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Expat Briefing Editorial Team, 16 January, 2019
The Seychelles are usually thought of as an upmarket tourist destination, a particular favourite of couples honeymooning from the chilly climes of northern Europe. However, the islands are also a popular choice for expats seeking a piece of paradise to live in, 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 unspoilt. The main island, Mahé, 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.
The Seychelles, which gained independence from the UK in 1976, is a democratic republic with a presidential style of government. President from 1977 until 2004, Albert Renee oversaw the conversion of a 'fishing and bananas' type of economy into a modern tourist Mecca. He also helped to create an offshore financial centre which has astutely taken notice of its competition.
Most of the country's 95,000 inhabitants live on Mahé Island. Ethnically they are a blend of European, African and Southeast Asian. As a first language, they speak Seychellois Creole (based on French), but use English and French in business.
Since independence, per capita output has expanded to more than seven times the previous 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% of the labour force and provides more than 70% of hard currency earnings.
Increased connectivity to the Seychelles' main tourist markets has been achieved by the addition of new air routes. Increasing the use of the country's good harbour access for cruise ships helped to boost visitor numbers to almost 350,000 in 2017.
Employment opportunities also exist in the offshore financial centre 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 service sectors are growing. Mutual and hedge funds are particularly popular. 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.
The Government has also opened the Seychelles Industrial Trade Zone (SITZ) which is successfully targeting trans-shipment and reprocessing 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 Seychellois 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 26 April 2015.
The official unit of currency remains the Seychellois rupee (SCR), which is divided into 100 cents. In early December 2018, one US dollar was worth SCR13.64.
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, nor are interest, dividends and other payments received from abroad taxed.
The following is based on information provided by the Seychelles Revenue Authority website. A withholding tax on individual payment sfrom employment was introduced in July 2010 at a rate of 15%.
Employers must pay 20% tax on the value of non-monetary benefits (such as subsidized housing, company car etc.) and for foreign employees they also have to pay a 'gainful occupation permit' fee of SCR700 per employee per month unless they are situated in the SITZ.
There are no special rules applying to the foreign or Seychellois 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%.
Sole traders and partnerships pay no tax on the first SCR150,000 of income, 15% on the next SCR850,000 and 33% on the remainder.
Companies pay 25% business tax on the first SCR1 million of taxable income and 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 not registered for VAT. Under this system, companies with an annual turnover of less than SCR1m per year may opt to pay a 1.5% tax on revenue. Opting in to the presumptive tax regime removes all obligations with regard to business tax and VAT.
The Seychelles is keen to be portrayed as a 'clean' offshore financial centre, 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 OECD's Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
The Seychelles has also committed to implementing the minimum standards the OECD put forward regarding base erosion and profit shifting (BEPS). The commitment comes as part of the country 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 2018
In April 2016, the Government announced that several important tax changes would be put in place. Further changes were proposed in the 2017 and 2018 Budgets and have generally been implement in the course of the past two years.
A SCR8,555.50 tax-exempt threshold was introduced, though it is not available to expatriates. Income from the above amount to SCR10,000 is to be taxed at 15%; that from SCR10,000 to SCR83,333 at 20% and all income above SCR83,333 at 30%.
A new property tax is planned to be introduced in January 2019 on land ownership in the Seychelles. It will only be levied at a rate at 0.25% on certain foreign-owned property that is capital improved. The purchases of private land by foreigners also attracts a high stamp duty, chargeable per square metre.
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% to 20%. Profits above SCR1m will continue to be taxed at 33%.
Furthermore, the Government is proposing that the presumptive tax rate will be realigned. Businesses with a turnover of up to SCR0.5m will be able to choose to pay a flat fee of SCR3,000, whikle those with a turnover of SCR0.5m to SCR25m will be taxed at a rate of 3%. Some professional taxpayers, such as accountants and engineers, will pay a 5% rate.
Work And Residence Permits
A gainful occupation permit allows the holder to be gainfully employed in Seychelles; this includes 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 SCR600 for each gainful occupation permit, plus a fee based on the duration of the work permit calculated at SCR1,500 per month.
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 labour 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 labour 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.