Seychelles has recently undertaken a slew of amendments in order to keep up with the evolving and complex capital and finance market dynamics, taxation practices all over the world, as well as the OECD's Base Erosion and Profits Shifting (BEPS) initiative.
The Business Tax (Amendment) Act, 2020 which came into force on 15 September 2021, has brought several changes in line with the above, to the Business Tax Act, 2009 (theAct).
Historically, Seychelles operated as a territorial tax regime meaning that only income sourced in Seychelles was liable to be taxed in Seychelles. Thus, any income derived by companies incorporated in Seychelles, by way of its activities carried outside Seychelles, was not considered to be taxable in Seychelles. This principle is still applicable to companies which are not a part of any multinational group.
However, the amended Act has considerably widened the scope of what is considered to be Seychelles sourced income, and adopts a revised approach for companies incorporated in Seychelles which are a member of multinational groups. A company incorporated in Seychelles would be a "covered company" if it is an enterprise that is a member of a multinational group i.e. any group that includes two or more enterprises which are tax residents in different jurisdictions.
Under the Act, the following criteria have now been added to consider whether an amount derived by a covered company shall be considered to be derived from sources in Seychelles:
- income derived from activities conducted, goods situated or rights used in Seychelles;
- income generated from activities conducted outside Seychelles unless attributable to business carried on through a permanent establishment of the person outside Seychelles;
- income derived from an intellectual property right held in Seychelles, other than qualifying income from a patent; or a right functionally equivalent to a patent;
- passive income, other than that referred to in paragraph(iii) above, generated outside Seychelles except to the extent that the resident company is a qualifying company in accordance with the Eleventh Schedule of the Act (which relates to substance requirements).
It is to be noted that Seychelles operates as a self-assessment tax regime and it is the responsibility of the company incorporated in Seychelles to determine if it has any Seychelles sourced income in the tax year.
The above changes, along with amendments to other relevant legislations, bring Seychelles in line with internationally accepted standards, solidifying its commitment to a transparent global tax system, and ensuring its competitiveness as an offshore financial jurisdiction.
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