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Expat Briefing Editorial Team
27 May, 2014
In the wake of the recent announcement that certain companies in the Seychelles now face limits on the numbers of expat workers they can employ, this briefing throws the spotlight on this tropical paradise in the centre of the Indian Ocean.
The Seychelles are a byword for tropical beauty. The 115 islands, near the equator and outside the cyclone belt, are indeed unspoiled. The main island, Mahe, has an international airport and a very good port, Victoria. The islands lie on many international shipping routes, so that cruise liners are a growing source of tourist business.
Most of the 89,000 inhabitants live on Mahe, and are a blended mixture of French and African, speaking Creole, but also English and French, especially in business, with business life centred around the capital, Victoria, which is situated on Mahe.
The British granted independence only in 1976, but the Seychelles are an independent, democratic and politically stable republic with a presidential style of government. The President from 1977 until 2004, Albert Renee oversaw the conversion of a 'fishing and bananas' type of economy into a modern tourist mecca, alongside a carefully created offshore financial centre which has taken good notice of its competition. Traditionally banking and insurance have been the mainstays of the offshore business sector, but the investment fund management and fiduciary services sectors are growing. By 2008 the number of international business companies (IBCs) registered in the Seychelles had surpassed 50,000, making it one of the fastest growing offshore centres in the world. Almost 16,500 IBCs were registered in the Seychelles in 2011 alone.
The Government has also opened the Seychelles Industrial Trade Zone (SITZ) which is successfully targetting trans-shipment and re-processing trade. Companies operating in the SITZ benefit from extensive tax concessions, including exemption from income tax, social security contributions and certain customs duties, among others.
The Seychelles Government is keen to create a suitable environment for foreign investment. The Investment Promotion Act 1994 legislates inward investment Incentives. These are granted to approved projects in the domestic and export sectors, including tourism, agriculture, manufacturing and the service industries. For substantial investments, further incentives can be obtained from the Government on a negotiated basis.
Although economic growth averaged about 5% in the 1990s, and somewhat less in the ‘noughties’, it hasn’t all been plain sailing; the Asian tsunami dealt a very heavy blow to the Seychelles, severely damaging tourism, infrastructure and the fishing industry, then the commodity price spike caused inflation to shoot up, and in combination with a shortage of currency reserves, the country defaulted on much of its debt and the economy faced crisis. In mid-2008 the government was forced to turn to the IMF for assistance, but the crisis prompted a series of economic reforms, including the unpegging the local currency, the Seychelles rupee, from the US dollar, the lifting of exchange controls, and tax reform. After a sharp fall, by the spring of 2009 the Seychelles rupee had stabilized at a rate about 50% lower than six months previously, and the reforms, though painful, have been largely successful. The Seychelles was given a positive assessment by the international ratings agency Fitch in February 2014.
The official unit of currency remains the Seychelles rupee (SCR), which is divided into 100 cents. At the time of writing, one US dollar was worth SCR12.
The Seychelles has an attractive fiscal regime. Taxation is on a territorial basis; that is, income is taxed only if derived or deemed to be derived from a source in the Seychelles. There is no capital gains tax; interest, dividends and other payments received from abroad are likewise not taxed. A withholding tax on individual emoluments from employment was introduced in July, 2010 at a rate of 15%. Employers must also pay 20% tax on the value of non-monetary benefits (such as subsidised housing, company car etc.) and for foreign employees they also have to pay the 'Gainful Occupation Permit' fee of SCR8,400 per employee per year unless they are a SITZ company. Government policy is to broaden the application of the income tax to other sources of domestic-sourced income (for example, dividends and interest on savings) once the personal income tax becomes established and the new system has been assessed.
There are no special rules applying to the foreign or Seychelles employees of offshore operations, other than the exemption from social security contributions applying to the crew of ships and aircraft.
VAT was introduced in 2013 at a rate of 15%.
Business tax reform has broadened the tax base and provided for a gradual reduction in rates to promote competitiveness and achieve harmonization across sectors. As a first step, the maximum rate was revised downward by 7% to 33%. Trade and Investment Minister Pierre Laporte's 2014 Budget reduced the corporate tax rate to 30% for most companies this year.
A Gainful Occupation Permit allows the holder to be gainfully occupied in Seychelles, including those intending to work in the country on a self-employed basis. The application form is usually completed by the person seeking the permit in the case of a self-employed person, or otherwise by the prospective employer.
In considering an application for a Gainful Occupation Permit, the following factors are taken into account by the immigration department:
There is a processing fee of SCR1,000 for each Gainful Occupation Permit, plus a fee based on the duration of the work permit calculated at SCR700 per month (the SCR8,400 per year work permit ‘tax’).
A Residence Permit is usually awarded to those who have a family connection to the Seychelles, or who have, or intend to, make a special contribution to the economic, cultural or social life of the islands. The holder of a Residence Permit must reside in the Seychelles for only a minimum of five days during each 12 month of the term of the permit. However, certain other conditions are attached, including that:
A Residence Permit holder is not permitted to work in the Seychelles. They are also not entitled to free medical care or social security benefits as provided in the Seychelles under local legislation.
Residence Permit fees are SCR150,000 for the main applicant and SCR75,000 for the spouse if applied for at the same time. The fee for each dependant is SCR25,000. There is also a SCR1,000 processing fee.
It has been announced that a quota entitlement for employing non-Seychellois workers came into force on May 15 in the tourism, construction, agriculture, fishing, manufacturing, financial services, trade and commerce, and domestic work industries.
Recent figures have shown that 24 percent of the Seychelles' 55,000 labour force is made up of foreign workers.
Minister of Labour and Human Resource Development Idith Alexander said the quota entitlement follows a decision taken last year after consultations with various stakeholders. "The aim is to create jobs and ensure Seychellois are continuously provided with job opportunities," she added. A new procedure in recruiting expatriates will work to ensure Seychellois are the first to get the opportunity to secure those job positions.
For example, a business involved in tourism, construction, agriculture, manufacturing, fisheries, and financial services wishing to recruit expatriates will now need to apply to the Ministry of Labour and Human Resource Development for a certificate of entitlement, proving it is currently adhering to all provisions of the Employment Act and other government regulations, and is within the quota entitlement.
On the other hand, employers seeking to recruit non-Seychellois in other areas, such as trade and commerce, will be required to tap the local labour market.
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