following fee and tax structures:

International Business Companies pay registration fees as follows:

• $100 for a company with authorised capital up to $100,000;
• $1,000 for a company whose authorised capital is over $100,000.

The continuing annual renewal fee for IBC status is the same amount. There is a scale of fees in the International Business Companies Act covering inspection of documents in the Registry, copies of entries, increase of capital etc. etc. The fee levels are fixed for the life of an IBC, whatever subsequent changes may take place to fee levels.

IBCs are exempt from the Business Tax, from withholding taxes and from Stamp Duty; however they pay social security contributions (see Personal Taxation) on the salaries of employees unless the IBC is in the International Trade Zone or the employees are crew members of a ship in international waters.

Seychelles Scope of Business Tax

The Business Tax Act 1987 as amended governs company taxation in the Seychelles. The Act states that resident, non-resident corporate and non-corporate businesses are liable to pay business tax on their income derived from the Seychelles. A company is considered resident if it is incorporated in Seychelles. A company not incorporated in the Seychelles that conducts business there is resident if its central management is located in the Seychelles or if its voting power is controlled by shareholders who reside there.

Income is defined as all income received by a sole trader, partnership, trust estate or company, less a number of types of exempted income of which the following are some of the main headings:

• the proceeds of rental properties other than dwellings;
• profits from dealing in or selling property;
• royalties;
• fees and commissions in respect of the sale of property or the processing of money loans;
• lease premiums;
• income on which a final withholding tax has been levied (see Withholding Tax below – the 10% and 40% rates are considered to be ‘final’).

Seychelles Rates of Business Tax

Tax rates are the same for corporate and non-corporate businesses. The following rates apply:

Note that an entity with a Certificate of Approval under the Investment Promotion Act 1994 may be exempt from part or all of the Business Tax, or may have special deductions or tax credits. Companies in the International Trade Zone also have tax privileges.

Seychelles Calculation of Taxable Base

Allowable expenditure is that incurred ‘in the course of carrying on business activities’, excluding capital, private and domestic expenses. A normal range of expenses are deductible. The following list gives some of the main additional deductions that are permitted:

• Pension scheme contributions;
• Professional fees incurred in preparation of the tax return;
• Net salaries and wages, but only if social security contributions have been deducted; owners and partners are not permitted a deduction of their salaries;
• Royalties and other payments made to non-residents from which withholding tax has been deducted (see below);
• Previous years’ losses, which can be carried forward only for five years; losses cannot be carried back; capital losses are not deductible;
• Non-capital expenditure on repairs to premises, plant and machinery;
• Losses incurred in property dealing;
• Specific bad debt write-offs; provisions for this or other purposes are not deductible;
• Office buildings are depreciated at a rate of 50% for the first year and 25% for the second and third years; hotels are depreciated at a rate of 20% for the first year and 10% for the following eight years; other buildings are depreciated at a straight-line rate of 4%; other assets are depreciated at conventional straight-line rates;
• Interest on borrowings made for the purpose of producing assessable income; the rate of interest chargeable is limited by reference to Central Bank rates.

Seychelles Filing Requirements and Payment of Tax

The tax year is normally the calendar year, ending 31st December. A tax return must be submitted by March 31st following the end of the tax year, along with the signed-off accounts.

Seychelles Withholding Tax

There are the following withholding taxes in the Seychelles:

• 15% on dividends paid to non-residents (this is a final tax);
• 10% on interest paid to non-residents other than financial institutions (for whom a nil rate applies); this is a final tax;
• 40% on interest payments by a Seychelles financial institution at maturity of a bearer security issued by that institution; this is a final tax;
• 15% on royalties paid to residents;
• 15% on royalties paid to non-residents on certain types of royalty (copyrights, patent, design and trademark royalties are exempt).