Seychelles Tax Reform On Track

By ExpatBriefing.com Editorial 19 July, 2010

The International Monetary Fund (IMF) has confirmed that the Seychelles is meeting all of the performance criteria under its three-year Extended Fund Facility approved six months ago, particularly in the progression of its tax reforms.

The Seychelles government launched a comprehensive reform of the tax system with the 2010 budget, of which the first stage was the introduction of a revised Business Tax Act from January 1, 2010.

The business tax reform 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 has been revised downward by 7%, to 33%. At the same time, the tax-free threshold was abolished for companies and reduced for sole traders and partnerships.

The second stage has been the introduction, from July 1, 2010, of a withholding-based personal income tax (PIT) on wages to replace social security contributions, expanding the labour income tax base to resident expatriates and eliminating existing sectoral concessions.

Government policy is to broaden the application of the PIT to other sources of domestic-sourced income (for example, dividends and interest on savings) once the PIT becomes established and the new system has been assessed. PIT rates will be harmonized at 15% for all categories of workers, effective January 1, 2011.

Finally, a value-added tax (VAT) will be introduced from January 1, 2012. The VAT will replace the current multiple-rate goods and services tax (GST), broadening the indirect tax base and improving both the efficiency of the indirect tax system and external competitiveness.

Steps in this direction were taken in the 2010 budget, including the expansion of the GST base to a broader range of services and the reduction of cascading effects through the option of levying GST either on imports or sales. The concessional 10% GST rate that currently applies in the tourism sector will be raised to 12% in November 2010, prior to alignment with the general GST rate of 15% by November 2011 in preparation for the introduction of the VAT.

These reforms are expected to be broadly revenue neutral over the medium-term and will be accompanied by efforts to modernize and reinforce revenue administration. With a view to establishing a level playing field for all businesses by the time of the VAT introduction, the government is maintaining its policy of not providing new tax incentives and exemptions.

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Tags: Expatriates | Tax | Value Added Tax (VAT) | Interest | Budget | International Monetary Fund (IMF) | Corporation Tax | Goods And Services Tax (GST) | Offshore | Tax Rates | Withholding Tax | Dividends | Tax Reform | Individual Income Tax | Seychelles | Services |

 





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