Why use Seychelles

1
Why use Seychelles?
2
Contents

• Where is Seychelles?
• Tax system in Seychelles
• Why use Seychelles as an offshore jurisdiction?
• Offshore in Seychelles
• Seychelles International Business Company and its
  possible uses
• Special License Company and its possible uses
• Other offshore products and their uses

4Hrs GMT
South of Equator
Population 80,000
3
Where is Seychelles?

• Independent nation comprising of a group of
  islands situated in the Indian Ocean
• Democratically elected Government
• Strategically located 7 degrees south of equator
• Modern reliable infrastructure
• Currency Seychelles Rupee
• English, Creole and French are official languages
• Gujarati widely spoken
• Situated at GMT 4 hours i.e. one and half hours
  behind India
• Population of 80,000
• Large Indian presence in telecommunication,
  construction, tourism, health and retail sector
• Bharti and Tata Groups have presence
• Double tax treaty with India being negotiated

4Hrs GMT
South of Equator
Population 80,000
4
Tax system in Seychelles

• Source based Only income earned from doing
  business in Seychelles is subject to tax (one
  exception to the source based rule the Special
  License Company)
• Only one head of income subject to tax -
  business tax
• No taxation of salaries, house properties,
  capital gains or income from other sources
• No transfer pricing regulations
• Tax rate for domestic companies upto 40 per cent

4Hrs GMT
5
Why use an offshore jurisdiction like Seychelles?

• Reasons for going offshore and utilising offshore
  companies for tax planning include
• Ease of setting up companies and doing business
• Residence of intangible and intellectual property
• Free remittance of profits and capital
• Access to tax treaties
• Security of property rights
• Low transaction costs for example zero capital /
  stamp duty on share transfers
• Banking privacy
• Enhanced privacy
• Customs and duty exemptions
• Fewer restrictions
• Sanctity of contracts
• Foreign investments inducements
• Higher yields and returns
• Bank facilities

South of Equator
Population 80,000
6
Offshore in Seychelles

• Offshore legislation introduced in 1994
• Initial offshore legislation provided for
  International Business Companies (IBC) or non
  resident Seychelles company
• Success of the IBC lead to development of more
  value added areas of offshore business
• Since 2003, Seychelles started a rapid expansion
  of its treaty network
• Use of domestic companies called Special License
  companies to avail of treaty network
• No sanctions imposed against it by OECD
• Other products include
• Free trade zones
• Trusts
• Limited liability partnerships

7
IBC

• Unique type of company which can undertake any
  activity outside the Seychelles except for
  banking, insurance, mutual funds and trusts
• Minimum of one shareholder and director
• Zero tax liability in Seychelles
• Can be incorporated within 24 hours
• Competitive license fee fixed for life
• No requirement to disclose shareholder
• No requirement to file annual returns with the
  Registrar
• No filing requirements
• Minimum paid up share capital USD 1
• All civil proceedings heard by Judge in Chambers
• Change of domicile can be effected easily
• Confidentiality is guaranteed
• Is considered as a non resident company and
  cannot avail treaty benefits

8
IBC incorporation till December 2005
9
Possible uses of an IBC

• Offshore recruitment agency and outsourcing
• Domestic recruitment
• agency in India

Manpower
Supplies manpower to offshore recruitment
agency
Manpower recruited by offshore agency
Seychelles IBC Offshore recruitment agency
Customer overseas
Supplying manpower under contract
10
Possible uses of an IBC

• Advantages of this structure
• Ability of the offshore recruitment agency to
  assume responsibility for non-wage obligations
• Employees retirement and savings plans
• Superannuation liabilities
• No fringe benefit tax, perquisite taxation, etc
• No withholding taxes on salary paid to employee
• As a result employees take home pay higher
• No service tax / VAT or GST or other domestic
  taxes payable on fees received by offshore
  recruitment agency from customer
• Zero tax in Seychelles on fees received from
  customer
• Zero tax liability for employee in Seychelles on
  salary received
• Could simplify employees tax liability ie avoid
  being taxed both in the country of receipt of
  salary and in the country to which deputed too
  under the contract but this would need to be
  examined on a case to case basis as is dependent
  on the residential status of each employee
• Structure could also be used by large companies
  who regularly depute individuals to overseas
  branches / group concerns
• Issues
• Ensuring an arms length price between the
  domestic recruitment agency in India and the
  Seychelles IBC

11
Possible uses of an IBC

• Royalty / Intellectual property (IP) company

Company X
Company Y
Company Z
Pays royalty/ income for use of IP to IBC
Seychelles IBC
Transfer IP / royalty to a Seychelles IBC

• Royalty / IP income exempt from tax in
  Seychelles
• IP protected from competitors no publicly
  available information about the Company
• However, the ability to transfer an IP to an
  offshore jurisdiction depends on domestic laws

12
Possible uses of an IBC

• International trading company
• Case study
• Mr X an Indian businessman, resident in
  India buys from Bangladesh, processes it in
  Pakistan and sells it in Japan
• Mr X wonders if he can structure the
  business in a tax effective manner using
  offshore
• Possible Offshore solution (Indian tax
  implications to be examined by Indian tax
  advisors)

Mr X
Seychelles IBC Zero tax liability in
Seychelles on profits accruing
Bangladesh Purchases raw material
Pakistan processes leather
Sold in Japan
13
Possible uses of an IBC

• International e-training
• Mr Y, a leading international tax expert based in
  India wishes to offer international tax training
  courses over the internet
• The participants will be from countries all over
  the world who will pay via the internet
  lecturers will also be from all over the world
• He structures the business in a tax effective
  manner using offshore

Lecture A Europe
Lecturer B US
Mr Y
Paid directly by IBC
Offshore bank
Seychelles IBC Zero tax liability in
Seychelles
Student A
Pay directly into the offshore bank
Hosts training website
Student B
14
Possible uses of an IBC

• Advantages of structure
• Profits from the e-training course are exempt
  from tax in Seychelles
• Easier to pay lecturers no exchange controls
• Lecturers not liable to pay tax on money received
  by them from the IBC in Seychelles no
  withholding taxes, etc
• Mr Y is liable to pay tax in India on only income
  received by him from the IBC ie salary or
  dividends distributed to him

15
Possible uses of IBC

• Other possible uses
• Service based activities like marketing, sales
  and distribution, agency agreements
• Financial and consultancy services
• Combined with larger structures to make them more
  tax efficient
• Invoicing and reinvoicing
• Few of the large companies undertaking activities
  from Seychelles Heinz, Lehman brothers, Chelle
  Medicals (listed on the Singapore Stock market)
• Regional headquarters (eg for Asia Pacific or
  EMEA) - No PE risk or risk of attribution of
  regional profits

16
Special license companies (CSL)

• Seychelles domestic company
• Used to avail treaty benefits
• Taxation
• Liable to Seychelles business tax at the rate of
  1.5 on its world-wide taxable income (exception
  to source based rule)
• Exempt from withholding taxes on dividends,
  interest and royalties
• Exempt from stamp duty on property transfers,
  share transfers and other business transactions
• Compliance
• Minimum of 2 Directors preferably Seychelles
  resident to prove management and control in the
  Seychelles
• Seychelles resident Company Secretary required
• Annual company return, tax returns and audited
  accounts to be filed

17
Comparison of tax rates among different
Seychelles entities
18
Treaty network

• Ratified/In Force
• China
• Indonesia
• Oman
• South Africa
• Botswana
• Mauritius
• Malaysia
• Thailand
• Vietnam

Negotiations Concluded Egypt UAE Bahrain
Russia Czech Republic Tunisia Namibia Kuwait
Negotiations in Progress Lesotho Cuba Bahrain Ivo
ry Coast Burundi Malta Morocco Philippines Uganda
Signed Zimbabwe Vietnam Belgium Cyprus Qatar
Agreement to Negotiate Israel Portugal Turkey T
anzania Zambia Sweden Kenya India

19
Treaty network
20
(No Transcript)
21
International Trade Zone

• Undertaking redistribution, light assembly,
  manufacturing, processing and export services
  from the Seychelles
• Can undertake management services from Seychelles
  and offer the following benefits
• Tax free operations of regional headquarters eg
  (for Asia Pacific or EMEA) - No PE risk or risk
  of attribution of regional profits
• License fee fixed for life
• Residency guaranteed for owners and operators
• Benefit from trade agreements which Seychelles
  has signed
• Preferential access to EU and US markets using
  the Lorne convention and African Growth
  Opportunities in America
• Member of the Common Market for Eastern and
  Southern Africa

22
Offshore Trusts

• What assets can be held by an offshore trust?
• Shares and stocks in both quoted and unquoted
  companies.
• Investment portfolios.
• Real and intellectual property
• Bank deposits.
• Life assurance policies issued on the life of the
  Settlor
• Most other types of asset
• Advantages of Offshore Trusts
• Confidentiality
• Wealth protection
• Tailored to specific family requirements
• Recognized in all common law jurisdictions
• Increasing recognition in important civil law
  jurisdictions
• An important tool in international income,
  capital gains and estate tax planning
• Used by corporations for employee benefit plans,
  retirement and stock option schemes, insurance
  plans and special financing arrangements

23
Seychelles Trusts

• Key features
• Seychelles trust legislation is modern,
  comprehensive and provides for the formation of
  versatile offshore trusts
• Simple process facilitated through a Seychelles
  licensed trustee
• A copy of trust deed not required to be filed
• One off registration fee of USD 115 payable to
  Registrar
• Advantages
• Zero tax on income
• An international trust can hold property
  worldwide (except for land in Seychelles)
• Transfer or disposition be a person creating an
  international trust cannot be invalidated by any
  foreign rule of forced heirship
• No restrictions on the accumulation of income
• Settlors or trustees can themselves be
  beneficiaries
• Law governing an international trust is the law
  chosen by the settlor to be the proper law
• No requirement to mention the name of the
  settlors or the beneficiaries (except for
  beneficiaries who are Seychellois nationals)
• Provision for discretionary trusts, purpose
  trusts, charitable trusts, etc

24
Seychelles trusts.. Possible solution?

• Pre migration tax planning RETURNING NRIs
• DR C, a prominent Indian Doctor who worked in UK
  for 25 years wishes to retire and return to India
• DR C wonders if he can mitigate his tax
  liabilities through pre migration tax planning
• Possible solution 1
• Dr C transfers all his foreign assets to a trust
  established by him prior to moving to India
• Trust administers the assets for the
  beneficiaries as determined by Dr C
• Issues
• If the beneficiaries are Indian tax residents,
  would they be subject to tax on income
  accumulated in the trust but not distributed by
  the offshore trust?

25
Re visit

• Where is Seychelles?
• Tax system in Seychelles
• Why use Seychelles as an offshore jurisdiction?
• Offshore in Seychelles
• Seychelles International Business Company and its
  possible uses
• Special License Company and its possible uses
• Other offshore products and their uses

4Hrs GMT
South of Equator
Population 80,000
26
(No Transcript)
27
THANK YOU FOR YOUR INTEREST IN SEYCHELLES

• Lets keep the dialogue on Seychelles going
• Write to us at
• anuj_at_abacus-offshore.com
• malika_at_abacus-offshore.com
• Abacus Seychelles Ltd
• Mont Fleuri
• Mahe, Seychelles
• www.abacus-offshore.com
• 248 610 780