Seychelles is now a known and respected jurisdiction in the global financial services market. Over the last 10 years, the Seychelles offshore financial services industry has increased its know-how and bolstered its business volume and international profile. A central factor in Seychelles’ rise as an international financial center has been its strategy of striking an effective balance between sound regulatory practice and pleasing the market-place. Seychelles’ northern Indian Ocean location (GMT+4) has also proved to be a significant advantage in servicing the European, Asian, Middle Eastern and African markets. The tax-exempt Seychelles international business company (IBC) has enjoyed substantial success with surging registrations over the last five years, with 8,238 new incorporations in 2006 and 10,295 new incorporations in 2007. This year promises to set a record for registrations, totaling approximately 52,000 companies on its register to date. Seychelles is now one of the most popular IBC entities worldwide and is also steadily developing its range of value-added products such as the Companies Special License (CSL).
The CSL is a Seychelles domestic company – incorporated under the 1972 Companies Act – which is granted a special license under the Companies (Special License) Act of 2003. Unlike the tax-exempt IBC, the CSL is a tax resident in the Seychelles and may access its growing network of Double Taxation Avoidance Agreements (DTA). The Seychelles has an attractive Double Taxation Agreement with the China that caps Chinese withholding tax on dividends at 5% and 10% on interest and royalties provided the CSL has a permanent establishment and effective management in the Seychelles, not in China. CSLs are increasingly being used by international listed groups as intermediary holding companies to hold shares and other investments in China. The attraction for the international groups is that use of a CSL, in conjunction with the Seychelles-China DTA, provides for significant scope for foreign investors to reduce their tax exposure in China. A CSL is liable to Seychelles’ 1.5% business tax rate on its worldwide taxable income; however this may be avoided by tax-credit provisions. Furthermore, a CSL is exempt from Seychelles withholding taxes on dividends, interest and royalties, and from Seychelles’ stamp duty on property transfers, share transfers and other business transactions. Seychelles has maximized its appeal and effectiveness as an offshore financial services center by striking an effective balance between sound regulatory practice and attractive financial services products. With Seychelles gaining momentum, it is now well-placed to serve the international market and China.