Seychelles remains committed to undergo necessary legislative reforms to cooperate with EU on tax matters | 08 October 2020
The Council of European Union for Taxation has maintained Seychelles on its European Union list of non-cooperative tax jurisdiction as per the list, which was announced on October 6, 2020. The government recognises the importance of cooperation, and is taking aggressive steps to implement the necessary reforms and expects to have completed the reforms by December 31, 2020.
The government is in the process of finalising the amendments of the Business Tax Act to incorporate substance tests for companies seeking to rely on the territorial exemption for foreign passive income. These rules will be combined with corresponding reporting, supervision, monitoring and enforcement systems.
The effect of the substance rules transitions Seychelles into taxing the foreign profits of its resident companies (with credit for foreign taxes incurred) where these companies do not sufficiently demonstrate substance in Seychelles commensurate with managing the foreign income they are generating. Such an approach would be consistent with the guidelines that the Code of Conduct Group (CoCG) published in respect of ‘foreign income exemption regimes’ on December 5, 2019.
The aim is to enact the legislations by November, for it to come into effect on January 1, 2021.
In addition, in April 2020, the Global Forum on Transparency and Exchange of Information for Tax Purposes under the ambit of the Organisation for Economic Co-operation and Development (OECD) published the Seychelles’ Second Round Peer Review Report assessing compliance with the international standard on transparency and exchange of information on request (“EOIR”). Following the review, the overall rating for Seychelles was a downgrade from “Largely Compliant” to “Partially Compliant” since the first round of EOIR Supplementary Peer Review assessment in 2015.
The 2020 report analyses the implementation of the international standard of transparency and exchange of information on request in Seychelles. The evaluation assesses both the legal and regulatory framework in force and the practical implementation of the framework, including exchange of information requests received and sent during the review period of July 1, 2015 to June 30, 2018.
One of the criteria being used by the EU to list countries on its list of non-cooperative jurisdictions is the OECD’s rating for EOIR assessment by the Global Forum. Countries having an overall rating of Partially Compliant or lower by the OECD are automatically included, or remain, on the EU list of non-cooperative jurisdictions.
One of the main deficiencies identified in the regulatory framework involves the identification of beneficial owners. Seychelles believes it has addressed these deficiencies by implementing the new Beneficial Ownership Act, 2020 that came into operation on August 28, 2020. The Act confirms the definition of beneficial ownership is consistent with the Financial Action Task Force (FATF) and OECD requirements. The Beneficial Ownership Act requires all legal persons and legal arrangements to maintain a register of beneficial owners, at the principal place of business of its resident agent. Law enforcement agencies and other designated competent authorities are authorised to request the Beneficial Ownership information from the resident agent. In addition, the Act provides for the Financial Intelligence Unit (FIU) to maintain the Seychelles Beneficial Ownership database of legal entities populated by the resident agents. The FIU maintained database will expedite international cooperation among Seychelles’ international partners. In addition, the subsequent regulations to the Act specify that the minimum threshold for identifying the beneficial owners of legal persons (excluding foundations) shall be ten percent of ownership and also introduces a penalty in the event the resident agent fails to maintain a beneficial ownership register or intentionally provides false or misleading information.
Another deficiency that was identified was in regard to the availability of accounting information for companies operating in the offshore sector. In line with the internationally accepted standards of best practices, the current legislation requires the International Business Companies (IBCs) to keep their accounting information either in or outside of Seychelles and, in cases where it is kept outside of Seychelles, the address has to be known by the registered agent in Seychelles. Despite the legislative framework being in line with the standards, in practice, the availability of accounting information remains a concern. This is especially for cases where accounting information of struck off and dissolved IBCs are maintained outside Seychelles, which are not made available to the registered agent or supervisory authority in Seychelles upon request. Hence, the government is making the necessary amendments to the current legislation and will make it a requirement for all IBCs to keep accounting information in Seychelles, through their respective registered agent. This will be tabled before the National Assembly in November 2020.
Once the legislations are enacted and in force, the aim is to request an EOIR supplementary review from OECD for a re-rating. Whilst the supplementary review process is normally initiated one year after the publishing of the report (which would be April 5, 2021), the review will be requested earlier to align with timing of the next review by the EU of the non-cooperative jurisdiction list.
The government remains committed to address our deficiencies and continues to engage with the international partners to ensure our operations are in line with the international standards.
Press release from the Ministry of Finance, Trade, Investment and Economic Planning