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Expat Briefing Editorial Team
17 July, 2017
The Seychelles are usually thought of as an up-market tourist destination, a particular favorite of honeymooning couples from the chilly climes of northern Europe. However, the islands are also a popular choice for expats seeking a piece of paradise in which to live, while the Seychelles' offshore business sector provides openings for skilled expat workers. This feature introduces the Seychelles and summarizes its tax and residence permit regimes.
Introduction to The Seychelles
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 93,000 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 centered 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.
Since independence in 1976, per capita output has expanded to roughly seven times the pre-independence, near-subsistence level, moving the island into the upper-middle-income group of countries. Growth has been led by the tourist sector, which employs about 30 percent of the labor force and provides more than 70 percent of hard currency earnings.
Increased connectivity to the Seychelles' main tourist markets through the addition of new air routes and the increasing use of the country's good harbor access for cruise ships boosted visitor numbers to approximately 320,000 in 2016.
Employment opportunities also exist in the offshore financial center which has grown steadily in recent years. 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 centers in the world.
The Government has also opened the Seychelles Industrial Trade Zone (SITZ) which is successfully targeting 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 for 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. Seychelles also became the 161st member of the World Trade Organization on April 26, 2015.
The official unit of currency remains the Seychelles rupee (SCR), which is divided into 100 cents. In early July 2017, one US dollar was worth SCR12.66.
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.
The following is based on information provided by the Seychelles Revenue Authority website.
A withholding tax on individual emoluments from employment was introduced in July, 2010 at a rate of 15 percent.
Employers must pay 20 percent tax on the value of non-monetary benefits (such as subsidized housing, company car etc.) and for foreign employees they also have to pay the "Gainful Occupation Permit" fee of SCR700 per employee per month unless they are a SITZ company.
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 percent.
Soler traders and partnerships pay zero percent tax on the first SCR150,000 of income, then 15 percent on the next SCR850,000, and 33 percent on the remainder.
Companies pay Business Tax at 25 percent on the first SCR1 million of taxable income, then 33 percent on the remainder. There is no tax-free allowance for companies.
A simplified presumptive tax regime was introduced in January 2013 for sole traders, partnerships and small companies no registered for VAT. Under this system, companies with an annual turnover of less than SCR1m per year may opt to pay a 1.5 percent tax on revenue. Opting in to the presumptive tax regime removes all obligations with regards to Business Tax and VAT.
The Seychelles is keen to be portrayed as a "clean" offshore financial center, and is taking part in international initiatives to increase the level of global tax transparency. For instance, in February 2015, the Government became the 85th signatory of the Organisation for Economic Co-operation and Development's Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
The Seychelles has also committed to implementing the minimum standards put forward by the OECD on base erosion and profit shifting (BEPS). The commitment comes as part of the territory becoming an associate member of the OECD's new inclusive framework for BEPS implementation. These minimum standards are on: harmful tax practices, tax treaty abuse, country-by-country reporting, and dispute resolution mechanisms.
Tax Changes in 2017
In December 2016, the Government announced that several important tax changes would be put in place in 2017.
A SCR8,555.50 tax-exempt threshold will be introduced, but it will not be available to expatriates. Income tax above that threshold will be subject to progressive rates of either 15 percent, 20 percent, or 30 percent.
In addition, a new property tax will be introduced on land ownership in Seychelles, to be levied only on foreigners, and purchases of private land by foreigners will also attract a high stamp duty. The stamp duty will be charged per square meter.
The Government is also proposing to change the Business Tax Act. The tax-free threshold for individual businesses, such as sole traders or partners, will remain at SCR150,000. However, to align personal income tax and individual business tax rates, the tax rate on profits of between SCR150,000 to SCR1m will be increased from 15 percent to 20 percent. Profits above SCR1m will continue to be taxed at 33 percent.
Furthermore, the Government is proposing that the presumptive tax rate will be realigned. The tax rate on businesses with a turnover of up to SCR0.5m is to remain at 1.5 percent, but a three percent tax will be imposed on businesses with a turnover from SCR0.5m. The new cap for the presumptive tax is proposed to rise to SCR2m, up from SCR1m. Professional taxpayers, such as accountants and engineers, will pay a five percent rate.
At the time of writing, it is unclear when the measures would become effective.
Work And Residence Permits
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 SCR50,000 for the main applicant and SCR75,000 for the spouse if applied for at the same time. The fee for each dependent is SCR25,000.
New Expat Quotas
With recent figures showing that one-quarter of the Seychelles' 55,000 labor force is made up of foreign workers, a quota entitlement for employing non-Seychellois workers came into force on May 15, 2014 in the tourism, construction, agriculture, fishing, manufacturing, financial services, trade and commerce, and domestic work industries.
Minister of Labour and Human Resource Development Idith Alexander said the quota entitlement follows a decision taken in 2013 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 is designed 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 labor market.
The Ministry of Labour and Human resources Development released guidance for the recruitment of non-seychellois workers in May 2014.
There are no restrictions as such on foreigners owning property in the Seychelles. However, non-residents must jump through more bureaucratic hoops than those with a Seychelles passport.
Non-Seychelles individuals or corporate bodies may purchase freehold property in the country, but only with the permission of the Government. An application to purchase, lease or hold an option in immovable property must be made to the Office of the Principle Secretary at the Ministry of Land Use and Housing, either directly or through a notary or attorney in the Seychelles. A processing fee equivalent to 1.5 percent of the market value of the property is charged for the processing of the application. In the case of a leasehold property, a fee equivalent to 1.5 percent of the annual rent is charged. A fee of SCR1,000 per application is due when shares are purchased in a company holding immovable property in the Seychelles. For non-resident buyers, stamp duty of 5 percent is payable on the purchase price. Residents are exempt from stamp duty.
There is a separate policy for the purchase of property within tourist resorts, and holiday homes bought outside of designated resorts attract an 11 percent duty, in addition to the 5 percent stamp duty.
Notary fees tend to be in the 1-2 percent range, and purchases may take up to one year to complete.
As is to be expected, a premium is charged for coastal properties, especially those located in the top-end resort developments. At the time of writing prospective buyers can expect to pay upwards of USD4m for luxury beach-front properties. However, substantial ocean-front properties can be purchased in non-resort areas for around USD1m. At the other end of the scale, two-bedroom apartments in inland areas can be bought for around USD350,000.
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