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Seychelles Overhauls Tax Settings In Recent 2018 Budget

by Mary Swire, Tax-News.com, Hong Kong

21 November 2017


The Seychelles Budget included numerous proposals to change the territory's tax settings, including new corporate tax reliefs and the settings for a progressive personal income tax regime.

The Government said its proposals for a progressive income tax will mark the third phase of reform efforts that began in April 2016, with the introduction of a higher personal income tax exemption, for those earning less than SCR8,555 (USD618) a month.

Under the new changes, the threshold will remain the same, but income up to SCR10,000 will be subject to a 15 percent rate; income up to SCR83,333 will be subject to a 20 percent rate, and a 30 percent rate will be levied on income above that threshold. Foreign individuals will not benefit from the tax exempt threshold. The threshold will be applicable on a monthly basis, in a move said to be to reduce the tax compliance burden.

The Government has also proposed an alternative for small businesses from being taxed under the business tax regime. Through such, they can be subject instead to a flat fee of SCR3,000, for businesses with a turnover of not more than SCR500,000; or a flat percentage of three percent for those businesses with turnover between SCR500,000 and SCR25m. Those with a turnover greater than this will not be eligible. It was noted alongside the proposals that Seychelles has offered a presumptive tax with a 1.5 percent rate since 2013.

In the Budget, it is proposed that the following businesses will no longer have five percent tax deducted at source (DAS): building contractors, maintenance contractors, mechanics, hirers or operators of plant and equipment, or hirers of buses.

Amendments are proposed to the Business Tax Act to clarify, first, that Seychelles will have a territorial tax regime and, second, tax on depreciable assets will be limited to the original cost of the asset.

From 2019, the following tax concessions for the tourism sector will be repealed: accelerated depreciation and the 200 percent allowable deduction for marketing and promotion costs. Instead the Government is considering offering a 200 percent allowable deduction for employing a qualified Seychellois graduate holding a Certificate, Diploma, or Degree or higher from an institution endorsed by Seychelles Qualification Authority (SQA); a 150 percent deduction for emoluments paid by an employer to a Post-Secondary or Tertiary, who is in full-time education and in part-time employment, and 150 percent for a business paying for training endorsed by the Agency of National Human Resources Development (ANHRD).

To support the maritime industry, "artisanal and semi-industrial fishermen" will no longer be included in the scope of the business tax regime; instead they will play a fee in addition to current license and registration fees.

The Government has proposed to amend the tax rules for landlords of residential buildings to replace the current 15 percent tax with a three percent tax on gross rental receipts.

These business tax reform proposals are proposed to be effective from January 2019.

In addition, the Government is to reintroduce legislation to establish an immovable property tax, having earlier shelved plans to introduce this tax from July 2017. Under the levy, a rate of 0.25 percent will be charged on the capital-improved value of property owned by all foreigners as from January 2018. The tax will be applicable for all foreign-owned residential, company-owned, and leased properties of more than 25 years. Owners must make a declaration between January and June 2018, with collections expected to start from October 2018.

The Budget also says changes to the International Trade Zone Act, 1995, will be considered for inclusion in the 2019 Budget. It also announces that the rate of tax on plug-in hybrid vehicles will be lowered from 15 percent to 10 percent.

The Budget also exempts from VAT funeral services and reduces customs duty on dietary supplements from 25 percent to zero percent.

Finally, the Budget announces that the Seychelles Revenue Commission's (SRC's) organization structure will be re-organized in 2018.

TAGS: individuals | compliance | tax | small business | business | value added tax (VAT) | tax compliance | property tax | training | fees | education | contractors | legislation | tax reform | Seychelles | services | Tax

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