The Republic of Seychelles is an archipelago in the Indian Ocean made up of 115 islands. With its main industries resting on the tourism and fishing, Seychelles' offshore services sector is slowly but surely emerging as the strongest pillar of its economy and the Government of Seychelles has recently introduced a number of legislative and regulatory changes to support its offshore services sector.
Seychelles was rated as the second best country in information and communication technology (ICT) development in the African region as per the International Telecommunication Union's ICT Development Index, with a mobile penetration of almost 100%. Due to its relative geographical isolation, continued connectivity is a key issue and therefore, the Government of Seychelles along with private partners has started the project to bring a second fibre optic cable to Seychelles in order to strengthen its current infrastructure. As part of the efforts to develop the ICT sector, the government of Seychelles has published a National ICT Policy that seeks to promote the use of ICT in all sectors of the economy of the country. The Central Bank of Seychelles has launched its electronic fund transfer system to be in line with its objective to modernise Seychelles' payment systems.
The Government of Seychelles is also seeking to amend its anti money laundering as well the beneficial ownership laws in order to assist to promote transparency and better align the country's legal framework with international standards by introducing new measures to combat money laundering and terrorist financing. Additionally, the laws will also help address threats to the integrity of the financial system as well as reputational risks. In order to encourage innovative financial products, Seychelles has introduced the option of a regulatory sandbox which provides a regulated environment within which Seychelles-registered companies carrying out FinTech-related financial services within the securities industry can operate.
Seychelles, with its modern and competitive financial services industry, a forward thinking financial services regulator, attractive business conditions and fibre optic connectivity is an the ideal location for virtual asset companies as well as companies operating in the Fintech sector.
TECHNOLOGY AND INNOVATION
1. Are there any "sandbox" or other regulatory neutral zones?
Yes, the Financial Services Authority (Regulatory Sandbox Exemption) Regulations, 2019 ("the Regulations") were introduced in June 2019. The regulatory sandbox ("sandbox") allows companies to test innovative eligible financial services or products within a defined duration and controlled environment and under the Seychelles Financial Services Authority's supervision. It also includes adequate safeguards measures to ensure consumer protection in cases of failure and to ensure the overall safety and soundness of the financial system. The sandbox allows for testing through exemptions from licensing, disclosure and reporting requirements under the Securities Act, 2007.
2. Is there a Digital "incubator" or hub?
Apart from the above sandbox, there is no specific digital "incubator or hub.
3. Are there any barriers to entry for foreign technology companies?
There are no special limitations or barriers to entry for foreign technology companies. However, a foreign company looking to conduct business in Seychelles would be required to set up a domestic company in Seychelles. It would also be required to obtain the approval from the Seychelles Investment Board (SIB) for licensing purposes. The licence would depend on the business that the foreign company seeks to do in Seychelles. Further, it shall also require government sanction in order to rent or lease any immovable property in Seychelles for the purpose of conducting business in Seychelles. To note, the above application would not be required when applying under the sandbox regulations.
A foreign company looking to conduct business outside Seychelles has the option to incorporate an international business company and subject to a few restrictions, it would not be required to obtain licences in Seychelles.
4. Have traditional institutions embraced new technologies?
The market ecosystem is still dominated by traditional technologies in Seychelles but there is a lot of interest in the block chain technology as well as Virtual Assets among entrepreneurs.
Interestingly, MERJ Exchange, the only securities exchange in Seychelles has allowed for listing of tokenised securities and has listed its own ordinary shares in the form of a security tokens on its Main Board. The exchange seeks to build a global securities and digital asset exchange ecosystem with direct market access for global traders and market intermediaries.
5. What forms of legal entity are available for technology companies?
The main types of entities available for technology companies under the laws of Seychelles are:
- A domestic company, which is incorporated under the Companies Act 1972 (Companies Act) and is required to have a minimum of two shareholders and directors, with 100% foreign ownership allowed, subject to the government sanction where business premises in Seychelles are required by the company. A tax rate of 25% is applicable on the first SCR 1 million of profits and 33% above SCR1 million. Financial institutions are incorporated under the Companies Act and licensed by the Central Bank pursuant to the Financial Institutions Act.
- An international business company, which is incorporated under the International Business Companies Act 2016. A minimum of one shareholder and director is required. It is tax exempt in Seychelles when its business is conducted outside Seychelles. It would be required to pay tax as per the rates specified above in case it carries on business in Seychelles.
- A company with special license, which is incorporated under the Companies Act and licenced under the Companies with Special Licence Act, 2003. It is tax resident in Seychelles and has certain benefits such as exemption from stamp duty and also lets investors take advantage of the more than 35 double-taxation agreements that Seychelles has with different countries.
6. What AML requirements apply to businesses in Seychelles?
International standards of anti-money laundering and counter-terrorist financing are set by the Financial Action Task Force (FATF). The Anti Money Laundering and Countering the Financing of Terrorism Act, 2020 (AML Act) and the Anti Money Laundering Regulations would be applicable to businesses in Seychelles. These include but are limited to identification of risks, compliance with customer due diligence measures, monitoring of customer transactions and reporting of suspicious transactions to the Seychelles Financial Intelligence Unit.
7. Are electronic signatures valid?
Yes, the Electronic Transactions Act, 2001 puts electronic signatures on an equal footing with "wet ink" signatures under the laws of Seychelles.
8. How is personal data protected?
At present there is no specific legislation for protection of personal data. The Computer Misuse Act, 1998 makes it a criminal offence for any person to secure unauthorised access or make unauthorised modification to a computer or a computer programme. The Electronic Transactions Act, 2001 provides penalties for offences under the act namely the offence of tampering with a computer source document, of failing to furnish information, of acting in breach of confidentiality and privacy, and, among others, of fraudulently dealing with the digital signature certificate.
1. How are virtual assets regulated?
There is no separate legislative or regulatory frame work with respect to virtual assets in Seychelles.
The primary legislation which governs securities and investment products in Seychelles is the Securities Act, 2007 (Securities Act). The Securities Act provides for licensing and regulation of securities dealers, investment advisers and securities exchange and the responsible body for the same is the Financial Services Authority (FSA). The Securities Act specifically lists the financial products that are considered securities under the Act and does not include virtual assets/ cryptocurrencies under the list. However, whether an asset/product would be considered as a security under the Securities Act would be determined by the features of the asset.
2. Are virtual assets subject to the local AML regime?
Yes. The Anti Money Laundering and Countering the Financing of Terrorism Act, 2020 (AML Act) provides for the AML regime in Seychelles and its main principle is that reporting entities should follow and apply the provisions of the law which reflect the Financial Action Task Force's (FATF) international standards to prevent detect and combat money laundering and terrorist financing. The AML Act defines a "reporting entity" as those persons that carry out certain businesses and activities and include banks (including offshore banks), bureau de change, insurance companies, money transfer companies, securities companies, corporate service providers, etc.
As per the definition of a reporting entity under the AML Act, a Seychelles international business company carrying out the business of dealing in virtual assets would not be considered as a reporting entity. However, we recommend a cautious approach as far as anti money laundering legislation is concerned and in our view companies incorporated in Seychelles must take appropriate measures to maintain the customer identification and record-keeping procedures and follow the anti-money laundering and counterterrorist financing obligations under the AML Act.
The Anti Money Laundering and Countering the Financing of Terrorism Act, 2020 defines virtual assets as " a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes and does not include digital representation of fiat currencies, securities and other financial assets."
3. Is a physical presence required in the Seychelles to conduct a virtual asset sale?
An international business company carrying out its business outside Seychelles may conduct a virtual asset sale without a physical presence in Seychelles.
4. Are gambling platforms permitted?
Yes, online gambling platforms are permitted, and regulated under the Seychelles Gambling Act, 2014.
5. Can decentralised-finance (DeFi) products be launched from Seychelles?
Yes. Decentralised Finance refers to a technology set that aims to replicate and innovate on current financial services models/products using blockchain technology. These financial services range from virtual assets that may or may not represent assets in the real world to financial smart contracts that can replicate derivative products found in traditional finance markets.
There are no restrictions under Seychelles laws that would prevent replication of current financial services models using blockchain technology. There is no specific legal or regulatory framework for decentralised finance products in Seychelles, however such products shall be subject to the Securities Act, where applicable.
VIRTUAL ASSET SERVICE PROVIDERS (VASPS)
1. Can a crypto-to-crypto exchange be established?
Currently, there are no restrictions with respect these under Seychelles law. Companies seeking to operate a crypto to crypto exchange may set up an international business company for the same.
2. Can a crypto-to-fiat exchange be established?
There are no guidelines or regulations with respect to the above. However, a crypto to fiat exchange may fall under the definition of "banking business" under the Financial Institutions Act, 2004 and it would be advisable to obtain the opinion of the Central Bank of Seychelles with respect to such an exchange. An international business company is not permitted to carry out banking business in or outside Seychelles.
3. Is a money services licence required for crypto-to-fiat conversion through an OTC desk?
There are no guidelines or regulations with respect to the above. However, crypto to fiat conversion through an OTC Desk may fall under the definition of "bureaux de change business" under the Financial Institutions Act, 2004 and it would be advisable to obtain the opinion of the Central Bank of Seychelles with respect to such an OTC Desk.
4. Can a virtual asset project establish a local bank account?
Potentially, but local banks remain very cautious about accepting business where funds are derived from the sale of virtual assets.
5. Can you register as a virtual asset custodian in Seychelles?
There is currently no registration regime under Seychelles law.
6. Are VASPs subject to the local AML regime?
1. Are tokenised funds regulated in Seychelles?
There is no separate framework for the regulation of tokenised funds in Seychelles.
2. What service providers are required for a tokenised fund?
3. What AML/KYC is required for token holders?
4. Is there a minimum investment amount?
5. Can token holders redeem their tokens or transfer the tokens they hold?
1. Does Seychelles impose economic substance requirements?
There are no regulations with respect to economic substance requirements in Seychelles.
2. Are there any reporting requirements in connection with economic substance?
3. What penalty provisions apply in the case of non-compliance?
The Seychelles Copyright Act, 2014 expressly includes computer programs within the definition of "literary and artistic works" and therefore protects them during the life of the author and for 50 years after his or her death.
The Copyright Act provides for only two instances where reproduction and adaptation of computer programs are permitted for use of the computer program with a computer for the purpose and extent for which the computer program has been obtained or (ii) for archival purposes and the replacement of the lawfully owned copy of the computer program in the event that the said copy of the computer program is lost, destroyed or rendered unusable.
Financial technology is potentially copyrightable. As mentioned above, under the new copyright laws in Seychelles, copyright will automatically subsist in works such as computer programs.
Computer source code is regulated under the Electronic Transactions Act. As such, it is an offence for anyone who knowingly or intentionally conceals, destroys or alters or intentionally or knowingly causes another to conceal, destroy or alter any computer source code used for a computer, computer program, computer system or computer network, when the computer source code is required to be kept or maintained by law for the time being in force. Computer source code means the listing of programs, computer commands, design and layout and program analysis of computer resource in any form.
Open source code is otherwise not separately regulated or protected in Seychelles.
2. Trade Marks
The main IP rights available to protect branding are registered trademarks. Fintech companies will generally own a combination of an established brand or trade name (which can include logos or icons) protected as registered trademarks.
Trade mark rights under the new Industrial Property Act, 2014 (designed to comply with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) compliance for World Trade Organisation Accession) give registered owners the right to prevent others using identical or confusingly similar marks to their registered mark.
Patents in Seychelles are awarded under the Seychelles Industrial Property Act, 2014. For Fintech companies, software is not, of itself patentable, although processes or methods performed by running this software may potentially be patentable. Such processes or methods would need to be new, involve an inventive step and be industrially applicable to be patentable.
4. Trade Secrets
The Industrial Property Act 2014 prohibits any unfair competition concerning undisclosed information and provides that any act or practice that, in course of industrial or commercial activities, in relation to industrial property rights results in the disclosure, acquisition or use by others of undisclosed information without the consent of the person lawfully in control of that information (rightful holder) and in a manner contrary to honest business practices shall constitute an act of unfair competition.
The disclosure, acquisition or use of confidential information by others without the consent of the rightful holder may, in particular, result from:
- industrial or commercial espionage;
- breach of contract;
- breach of confidence;
- inducement to commit industrial or commercial espionage, by breach of confidence or contract; or
- the acquisition of confidential information by a third party who knew or was grossly negligent in failing to know that this acquisition entailed one of the foregoing acts.
There are civil as well a criminal remedies provided in case of infringements of rights under the Industrial Property Act 2014.
DOING BUSINESS IN SEYCHELLES
1. Trade Licences
Companies under the Fintech sector may require a licence from the Central Bank of Seychelles in order to operate in Seychelles. Exchanges for cryptocurrencies may be under the purview of the Financial Services Authority and may require a licence under the Securities Act.
2. Visas and Work Permits
Seychelles has Visa on Arrival for visitors which is extendable to up to three months. If it is intended that any management staff (including owner/directors) shall be non-Seychellois, as a requirement under the Seychelles Immigration Decree, they must obtain a gainful occupation permit (GOP) in order to work in Seychelles. There are certain guidelines for the recruitment of non-Seychelles workers and a quota for entitlement and procedures to go through for certain sections of the industry issued by the Ministry of Labour and Human Resource Development (MLHR).
3. Transportation Links
Seychelles is easily accessible via flights with a number of airlines operating daily flights to and from Seychelles and has excellent air connectivity to major hubs in the Middle East, Europe, Africa and Asia.
4. Tax Matters
An IBC incorporated under the International Business Companies Act 2016 is exempt from income tax in Seychelles if its carries on its business outside Seychelles. Beneficial owners are advised to seek independent tax advice in relation to any tax implications in their jurisdiction. The usual business tax rate for a domestic company is 25% on the first SR1,000,000 of taxable income and 33% on the remainder. Usual business tax rates shall also apply to international business companies if they derive assessable income in Seychelles. There are currently no specific tax conditions or attributes designed for Fintech entities in Seychelles.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.