Seychelles Double Tax Treaties

The Seychelles has Double Tax Agreements in force with China, South Africa, Indonesia, Thailand, Oman, Malaysia, Namibia and Zimbabwe. Negotiations are said to have been concluded with Russia, Botswana, Vietnam, Malaysia, and Egypt.

Discussions are underway with Tunisia, Cyprus, Malta, India and the Czech Republic.

The Government sees such treaties as being an important part of its scheme to develop as a key financial hub in the Indian Ocean, and is actively negotiating more treaties with a number of its trading partners.

An Agreement on Double Taxation Avoidance and Prevention of Fiscal Evasion with respect to taxes on income between the Government of the Republic of Mauritius and the Government of the Republic of Seychelles was signed on 11 March 2005 by the Prime Minister of Mauritius, Paul Raymond Bérenger and the President of Seychelles, James Alix Michel.

In January, 2006, a Cypriot government delegation was in the Seychelles to kick off negotiations that will lead to a Double Taxation Avoidance Agreement between the two countries.

An initial agreement to start the negotiations was signed by Lekha Nair, the principal secretary of the Seychelles Department of Finance and by Mr George Poufos Commissioner and Director of the Cypriot Inland Revenue.

Cyprus has also shown "keen interest" in starting negotiations towards a a Bilateral Investment Promotion and Protection Agreement.

After Indonesia threatened to abrogate its DTAA with the Seychelles, alleging 'round-tripping' by Indonesian companies, in March, 2006, the Seychelles Association of Offshore Practitioners and Registered Agents (SAOPRA) said that Indonesia had no legal grounds to do so, at least until 2010.

SAOPRA contends that by virtue of Article 29 of the Indonesia / Seychelles DTA, the DTA is legally binding and cannot be ended until 2010 at the earliest. SAOPRA further states that, notwithstanding inferences to the contrary by the Indonesian Tax Office, Seychelles companies can be resident (and have permanent establishment) in Indonesia (such as if managed by Indonesian residents) and so step outside the terms of the DTA and become fully taxable in Indonesia.

On the other hand, if persons are using Seychelles tax resident companies to hold shares in Indonesian companies and, apart from that, the Seychelles companies conduct no activities in Indonesia (and have a permanent establishment in Seychelles), then the Seychelles companies can lawfully access and rely on the DTA benefits (including reduced Indonesian withholding tax on repatriated dividends and avoidance of Indonesia capital gains tax on sale of the shares).

The Seychelles / Indonesia DTA sets a cap of 10% Indonesian withholding tax on repatriated dividends, interest and royalties (instead of usual rate of 20%). More particularly Article 13(4) provides that no Indonesian capital gains tax applies on disposal of shares in Indonesian companies held by the Seychelles company (ie. gains are taxable in Seychelles, but no tax applies as there is no CGT in Seychelles).

The Seychelles / Indo DTA also offers a fiscal advantage over the Singapore / Indo DTA. The principal difference lies in the treatment of the proceeds from the sale of shares in a private Indonesian company. Under the Seychelles DTA, the gain is exempt from tax; there is no exemption under the Singapore DTA. Therefore, if a Singapore company sells the shares of a private Indonesian company, a 5% tax is levied on the gross sales proceeds. This tax is particularly painful if the shares are being sold at a loss since the tax is levied on gross proceeds, not the gain.

Seychelles Other International Agreements

Mutual Assistance Treaties: The Seychelles has no international treaties bearing on exchange of information, but the double tax treaties it is negotiating will include such clauses based on the OECD model. However there are a number of pieces of domestic legislation, including the Mutual Assistance in Criminal Matters Act 1995, the Anti-Money Laundering Act 1996, and most of the sectoral 'offshore' Acts which accept the need to provide information internationally when criminal behaviour is suspected. Usually the Court has to be involved, sometimes at the behest of the Attorney-General. In some cases, the legislation admits the possibility of 'fiscal' crime, which is not always the case among the country's competitors.

In its endeavour to participate in the fight against terrorism, Seychelles ratified in 2003 the following conventions: Convention Against the Taking of Hostages; Convention for the Suppression of Terrorist Bombings; Convention for the Suppression of the Financing of Terrorism; Convention Against Trans-National Organized Crime; Statute Establishing the International Criminal Court; Convention on the Physical Protection of Nuclear Material; and the Convention on the Marking of Plastic Explosives for the Purposes of Detection.