Taxes and Reporting Requirements for Seychelles Companies: IBCs and Local Companies

Recently, the regulatory environment in the Seychelles has become significantly more sophisticated. As a result, when incorporating an offshore company in the Seychelles, it is now important to consider, among other things, reporting and record-keeping obligations, as well as the applicable tax rules. This article outlines the above requirements and the key compliance considerations relevant to Seychelles companies.

IBCs and Local Companies in the Seychelles

International Business Companies (IBCs) remain one of the most commonly used business structures in the Seychelles. Traditionally, Seychelles IBCs were used to conduct business activities outside the jurisdiction and, as a rule, were not intended to carry out operations within the country. For this reason, they have traditionally been used as classic Seychelles offshore companies.

As a result of the 2021 corporate and tax law reform, the legal framework regulating IBCs was substantially revised. In particular, such companies were granted the right to conduct business activities within the Seychelles and were made subject to stricter requirements as regards taxation, accounting, and record-keeping.

Although the regulatory framework for IBCs has, in certain respects, become similar to that applicable to local Seychelles companies, important distinctions between the two structures still remain.

Characteristics of Local Companies

Local companies are governed by the Companies Ordinance 1972. They are primarily intended for conducting business within the country and for carrying out licensed activities.

Local companies are subject to more stringent financial reporting requirements. In addition, foreign investors are required to obtain approval from the Seychelles Investment Board in order to incorporate a local company.

Characteristics of IBC

The incorporation and functioning of IBCs are governed by the International Business Companies Act 2016, as amended. IBCs continue to offer a more flexible corporate structure and may be incorporated by foreign investors without any additional approvals.

A detailed overview of the Seychelles offshore regime shows that this flexibility, combined with the absence of currency controls and the option to conduct business both inside and outside the country, continues to make IBCs attractive for international structuring. Moreover, these companies are subject to less stringent reporting requirements (see below for further details).

IBCs are primarily used for:

• international trade;
• investment activities; and
• asset holding.

Taxation of Seychelles Companies

The Seychelles’ tax system is based on the territorial principle, meaning that tax is generally imposed on income derived from sources within the Seychelles.

The main taxes applicable to Seychelles companies include:

• business tax (on corporate income);
• withholding tax on payments made to non-residents; and
• VAT.

Business tax

The Seychelles’ legislation provides for the application of business tax to both local companies and IBCs; however, the applicable tax treatment differs for these types of company.

Local Companies

Local companies are treated as Seychelles tax residents and are subject to business tax at the following rates:

• 15% on the first SCR 1,000,000 of taxable income;
• 25% on the amount exceeding this threshold.

Seychelles companies qualifying as small businesses (with annual turnover below SCR 1,000,000) may benefit from a special tax regime under which tax is payable at a rate of 1.5% of annual turnover.

Business tax returns must be filed with the Seychelles Revenue Commission within three months following the end of the relevant tax period.

Business tax is paid under the Pay As You Go (PAYG) system, which requires companies to make monthly provisional tax payments by the 21st day of the following month. The final tax liability is calculated after the end of the relevant tax period.

IBCs

In 2020, as part of the Seychelles tax reform, separate tax regimes were introduced for ordinary IBCs and for covered companies.

Following further amendments introduced in 2021, the classification of a company as a covered company became dependent on its participation in a multinational group of companies. In practice, this means that any Seychelles IBC forming part of a corporate ownership structure involving companies from other jurisdictions will generally qualify as a covered company.

From a tax perspective, this approach means that the passive income of covered companies is treated as if sourced in the Seychelles and is therefore subject to business tax at the standard rates applicable to local companies. However, such income may be exempt from taxation if the company is able to demonstrate sufficient economic substance in the Seychelles.

The sufficiency of economic substance is assessed based on the following criteria taken together:

Criterion	Description
Filing obligations	The company files the required information with the Registrar in accordance with the Companies Act or the legislation governing IBCs.
Availability of resources	The company has sufficient personnel and premises in the Seychelles to carry out its business activities.
Management and control	The following activities are carried out within the Seychelles: making key strategic decisions; managing principal risks; and incurring adequate expenditure in connection with the acquisition, holding, and disposal of assets. This criterion does not apply to pure equity holding companies or companies holding real estate assets.

Additional Taxes Applicable to Local Companies

Local Seychelles companies are also subject to VAT and withholding tax.

VAT

VAT be imposed at the following rates:

• 15% – the standard rate;
• 0% – applicable to certain transactions, such as the export of goods.

In addition, certain transactions may be exempt from VAT.

Companies are required to register for VAT purposes if their annual taxable turnover is equal to or exceeds SCR 2 million. Voluntary registration is also available.

VAT returns must be filed on a monthly basis within 21 days following the end of the relevant reporting month.

Withholding tax

Withholding tax is levied at source in the Seychelles and applies to certain types of payments made to non-residents, including:

• dividends;
• interest; and
• royalties.

The standard withholding tax rate applicable to these categories of income is 15%, although special rates may apply in certain cases. For example, the Seychelles has concluded approximately 30 double tax treaties, which may provide for reduced or zero withholding tax rates.

Financial Reporting Obligations and Corporate Documents of Seychelles Companies

Both local companies and IBCs are subject to the requirements relating to accounting records, as well as the maintenance and disclosure of certain corporate documentation. The main differences concern the scope of financial reporting obligations and audit requirements.

Reporting Obligations of Local Companies

Document	Description
Annual Return	Contains general information about the company, including: the company’s address; the share capital structure; information on shareholders; and details of the directors. The Annual Return must be filed with the Registrar of Companies.
Register of directors and members	The company’s registers of directors and members must be kept at the office of the registered agent and updated on a regular basis. Information contained in these registers is filed with the Registrar of Companies.
Register of beneficial owners	Local Companies are required to maintain registers of their beneficial owners. Information on beneficial ownership is submitted to the Seychelles Financial Intelligence Unit (FIU), which is responsible for maintaining a centralised database. Information on beneficial owners may be shared with certain governmental authorities, but it is not open to the general public.
Accounting records	Local companies are required to maintain accounting records and retain supporting accounting documentation.
Financial statements and audit	Local companies are required to file audited financial statements with the Registrar of Companies.

Reporting Obligations of IBCs

Document	Description
Annual Return	IBCs are not required to file annual returns provided that they do not derive income from the Seychelles territory.
Registers of directors and members	IBCs are required to maintain registers of directors and members in the same manner as local Seychelles companies. If an IBC has a nominee shareholder, the register of members must also reflect the details of the nominator, i.e. the person who appointed such nominee shareholder and/or director.
Register of beneficial owners	IBCs are required to maintain beneficial ownership registers in the same manner as local Seychelles companies and to provide the relevant information to their registered agent, who then submits it to the competent government authority.
Accounting records	IBCs are required to retain accounting records at the office of their registered agent in the Seychelles for a period of seven years. Where such records are kept elsewhere, the company must submit them to the registered agent at least once every six months.
Financial statements and audit	Where an IBC does not conduct business in the Seychelles, it is not required to prepare full financial statements or undergo an audit. However, such companies (except for holding companies with annual revenue below SCR 50,000,000) are required to provide their registered agent with a financial summary.  The financial summary consists of a balance sheet and a profit and loss statement. These documents are kept at the office of the registered agent and are not filed with any government authority.

Liability of Seychelles Companies

Amendments introduced as part of the Seychelles corporate and tax law reform, among other measures, increased the penalties applicable to IBCs for non-compliance with accounting and record-keeping obligations. Below are some of the most common violations and the relevant penalties.

Violation	Penalty
Failure to comply with the obligation to keep accounting records	up to USD 10,000 for an IBC
Failure to comply with the obligation to maintain the register of beneficial owners	up to SCR 150,000 for companies
Failure to comply with requirements relating to the maintenance of the register of members and the disclosure of information on nominators	up to USD 10,000 for an IBC
Failure to comply with the obligation to keep records at the office of the registered agent	up to USD 5,000 for an IBC

In certain cases, penalties may be imposed not only on the legal person itself, but also on its directors and registered agent.

Conclusion

The tax and reporting requirements for Seychelles companies introduced in recent years have substantially changed the traditional offshore regime previously existing in the Seychelles. As a result, Seychelles IBCs should carefully assess the nature and source of their income, as certain categories of foreign-source and passive income may become subject to taxation in the Seychelles.

In addition, even where there is no obligation to file audited financial statements, companies are still required to:

• maintain accounting records;
• keep corporate documentation;
• keep information on directors, members, and beneficial owners up to date; and
• in certain cases, submit financial summary.

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