On the domestic sector side, the Investment Promotion Act (IPA) was enacted in 1994 to encourage inward investment. The IPA provides fiscal incentives to businesses serving both the domestic sector and those geared at exports as well through a Certificate of Approval. Hence, generous tax breaks under the IPA have been provided for guaranteed lengths of time for certain categories of projects ranging from tourism, agriculture, the manufacturing sector as well as those of services. Procedures have been simplified for project approval and decisions can be made rapidly under the new scheme.

Some of the attractions of the new investment policies are:

• 100% foreign ownership
• No foreign exchange controls
• 100% repatriation of capital and profits
• No withholding tax on dividends
• Accelerated depreciation
• unlimited carry forward of losses arising out of depreciation
• No personal income tax
• No wealth tax, gift tax, property tax, capital gains tax, death duties or taxes on properties
• Reasonable rates on corporate tax, social security and incidental benefits
• Instant Approval of Projects
• modern corporate legislation
• Work permit for expatriates available

The Investment Promotion Act itself features the following:

• Local and foreign owned businesses are eligible
• Any changes in taxation subsequent to the issue of a Certificate of Approval cannot be to the detriment of the promoter.
• No import duties on capital equipment, intermediate inputs and no sales tax
• Automatic entitlement to employ up to 25% of employees from overseas at a confessional fee of SR 500 per month per employee and an additional 25% upon payment of a fee of SR 1,500 per month per employee.
• Accelerated depreciation of up to 150% of original cost of asset for certain categories of investments.
• Low business tax rate of 15% with further tax credits, resulting in an effective tax rate of 9%. In some cases, some business enjoy a virtual tax holiday.
• Special incentives for investments in Export Oriented Unit (EOUs) and Special Growth Area (SGA).

Potential projects currently being promoted by Government here would include:

• the building of a Yacht Marina
• a modern 18-hole Golf Course
• other tourism projects
• agricultural (including fishing) projects are also encouraged

Seychelles already has seen investment made by major world players such as Guinness who have a stake in a brewery. Cable & Wireless in the telecommunications field and Berjaya Leisure Group (from Malaysia) in the tourism sector are others who have opted to place substantial assets here in Seychelles.

General Introduction

Offshore business in Seychelles only really took off following the enactment of a suite of legislation in December 1994 covering the registration of offshore companies, offshore trusts and the licensing of international trade zone (free zone) companies. Recently a further set of legislation has been introduced. This covers the licensing of offshore banks, offshore insurance companies as well as the setting up of a securities industry.

In order to facilitate the administering of these laws, a special body SIBA, the Seychelles International Business Authority, has been set up. SIBA is empowered to act as a one-stop shop for all offshore related activities and formally came into existence in February 1995 through an Act of Parliament. To date, SIBA has been mainly pre-occupied with the registration of offshore companies. At the same time, a fair amount of preparatory work has been done in the setting of a future free port that will promote hub and spoke operations from Seychelles mainly to countries of the Indian Ocean Region.

The legislation that has been enacted has been the fruit of a task force, set up by the Government in 1993. This task force was headed by leading officials of the Central Bank of Seychelles, the Ministry of Finance and the Attorney General's office. The group firstly set about studying the operations of existing offshore jurisdictions. Discussions were held with major international players in the offshore world and a large number of laws were studied by the group.

It will be noted that the laws prevailing in the Caribbean, notably the Bahamas and the British Virgin Islands, are very similar to those adopted by Seychelles. For example, the IBC Act of the Bahamas would have similarities with that of the Seychelles, whilst the International Trusts Act of Seychelles is an amalgamation of various laws prevailing in the Caribbean.

International Business Companies (IBCs)

The registration process in Seychelles is quite straight forward. SIBA is automated, hence name approvals are granted almost instantly. Certificates of incorporation for all IBCs are issued by SIBA to the registered agents as this is a requirement by law. Memorandums and Articles of Association when presented to SIBA are vetted and approved normally within 2 hours making SIBA one of the fastest Registrars in the world.

Some of the attractions of the Seychelles IBC Act:

• No requirement to disclose the beneficial owners of an IBC
• Directors may be elected at the first meeting of the Board of the company
• No minimum capital stipulation
• Bearer shares are allowed
• Only 1 director or shareholder is required
• No need to file accounts with the Registrar
• Confidentiality is guaranteed by law
• All civil proceeding in respect of IBCs may be heard by a Judge in Chambers
• Licence fees, which are very competitive, are fixed for life. In other words, an IBC registered at a point in time, will always be subject to the same annual fees for life irrespective of any fee increases in future.
• An IBC may own or manage a vessel registered in Seychelles, hence effectively being exempt of taxes, despite operating within the exclusive economic zones of Seychelles.
• IBC licence fees are fixed as follows:
• US$ 100 if the authorised share capital is less than US$ 5,000
• US$ 300 if the authorised share capital does not exceed US$ 50,000
• US$ 1,000 if the authorised share capital exceeds US$ 50,000
• IBCs of course pay no taxes in Seychelles.
• There are no foreign exchange controls.

International Trusts

Trust registration is also quite simple. This again has to be done through a licensed trustee, of which there are 2 currently. Trusts cannot involve any land in Seychelles and the settlors cannot be residents of Seychelles. A Seychelles trust may own and trade in other shares, open bank accounts or even deal in Government securities in the country.

Some of the features of our trust law include:

• The transfer or disposition by a person creating an international trust cannot be invalidated by any foreign rule of forced heirship
• there are no restrictions on the accumulation of income
• the settlors or trustees can themselves be named as beneficiaries under the Trust
• the law governing an international trust is the law chosen by the settlor to be the proper law, the choice may be express or implied in the terms of the trust.
• No requirement to mention the names of the settlor and of the name of the beneficiary, unless the latter is a Seychellois national or a body corporate resident in Seychelles
• An international trust is valid and enforceable in Seychelles.
• Confidentiality is maintained and it is prohibited to disclose or produce any information or document relating to an international trust, except under an injunction of the Seychelles Supreme Court on application made by the Seychelles Attorney General and only for the purpose of an inquiry or trial into or relating to the trafficking of narcotics and dangerous drugs, arms trafficking or money laundering.
• One-off registration fee of US$ 100.

Offshore Banking

The Seychelles banking legislation has been recently amended in order to make provisions for the licensing of offshore banks in Seychelles.

There is one piece of legislation regulating both domestic and non-domestic banking business with the necessary flexibility for offshore banking business.

The tax treatment of offshore banks is equivalent to that of offering by the most reputable offshore jurisdictions (corporation tax, withholding tax on dividends and interests, wealth tax, capital gains tax, customs duties, stamp duty, exchange control are non-existing).

Possibility of electing to pay corporation tax at a rate to be agreed upon between the offshore banking company and the Commissioner of Taxes.

Full confidentiality, except in the case of criminal investigation.

An offshore bank may be administered by a well-established domestic bank.

An offshore bank must be either a company limited by shares or an unlimited company incorporated or registered under the local Companies Act.

The minimum paid-up capital is US$1 million or its equivalent in any freely convertible currency.

Application processing fee and annual fee are US$ 2,000 and US$ 15,000, respectively.

Any prospective applicant shall apply either directly or through a firm of Chartered Accountants or Attorney-at-Law to the Offshore Banking Department of the Central Bank of Seychelles.

Main information and documentation to be filed with the application for an offshore banking licence are the following-

1. List of shareholders and directors of the proposed offshore banking company with details of addresses, nationalities, related banking experience and at least two references verifying their good financial standing.
2. A business plan setting out details of the commercial activities in which the applicant intends to engage in.
3. Draft Articles of Incorporation.
4. Draft of the Administered Bank Agreement (if any).

Offshore Insurance

The insurance Act, 1994 which is modelled on the Insurance Act of Singapore has been recently amended to make provisions for the licensing of offshore insurance companies, insurance managers and principal insurance representatives.

That Act, which regulates both domestic and non-domestic insurance business, is an excellent legal framework for conducting offshore insurance business.

Full confidentiality, except in the case of criminal investigation.

An offshore insurance company must be either a company limited by shares or an unlimited company incorporated or registered under the local Companies Act.

The minimum paid-up capital is:

• Companies engaged in general or life business US$ 125,000.
• Companies engaged in reinsurance business solely US$ 1 million.
• Captive insurance companies US$ 70,000.

Application processing fee

• Applicant for offshore insurance licence US$ 500.
• Applicant for approval as an insurance manager or principal insurance representative US$ 300.

Annual fee

• Offshore insurer engaged in general or life business US$ 1500.
• Offshore insurer engaged in both general and life business US$ 3,000.
• Captive insurer US$ 1,000.
• Insurance Manager US$ 2,000.
• Principal insurance representative US$ 500.
• Reasonable margin of solvency requirements, as well as records and reporting obligations.

The tax treatment of offshore insurance companies is equivalent to that of offering by the most reputable offshore jurisdictions (corporation tax, withholding tax on dividends and interests, wealth tax, capital gains tax, customs duties, transfer tax on assets or securities, exchange control are nonexisting).

Possibility of electing to pay corporation tax at a rate to be agreed upon between the offshore insurance company and the Commissioner of Taxes.

Attractive guarantees against future taxes - 20 years from the date of registration.

Pospective applicants shall apply either directly or through a firm of Chartered Accountants or Attorney-at-Law to the Insurance Authority who is based in the Ministry of Finance and Communications.

Main information and documentation to be filed with the application for an offshore insurance licence are the following:

1. The class or classes of offshore insurance business which the applicant is seeking to carry on.
2. A business plan which shall set out details of the commercial operations in which the applicant intends to engage, if the applicant is licensed as an offshore insurer.
3. The applicant's memorandum or articles and resolution of the Board of Directors.
4. The applicant's certificate of incorporation or registration.
5. The list of shareholders, directors and managers, with their addresses, nationalities related insurance expertise and three references, one of which shall be financial in nature from an international reputable financial institutions.