The International Business Companies Act 2016 was amended by the International Business Companies (Amendment) Act 2018 with effective date 1st of January 2019 (hereinafter referred to as the “Amendments”).
Summary of Amendments:
1. Continuation of no public access to IBC Registers of Directors filed with the Registrar.
a. The penalties for breach of the obligation to file a copy Register of Directors have been reduced to US$250 (from $500) and a daily penalty of $25 (instead of $50) for each day or part thereof during which the contravention continues.
2. An IBC is deemed to be dissolved after being struck off continuously for 7 (instead of 5) years.
3. Registrar to have wider powers to restore struck off companies.
a. Extended power to the Registrar to restore a company struck off the Register except for those companies being struck off for involvement in fraud or for jeopardizing the reputation of Seychelles as a financial centre.
4. Increasing restoration order application period from 10 to 12 years.
5. IBCs become Seychelles tax resident but continue to pay no Seychelles tax on foreign sourced income.
a. The ban on IBCs carrying on business in Seychelles has been removed. An IBC is now tax resident in Seychelles and no longer tax exempt. If an IBC carries on business in Seychelles it must pay Seychelles business tax. Significantly however, if an IBC only earns foreign sourced income, it is not liable for Seychelles tax on any of its income or profits. Seychelles has a territorial tax system such that a Seychelles tax resident is liable for Seychelles tax on Seychelles sourced income but not on foreign sourced income.
b. IBCs continue to be exempt from Seychelles stamp duty on instruments relating to:
i. the formation of a company;
ii. transfers of property to or by a company;
iii. transactions in respect of the shares, debt obligations or other securities of a company;
iv. the creation, variation or discharge of a charge or other security interests over any property of a company; and
v. other transactions relating to the business or assets of a company, except that no stamp duty exemption applies to an instrument directly or indirectly relating to Seychelles immovable property.
c. The former prohibition against IBCs carrying on business in Seychelles has been removed. However, if an IBC earns assessable income (income derived from sources in Seychelles) it is legally required to:
i. notify the Registrar;
ii. submit to the Registrar an Annual Return, including annual audited financial statements;
iii. pay Seychelles tax on its assessable income.
d. The applicable Tax rate will be at:
i. 25% on the first SR1,000,000 of taxable income, and
ii. 33% on the remainder.
e. Business Tax Act 2009 (hereinafter referred to as “BTA”) has recently been amended by the Business Tax (Amendment) Act 2018. The following provisions of the BTA as amended by the BTA Amendment Act 2018 can be noted:
i. assessable income” only includes income derived from sources in Seychelles;
ii. “non-taxable business income” means income not sourced in Seychelles and not included in the assessable income of a business;
iii. An amount derived by a resident person (including an IBC) in carrying on business is derived from sources in Seychelles if derived from activities conducted, goods situated or rights used in Seychelles, regardless of the residence of the parties participating in the transactions and regardless of the place where the agreements are executed;
iv. The remittance of an amount to a person outside Seychelles, out of non-taxable business income is not subject to Seychelles tax; and
v. Whereas section 8(1) of the BTA provides for business tax (withholding tax) on certain payments by a resident person (including dividends, interest and royalties) to non-resident persons, section 8(4) of the BTA provides that subsection (1) shall not apply if dividends, interest, royalties or other payments are made by a resident person from income that is not sourced in Seychelles.
f. While an IBC may carry on business in Seychelles and earn Seychelles-sourced income, an IBC continues to be prohibited from:
i. carrying on banking business in or outside Seychelles;
ii. carrying on insurance business in Seychelles or, unless it is licensed or otherwise legally able to do so under the laws of the country in which it carries on such business, outside Seychelles;
iii. carrying on business providing international corporate services, international trustee services or foundation services as defined in the International Corporate Service Providers Act 2003 except:
- to the extent permitted under the International Corporate Service Providers Act 2003; and
- in the case of carrying on such business outside Seychelles, if the company is licensed or otherwise legally able to do so under the laws of each country outside Seychelles in which it carries on such business;
iv. carrying on securities business in Seychelles or, unless it is licensed or otherwise legally able to do so under the laws of the country in which it carries on such business, outside Seychelles;
v. carrying on business as a mutual fund unless it is licensed or otherwise legally able to do so under the Mutual Fund and Hedge Fund Act 2008 or under the laws of a recognized jurisdiction as defined in the Mutual Fund and Hedge Fund Act 2008; or
vi. carrying on gambling business, including interactive gambling business, in or outside Seychelles unless it is licensed or otherwise legally able to do so under the laws of the country in which it carries on such business.
6. Keeping of Accounting Records By IBCs
The Registrar of IBSs has announced that it would be commencing a testing program, which relates to keeping of accounting information as part of its mandate to ensure that such records are accessible by competent Authorities upon request in compliance with the IBC Act 2016.
This update is not exhaustive, is intended as a general summary.