Changes to Business Tax Act proposed for 2019 |27 November 2017

In his Budget Address 2018 to the National Assembly on October 31, the Minister for Finance, Trade and Economic Planning, Dr Peter Larose, announced amendments to the Business Tax Act for January 1, 2019 where he said the proposal is to make the business tax simple for SRC to administer and for the taxpayers to settle their bills.

And that government is proposing two options for the business community. He said businesses can still use the current business tax on profit if they so desire and the new option is as follows: a flat fee of R3,000 for businesses deriving a turnover of not more than R500,000 per year, which is equivalent to R250 per month; a flat percentage of 3% for businesses generating a turnover above R500,000 but up to R25 million and businesses earning above R25 million turnover will fall in the current business tax regime.

Dr Larose said the proposal for such an amendment will take effect from January 2019, which will allow enough preparation by the business community.

“We introduced the Presumptive Tax of 1.5% on turnover for businesses earning up to R1 million turnover since 2013. According to our statistic, out of the 4,982 businesses, which are generating less than R1 million turnover, we noticed that 4,282 or 86% opted to stay with the Presumptive Tax regime. Therefore, this statistic explains that businesses prefer the Presumptive Tax for simplicity.

“The 5% Deduction at Source (DAS), which certain businesses were liable to, will no longer exist as from January 2019. These businesses are building contractor, maintenance contractor, mechanic, hirer or operator of plant and equipment, hirer of omnibus,” said the minister.

He added the Business Tax Act will be amended to ensure that businesses are clearer on some provisions to reflect that Seychelles will have a Territorial Tax regime, and tax on depreciable asset will be limited to the original cost of the asset. While, he highlighted, the rate for the tourism, fisheries and agricultural sector will remain at 15%.

“We have re-assessed the current concessions that exist for the tourism sector. Most of the Tourism Incentive Act (TIA) certificates will expire by the end of December 2018. Thus, from 2019, the following concessions will no longer exist: Accelerated depreciation, and 200% allowable deduction for marketing and promotion costs.

“As part of the Business Tax reform, government is re-considering some of the concessions that used to exist for only certain sectors. With this in mind, we want to broaden the base for all businesses for the following: 200% allowable deduction for employing a qualified Seychellois graduate holding a Certificate, Diploma or Degree or higher from an institution endorsed by Seychelles Qualification Authority (SQA); 150% for emoluments paid by an employer to a post-secondary or tertiary institution, who is in full time education but in part-time employment, and 150% for a business paying for training endorsed by the Agency of National Human Resources Development (ANHRD),” he explained.

The government, he said,  noted the complexity in collecting taxes from the artisanal and semi-industrial fishermen. We have discussed extensively with the Fishermen and Boat Owners Association. In response to discussions held, a proposal was put forward that the artisanal and semi-industrial fishermen will not form part of the current business tax regime. However, the minister added, they will pay a flat fee as part of their annual license and registration fee.

“Thus, government proposes the following: Artisanal fishermen’s license and registration fee to increase from R50 to R250 per year and boat owners’ license and registration fee to increase from R100 to R500 per year.

“I want to highlight that it is important that fishermen are registered and pay their annual fee. This is useful for them to get access to any benefits either from the Seychelles Fishing Authority (SFA) or the Agency for Social Protection. In addition, I will urge them to pay their pension so that they benefit when they retire,” remarked the minister.

Dr Larose said another group of business which forms part of the business tax reform is the landlords of residential dwelling. Currently, they are liable to pay 15% business tax on the rental revenue. Government proposes to reduce this rate to 3% on gross rental receipts.

“I take the opportunity to request the landlords to pass on the benefit in the rental chargeable to the tenants. Government wants to encourage more investments in residential dwellings and at the same time reduce the cost of living,” he said.

Immovable Property Tax

Dr Larose also announced another type of tax, the Immovable Property Tax, will be introduced next year. He said the tax was initially planned to be introduced in July this year but its implementation was deferred to allow further consideration in the best interest of Seychelles.

“The Immovable Property Tax Bill will be introduced before the National Assembly as part of the budget process. Based on the available data, we expect to collect SR40 million for the fiscal year 2018. I would like to reiterate that the Immoveable Property Tax is not a new tax imposed on foreigners. This announcement was made in the 2017 Budget Speech last year,” he highlighted.

Explaining the tax, the minister said the rate of 0.25% will be charged on the capital improved value of the property owned by all foreigners as from January 2018. The tax will be applicable for all foreign-owned residential, company owned and leased properties of more than 25 years.

“The owner has a space between January to June 2018 to value his/her property and make a self-declaration. Seychelles Revenue Collection will start collection from October 2018.

The proposal in the National Assembly today recommends that valuation is carried out every 5 years. If there are substantial improvements on the property before the lapse of the 5 years, the owner should inform the National Land Valuation Board that will be set up. Before any decision to revise the rate after every 5 years, we will consult with the private sector. This condition is to ensure that there is long-term stability in this market,” Dr Larose said.