Originally published by Offshore Investment Magazine

In order to overcome the use of offshore centres by criminals Seychelles has declared its willingness to co-operate with international authorities. This willingness persists despite the approaches of some authorities, which tend to be prejudiced and which assume that the ethics of offshore centres to be no better than that seen in many financial organisations of the industrial countries. Seychelles' conservative policy in respect of its policy of careful scrutiny of applications for licences for offshore financial operations is supporting the country's reputation for propriety. Existing foreign investors who operate through international business companies and in the Seychelles International Trade Zone appreciate this.

Last year saw the introduction of the procedures for the registration and supervision of mutual funds following the enactment of the supporting regulations in 1997 and 1998 respectively. Negotiations continue towards the establishment of a mutual fund base on Seychelles. The operation is proving to be an exciting one and which stimulates review of the structure and financing of domestic companies. The possibility of developing of a domestic stock exchange is being examined. Such a development would focus international attention on Seychelles as a share holding economy where the current high standards of financial conduct will attract fund managers.

The International Trust Act 1994 has been amended. Under this act each international trust must have as trustee either an individual resident in Seychelles, an approved international business company or a financial institutions registered under the Financial Institutions Act 1994. Under the amendment (International Trust (Amendment) Act 2000) the Seychelles International Business Authority is responsible for licensing of this trustee under the Licences Act. By this short amendment Seychelles has effectively introduced the requirement of that trustees of international trusts shall be registered and thereby regulated. This will enhance Seychelles' reputation as a place in which to establish an international trust. Other jurisdictions, which licences trustees, can only control and those trustees, which are resident within their jurisdiction. Under the Seychelles act all international trusts need to have a Seychelles' resident trustee who is responsible for the proper formation of the trust and who must register the existence of the trust as having been properly set up. No details however are disclosed as to the settlor, beneficiaries or trust assets. By regulating of this resident trustee potential settlor's can be reassured that that their trust will be properly formed and this will be registered.

An amendment to the International Business Companies Act has extended the number of the mandatory words, which form part of the name of every company incorporated under the act. This means that a company incorporated under the laws of a jurisdiction outside Seychelles, which continues under the International Business Companies Act, may use the name designated in the articles of continuation. The amendment also makes some modest extension of the time allowed for payment of fees. Also, all furniture and equipment imported for the use of international business company shall be exempt for payment of trade tax and payments under the Social Security Act will not apply to anyone employed by the company for those administrative functions, which are not regarded as carrying on business in Seychelles. Also such employees are exempt from the fees otherwise chargeable under the Immigration Decree.

The latest international development has been additions are to Seychelles' double taxation treaties. Seychelles does not have as many double taxation treaties as some other offshore financial centres but, being a latecomer to the tax treaty network, it is concluding treaties, which are most relevant to the needs of the new century. One recent treaty is with the Republic of Indonesia. This country, despite its recent economic difficulties, is clearly a potential major trading centre, which views Seychelles as a base for entry of its goods into the EU, and African markets. With an estimated population of nearly 200 million people there is considerable opportunity to develop business relationships with Indonesian textile and other manufacturers and assembly operations. The double taxation treaty, as well as simplifying taxation between the two countries, focuses attention on the amicable relationships between the governments. The treaty, based upon the OECD model, covers Seychelles Business Tax. The treaty provides the means to resolve the question of a taxpayer's place of residence where the taxpayer appears to be resident in both countries. Ultimately the question is determined on of where the taxpayer has his habitual abode or, failing that, the state of which he is a national. If that fails then the competent authorities will settle the question by mutual agreement (Article 4).

Under the treaty the term "permanent establishment" includes farms or plantations and the term also encompasses the provision of services, including consultancy services by enterprise whose employees are considered to continue for more than three months in any 12 month period in the other country.

Dividends paid by a company to a resident of the other contracting state are taxed in the state in which the company is resident and the rate may not exceed 10% of the gross amount of the dividends distributed if paid the beneficial owner in than other state. Similarly with interest, the tax shall not exceed 10% of the gross amount of interest when paid to beneficial owner in the other state and similar provision applies to taxation of royalties.

The treaty contains exchange of information provision.

Another interesting development is the ratification in December 1999 of a double taxation treaty with the People's Republic of China. This treaty applies in Seychelles to business tax and to the petroleum income tax.

Under the treaty the term "China" means that People's Republic of China means all the territory of the People's' Republic of China including its territorial sea where Chinese tax laws apply and any area beyond where China has sovereign rights of exploration for the exploitation of resources on the seabed and subsoil and for superjacent water resources according to international law.

The question of where person is resident is decided under the standard clause as also appears in the treaty with Indonesia. The provision relating to the taxation of dividends provides that where recipient of the dividends is the beneficial owner the tax charged shall not exceed, in the state in which the dividend paying company is resident, 5% on the gross amount of the dividend. With interest, the tax charged shall not exceed 10% when paid to beneficial owner of the other state and similar maximum is provided in respect of royalties.

Generally over last year Seychelles has made steady progress. Incorporation of international business companies continue and increasing interest is being shown in Seychelles international trade zone. Seychelles looked for to the forthcoming year with confidence.

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