Why use Seychelles?

Contents

Where is Seychelles?

Tax system in Seychelles

Why use Seychelles as an offshore jurisdiction?

Offshore in Seychelles

Seychelles International Business Company and its possible uses

Special License Company and its possible uses

Other offshore products and their uses

Population 80,000

South of Equator

+4Hrs GMT

Abacus Seychelles

Where is Seychelles? Independent nation comprising of a group of

islands situated in the Indian Ocean Democratically elected Government Strategically located 7 degrees south of

equator Modern reliable infrastructure Currency: Seychelles Rupee English, Creole and French are official

languages Gujarati widely spoken Situated at GMT +4 hours; i.e. one and half

hours behind India Population of 80,000 Large Indian presence in telecommunication,

construction, tourism, health and retail sector Bharti and Tata Groups have presence Double tax treaty with India being negotiated

Population 80,000

South of Equator

+4Hrs GMT

Abacus Seychelles

Tax system in Seychelles

+4Hrs GMT

Source based – Only income earned from doing business in Seychelles is subject to tax (one exception to the source based rule – the Special License Company)

Only one head of income subject to tax - business tax

No taxation of salaries, house properties, capital gains or income from other sources

No transfer pricing regulations

Tax rate for domestic companies upto 40 per cent

Abacus Seychelles

Why use an offshore jurisdiction like Seychelles?

Reasons for going offshore and utilising offshore companies for tax planning include: Ease of setting up companies and doing business Residence of intangible and intellectual property Free remittance of profits and capital Access to tax treaties Security of property rights Low transaction costs for example zero capital / stamp duty on share transfers Banking privacy Enhanced privacy Customs and duty exemptions Fewer restrictions Sanctity of contracts Foreign investments inducements Higher yields and returns Bank facilities

Population 80,000

South of Equator

Abacus Seychelles

Offshore in Seychelles Offshore legislation introduced in 1994

Initial offshore legislation provided for International Business Companies (IBC) or non resident Seychelles company

Success of the IBC lead to development of more value added areas of offshore business

Since 2003, Seychelles started a rapid expansion of its treaty network

Use of domestic companies called Special License companies to avail of treaty network

No sanctions imposed against it by OECD

Other products include Free trade zones Trusts Limited liability partnerships

Abacus Seychelles

IBC Unique type of company which can undertake any activity outside the

Seychelles except for banking, insurance, mutual funds and trusts Minimum of one shareholder and director Zero tax liability in Seychelles Can be incorporated within 24 hours Competitive license fee fixed for life No requirement to disclose shareholder No requirement to file annual returns with the Registrar No filing requirements Minimum paid up share capital USD 1 All civil proceedings heard by Judge in Chambers Change of domicile can be effected easily Confidentiality is guaranteed Is considered as a non resident company and cannot avail treaty

benefits

Abacus Seychelles

IBC incorporation till December 2005

0

5000

10000

15000

20000

25000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Actual

Cummulative

Abacus Seychelles

Possible uses of an IBC…

Offshore recruitment agency and outsourcing

Domestic recruitment agency in India

Seychelles IBC – Offshore

recruitment agencyCustomer overseas

Supplying manpower under contract

Manpower

Manpower recruited by offshore agency

Supplies manpower to offshore recruitment agency

Abacus Seychelles

…Possible uses of an IBC…Advantages of this structure Ability of the offshore recruitment agency to assume responsibility for non-wage obligations:

Employee’s retirement and savings plans Superannuation liabilities

No fringe benefit tax, perquisite taxation, etc No withholding taxes on salary paid to employee As a result employees take home pay higher No service tax / VAT or GST or other domestic taxes payable on fees received by offshore

recruitment agency from customer Zero tax in Seychelles on fees received from customer Zero tax liability for employee in Seychelles on salary received Could simplify employees tax liability – ie avoid being taxed both in the country of receipt of

salary and in the country to which deputed too under the contract but this would need to be examined on a case to case basis as is dependent on the residential status of each employee

Structure could also be used by large companies who regularly depute individuals to overseas branches / group concerns

Issues Ensuring an arms length price between the domestic recruitment agency in India and the

Seychelles IBC

Abacus Seychelles

Royalty / Intellectual property (IP) company

…Possible uses of an IBC…

Seychelles IBCTransfer IP / royalty to a Seychelles IBC

Company X Company Y Company Z

Pays royalty/ income for use of IP to IBC

Royalty / IP income exempt from tax in Seychelles

IP protected from competitors – no publicly available information about the Company

However, the ability to transfer an IP to an offshore jurisdiction depends on domestic laws

…Possible uses of an IBC…

International trading company

Case study

Mr X an Indian businessman, resident in India buys from Bangladesh, processes it in Pakistan and sells it in Japan

Mr X wonders if he can structure the business in a tax effective manner using offshore

Possible Offshore solution (Indian tax implications to be examined by Indian tax advisors)

Mr X

Seychelles IBC – Zero tax liability in

Seychelles on profits accruing

Bangladesh – Purchases raw material

Pakistan – processes

leatherSold in Japan

International e-training Mr Y, a leading international tax expert based in India wishes to offer international tax training

courses over the internet The participants will be from countries all over the world who will pay via the internet; lecturers

will also be from all over the world He structures the business in a tax effective manner using offshore

…Possible uses of an IBC

Mr Y

Seychelles IBC – Zero tax liability in

Seychelles

Hosts training website

Student A

Student B

Offshore bank

Pay directly into the offshore bank

Lecture A – Europe

Lecturer B – US

Paid directly by IBC

Abacus Seychelles

Advantages of structure

Profits from the e-training course are exempt from tax in Seychelles Easier to pay lecturers – no exchange controls Lecturers not liable to pay tax on money received by them from the IBC

in Seychelles – no withholding taxes, etc Mr Y is liable to pay tax in India on only income received by him from

the IBC – ie salary or dividends distributed to him

…Possible uses of an IBC

Abacus Seychelles

…Possible uses of IBC

Other possible uses

Service based activities like marketing, sales and distribution, agency agreements

Financial and consultancy services Combined with larger structures to make them more tax efficient Invoicing and reinvoicing Few of the large companies undertaking activities from

Seychelles – Heinz, Lehman brothers, Chelle Medicals (listed on the Singapore Stock market)

Regional headquarters (eg for Asia Pacific or EMEA) - No PE risk or risk of attribution of regional profits

Abacus Seychelles

Special license companies (CSL)…

Seychelles domestic company Used to avail treaty benefits

Taxation Liable to Seychelles business tax at the rate of 1.5% on its world-wide taxable income

(exception to source based rule)

Exempt from withholding taxes on dividends, interest and royalties

Exempt from stamp duty on property transfers, share transfers and other business transactions

Compliance Minimum of 2 Directors – preferably Seychelles resident to prove management and

control in the Seychelles Seychelles resident Company Secretary required Annual company return, tax returns and audited accounts to be filed

Abacus Seychelles

…Comparison of tax rates among different Seychelles entities

Tax regime Tax rate WHT / cap gains Tax treaties

Normal companies

Territorial 40% Div.: 15%

Int.: 10/40%

Roy.: 0/15%

Yes

IBC N.A. 0% 0% No

CSL World-wide 1.5% 0% Yes

Abacus Seychelles

Treaty network…

Ratified/In Force

ChinaIndonesiaOmanSouth AfricaBotswanaMauritiusMalaysiaThailandVietnam

Signed

ZimbabweVietnamBelgium CyprusQatar

Negotiations Concluded

Egypt UAEBahrain RussiaCzech RepublicTunisiaNamibiaKuwait

Negotiations in

Progress

LesothoCubaBahrainIvory CoastBurundiMaltaMoroccoPhilippinesUganda

Agreement to Negotiate

IsraelPortugalTurkeyTanzaniaZambiaSwedenKenyaIndia

Abacus Seychelles

…Treaty networkCountry Project duration for

permanent establishment purposes

Maximum Tax Rates applicable in the country of source

    Dividends Interest Royalties

Botswana >183 days 5% & 10%(b) 7.50% 10%

China >12 months 5% 10% 10%

Indonesia > 6 months 10% 10% 10%

Malaysia >6 months 10% 10% 10%

Mauritius >12 months 0% 0% 0%

Oman >6 months 5% 5% 10%

South Africa >6 months 0% 0% 0%

Thailand >6 months 10% 10% or 15% (e) 15%

Vietnam >6 months 10% 10% 10%

(a) Lower rates applies to companies holding at least 10% capital.

(b) Lower rates applies to companies holding at least 25% capital.

(c) Lower rates applies to companies holding at least 20% capital.

(d) Lower rates applies to companies holding at least 15% capital.

(e) Lower rates applies if paid to any Bank carrying on a bona fide banking business.

(f) Higher rates applies to companies holding investment other than portfolio investment.

Abacus Seychelles

Abacus Seychelles

International Trade Zone

Undertaking redistribution, light assembly, manufacturing, processing and export services from the Seychelles

Can undertake management services from Seychelles and offer the following benefits: Tax free operations of regional headquarters eg (for Asia Pacific or

EMEA) - No PE risk or risk of attribution of regional profits License fee fixed for life Residency guaranteed for owners and operators

Benefit from trade agreements which Seychelles has signed Preferential access to EU and US markets using the Lorne

convention and African Growth Opportunities in America Member of the Common Market for Eastern and Southern Africa

Abacus Seychelles

Offshore Trusts

What assets can be held by an offshore trust? Shares and stocks in both quoted and unquoted companies. Investment portfolios. Real and intellectual property Bank deposits. Life assurance policies issued on the life of the Settlor Most other types of asset

Advantages of Offshore Trusts Confidentiality Wealth protection Tailored to specific family requirements Recognized in all common law jurisdictions Increasing recognition in important civil law jurisdictions An important tool in international income, capital gains and estate tax planning Used by corporations for employee benefit plans, retirement and stock option

schemes, insurance plans and special financing arrangements

Abacus Seychelles

Seychelles Trusts

Key features Seychelles trust legislation is modern, comprehensive and provides for the formation

of versatile offshore trusts Simple process facilitated through a Seychelles licensed trustee A copy of trust deed not required to be filed One off registration fee of USD 115 payable to Registrar

Advantages Zero tax on income An international trust can hold property worldwide (except for land in Seychelles) Transfer or disposition be a person creating an international trust cannot be

invalidated by any foreign rule of forced heirship No restrictions on the accumulation of income Settlors or trustees can themselves be beneficiaries Law governing an international trust is the law chosen by the settlor to be the proper

law No requirement to mention the name of the settlors or the beneficiaries (except for

beneficiaries who are Seychellois nationals) Provision for discretionary trusts, purpose trusts, charitable trusts, etc

Abacus Seychelles

Seychelles trusts.. Possible solution?

Pre – migration tax planning – RETURNING NRIs

DR C, a prominent Indian Doctor who worked in UK for 25 years wishes to retire and return to India

DR C wonders if he can mitigate his tax liabilities through pre migration tax planning

Possible solution 1

Dr C transfers all his foreign assets to a trust established by him prior to moving to India

Trust administers the assets for the beneficiaries as determined by Dr C

Issues

If the beneficiaries are Indian tax residents, would they be subject to tax on income accumulated in the trust but not distributed by the offshore trust?

Abacus Seychelles

Re visit

Where is Seychelles?

Tax system in Seychelles

Why use Seychelles as an offshore jurisdiction?

Offshore in Seychelles

Seychelles International Business Company and its possible uses

Special License Company and its possible uses

Other offshore products and their uses

Population 80,000

South of Equator

+4Hrs GMT

Abacus Seychelles

THANK YOU FOR YOUR INTEREST IN SEYCHELLES

Let’s keep the dialogue on Seychelles going Write to us at:

anuj@abacus-offshore.com malika@abacus-offshore.com

Abacus Seychelles Ltd Mont Fleuri Mahe, Seychelles

www.abacus-offshore.com

+248 610 780

Abacus Seychelles