Why use Seychelles?
Contents
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Where is Seychelles?
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Tax system in Seychelles
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Why use Seychelles as an offshore jurisdiction?
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Offshore in Seychelles
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Seychelles International Business Company and its possible
uses
+4Hrs GMT
South of
Equator
Population
80,000
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Special License Company and its possible uses
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Other offshore products and their uses
Abacus Seychelles
Where is Seychelles?
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Independent nation comprising of a
group of islands situated in the Indian
Ocean
Democratically elected Government
Strategically located 7 degrees south
of equator
Modern reliable infrastructure
Currency: Seychelles Rupee
English, Creole and French are official
languages
Gujarati widely spoken
Situated at GMT +4 hours; i.e. one
and half hours behind India
Population of 80,000
Large Indian presence in
telecommunication, construction,
tourism, health and retail sector
Bharti and Tata Groups have
presence
Double tax treaty with India being
negotiated
+4Hrs GMT
South of
Equator
Population
80,000
Abacus Seychelles
Tax system in Seychelles
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Source based – Only income earned from doing business in Seychelles
is subject to tax (one exception to the source based rule – the Special
License Company)
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Only one head of income subject to tax - business tax
+4Hrs GMT
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No taxation of salaries, house properties, capital gains or income from
other sources
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No transfer pricing regulations
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Tax rate for domestic companies upto 40 per cent
Abacus Seychelles
Why use an offshore jurisdiction like Seychelles?
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Reasons for going offshore and utilising offshore companies for tax
planning include:
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Ease of setting up companies and doing business
Residence of intangible and intellectual property
Free remittance of profits and capital
Access to tax treaties
Security of property rights
Low transaction costs for example zero capital / stamp duty on share
transfers
Banking privacy
South of
Enhanced privacy
Equator
Customs and duty exemptions
Fewer restrictions
Sanctity of contracts
Population
80,000
Foreign investments inducements
Higher yields and returns
Bank facilities
Abacus Seychelles
Offshore in Seychelles
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Offshore legislation introduced in 1994
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Initial offshore legislation provided for International Business
Companies (IBC) or non resident Seychelles company
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Success of the IBC lead to development of more value added areas
of offshore business
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Since 2003, Seychelles started a rapid expansion of its treaty
network
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Use of domestic companies called Special License companies to
avail of treaty network
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No sanctions imposed against it by OECD
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Other products include
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Free trade zones
Trusts
Limited liability partnerships
Abacus Seychelles
IBC
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Unique type of company which can undertake any activity outside the
Seychelles except for banking, insurance, mutual funds and trusts
Minimum of one shareholder and director
Zero tax liability in Seychelles
Can be incorporated within 24 hours
Competitive license fee fixed for life
No requirement to disclose shareholder
No requirement to file annual returns with the Registrar
No filing requirements
Minimum paid up share capital USD 1
All civil proceedings heard by Judge in Chambers
Change of domicile can be effected easily
Confidentiality is guaranteed
Is considered as a non resident company and cannot avail treaty
benefits
Abacus Seychelles
IBC incorporation till December 2005
25000
Actual
Cummulative
20000
15000
10000
5000
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Abacus Seychelles
Possible uses of an IBC…
Offshore recruitment agency and outsourcing
Domestic recruitment
agency in India
Supplies
manpower to
offshore recruitment agency
Seychelles IBC –
Offshore
recruitment agency
Manpower
Manpower recruited by offshore agency
Supplying manpower under contract
Customer overseas
Abacus Seychelles
…Possible uses of an IBC…
Advantages of this structure
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Ability of the offshore recruitment agency to assume responsibility for non-wage
obligations:
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Employee’s retirement and savings plans
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Superannuation liabilities
No fringe benefit tax, perquisite taxation, etc
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No withholding taxes on salary paid to employee
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As a result employees take home pay higher
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No service tax / VAT or GST or other domestic taxes payable on fees received by
offshore recruitment agency from customer
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Zero tax in Seychelles on fees received from customer
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Zero tax liability for employee in Seychelles on salary received
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Could simplify employees tax liability – ie avoid being taxed both in the country of receipt
of salary and in the country to which deputed too under the contract but this would need
to be examined on a case to case basis as is dependent on the residential status of
each employee
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Structure could also be used by large companies who regularly depute
individuals to overseas branches / group concerns
Issues
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Ensuring an arms length price between the domestic recruitment agency in India and
the Seychelles IBC
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Abacus Seychelles
…Possible uses of an IBC…
Royalty / Intellectual property (IP) company
Company X
Company Y
Company Z
Pays royalty/ income
for use of IP to IBC
Transfer IP / royalty
to a Seychelles IBC
Seychelles IBC
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Royalty / IP income exempt from tax in Seychelles
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IP protected from competitors – no publicly available information about the Company
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However, the ability to transfer an IP to an offshore jurisdiction depends on domestic laws
…Possible uses of an IBC…
International trading company
Case study
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Mr X an Indian businessman, resident in India buys from Bangladesh, processes it in
Pakistan and sells it in Japan
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Mr X wonders if he can structure the business in a tax effective manner using offshore
Possible Offshore solution (Indian tax implications to be examined by Indian tax advisors)
Mr X
Seychelles IBC –
Zero tax liability in
Seychelles on
profits accruing
Bangladesh –
Purchases
raw material
Pakistan –
processes
leather
Sold in Japan
…Possible uses of an IBC
International e-training
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Mr Y, a leading international tax expert based in India wishes to offer international tax training
courses over the internet
The participants will be from countries all over the world who will pay via the internet; lecturers
will also be from all over the world
He structures the business in a tax effective manner using offshore
Lecture A –
Europe
Mr Y
Lecturer B –
US
Paid directly by IBC
Offshore bank
Seychelles IBC –
Zero tax liability in
Seychelles
Student A
Hosts training website
Student B
Pay directly
into the offshore bank
Abacus Seychelles
…Possible uses of an IBC
Advantages of structure
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Profits from the e-training course are exempt from tax in Seychelles
Easier to pay lecturers – no exchange controls
Lecturers not liable to pay tax on money received by them from the IBC
in Seychelles – no withholding taxes, etc
Mr Y is liable to pay tax in India on only income received by him from
the IBC – ie salary or dividends distributed to him
Abacus Seychelles
…Possible uses of IBC
Other possible uses
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Service based activities like marketing, sales and distribution,
agency agreements
Financial and consultancy services
Combined with larger structures to make them more tax efficient
Invoicing and reinvoicing
Few of the large companies undertaking activities from
Seychelles – Heinz, Lehman brothers, Chelle Medicals (listed
on the Singapore Stock market)
Regional headquarters (eg for Asia Pacific or EMEA) - No PE
risk or risk of attribution of regional profits
Abacus Seychelles
Special license companies (CSL)…
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Seychelles domestic company
Used to avail treaty benefits
Taxation
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Liable to Seychelles business tax at the rate of 1.5% on its world-wide taxable income
(exception to source based rule)
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Exempt from withholding taxes on dividends, interest and royalties
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Exempt from stamp duty on property transfers, share transfers and other business
transactions
Compliance
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Minimum of 2 Directors – preferably Seychelles resident to prove management and
control in the Seychelles
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Seychelles resident Company Secretary required
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Annual company return, tax returns and audited accounts to be filed
Abacus Seychelles
…Comparison of tax rates among different
Seychelles entities
Tax regime
Tax rate
WHT / cap gains
Tax treaties
Territorial
40%
Div.: 15%
Int.: 10/40%
Roy.: 0/15%
Yes
IBC
N.A.
0%
0%
No
CSL
World-wide
1.5%
0%
Yes
Normal
companies
Abacus Seychelles
Treaty network…
Ratified/In
Force
China
Indonesia
Oman
South
Africa
Botswana
Mauritius
Malaysia
Thailand
Vietnam
Signed
Zimbabwe
Vietnam
Belgium
Cyprus
Qatar
Negotiations
Concluded
Egypt
UAE
Bahrain
Russia
Czech
Republic
Tunisia
Namibia
Kuwait
Negotiations
in
Progress
Agreement to
Negotiate
Lesotho
Cuba
Bahrain
Ivory Coast
Burundi
Malta
Morocco
Philippines
Uganda
Israel
Portugal
Turkey
Tanzania
Zambia
Sweden
Kenya
India
Abacus Seychelles
…Treaty network
Country
Project duration for
permanent establishment
purposes
Maximum Tax Rates applicable in the country of source
Dividends
Botswana
>183 days
China
Interest
Royalties
5% & 10%(b)
7.50%
10%
>12 months
5%
10%
10%
Indonesia
> 6 months
10%
10%
10%
Malaysia
>6 months
10%
10%
10%
Mauritius
>12 months
0%
0%
0%
Oman
>6 months
5%
5%
10%
South Africa
>6 months
0%
0%
0%
Thailand
>6 months
10%
10% or 15% (e)
15%
Vietnam
>6 months
10%
10%
10%
(a) Lower rates applies to companies holding at least 10% capital.
(b) Lower rates applies to companies holding at least 25% capital.
(c) Lower rates applies to companies holding at least 20% capital.
(d) Lower rates applies to companies holding at least 15% capital.
(e) Lower rates applies if paid to any Bank carrying on a bona fide banking business.
(f) Higher rates applies to companies holding investment other than portfolio investment.
Abacus Seychelles
Abacus Seychelles
International Trade Zone
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Undertaking redistribution, light assembly, manufacturing, processing
and export services from the Seychelles
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Can undertake management services from Seychelles and offer the
following benefits:
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Tax free operations of regional headquarters eg (for Asia Pacific or
EMEA) - No PE risk or risk of attribution of regional profits
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License fee fixed for life
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Residency guaranteed for owners and operators
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Benefit from trade agreements which Seychelles has signed
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Preferential access to EU and US markets using the Lorne
convention and African Growth Opportunities in America
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Member of the Common Market for Eastern and Southern Africa
Abacus Seychelles
Offshore Trusts
What assets can be held by an offshore trust?
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Shares and stocks in both quoted and unquoted companies.
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Investment portfolios.
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Real and intellectual property
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Bank deposits.
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Life assurance policies issued on the life of the Settlor
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Most other types of asset
Advantages of Offshore Trusts
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Confidentiality
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Wealth protection
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Tailored to specific family requirements
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Recognized in all common law jurisdictions
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Increasing recognition in important civil law jurisdictions
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An important tool in international income, capital gains and estate tax planning
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Used by corporations for employee benefit plans, retirement and stock option
schemes, insurance plans and special financing arrangements
Abacus Seychelles
Seychelles Trusts
Key features
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Seychelles trust legislation is modern, comprehensive and provides for the
formation of versatile offshore trusts
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Simple process facilitated through a Seychelles licensed trustee
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A copy of trust deed not required to be filed
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One off registration fee of USD 115 payable to Registrar
Advantages
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Zero tax on income
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An international trust can hold property worldwide (except for land in Seychelles)
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Transfer or disposition be a person creating an international trust cannot be
invalidated by any foreign rule of forced heirship
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No restrictions on the accumulation of income
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Settlors or trustees can themselves be beneficiaries
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Law governing an international trust is the law chosen by the settlor to be the
proper law
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No requirement to mention the name of the settlors or the beneficiaries (except for
beneficiaries who are Seychellois nationals)
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Provision for discretionary trusts, purpose trusts, charitable trusts, etc
Abacus Seychelles
Seychelles trusts.. Possible solution?
Pre – migration tax planning – RETURNING NRIs
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DR C, a prominent Indian Doctor who worked in UK for 25 years wishes to retire
and return to India
DR C wonders if he can mitigate his tax liabilities through pre migration tax
planning
Possible solution 1
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Dr C transfers all his foreign assets to a trust established by him prior to moving to
India
Trust administers the assets for the beneficiaries as determined by Dr C
Issues
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If the beneficiaries are Indian tax residents, would they be subject to tax on
income accumulated in the trust but not distributed by the offshore trust?
Abacus Seychelles
Re visit

Where is Seychelles?

Tax system in Seychelles

Why use Seychelles as an offshore jurisdiction?

Offshore in Seychelles

Seychelles International Business Company and its possible
uses
+4Hrs GMT
South of
Equator
Population
80,000

Special License Company and its possible uses

Other offshore products and their uses
Abacus Seychelles
THANK YOU FOR YOUR INTEREST IN
SEYCHELLES
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Let’s keep the dialogue on Seychelles going
Write to us at:
[email protected]
[email protected]
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Abacus Seychelles Ltd
Mont Fleuri
Mahe, Seychelles
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www.abacus-offshore.com
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+248 610 780
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Abacus Seychelles
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Companies (Special Licenses) Act, 2002 - IFA)