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Seychelles Challenged On IBCs Tax Regime

by Lorys Charalambous,, Cyprus

26 February 2019

The EU's Code of Conduct Group (Business Taxation) has written to authorities in Seychelles to warn that new provisions to the territory's tax regime are considered harmful.

The letter, sent on February 1, 2019, notes the steps taken to bring the territory's tax regime into line with international standards, taken in response to concerns earlier raised by the Group. It notes that Seychelles has delivered on its commitment to amend or repeal the following preferential tax measures for International Business Companies (IBCs), international trade zones, offshore banks, offshore insurance, special license companies, securities business under the Securities Act, and fund administration business.

However, the Code Group considers that changes to the tax settings for IBCs, which ensure that foreign income is exempt from tax, are equally harmful. Changes introduced from the start of this year provided that only Seychelles source income of a Seychelles IBC would be subject to tax; an IBC that earns only income overseas and derives no income from activities in Seychelles can avoid taxation entirely.

Challenging the provisions, the Code Group wrote: "Against this background, we would welcome to receive a commitment at a high political level that Seychelles will amend or abolish this regime by December 31, 2019, without any grandfathering mechanism."

"Finally, the Code of Conduct Group would like to inform Seychelles that no further replacement with measures of similar effect or delays will be accepted when assessing at the beginning of 2020 whether the requested commitments will have been implemented."

The letter to authorities in Seychelles was one of six addressed to offshore territories recently by the Code of Conduct Group, which was reviewing progress made by territories on reforming potentially harmful preferential tax regimes. Jurisdictions that fail to make the required changes may be placed on an EU list of non-cooperative tax jurisdictions.

TAGS: Offshore | tax | business | insurance | offshore | transfer pricing | standards | trade | European Union (EU) | Seychelles | Europe | Tax | BEPS

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