In a push to get off EU's black list, Seychelles finalises new Business Tax Act amendments
(Seychelles News Agency) - The Seychelles' government is finalising amendments to the Business Tax Act to become compliant with the European Union on tax matters, and the legislation is expected to come into effect on January 1, the finance ministry said on Wednesday.
The Council of European Union for Taxation in October put Seychelles on its list of non-cooperative tax jurisdictions.
The Ministry of Finance, Trade, Investment and Economic Planning said in a communique that "the government recognises the importance of cooperation, and is taking aggressive steps to implement the necessary reforms and expects to have completed the reforms by December 31, 2020."
This was echoed by the secretary of state for finance, Patrick Payet, who told SNA that the government "remains committed to doing the necessary reform to ensure that our laws are based-off and in line with international practices."
The 115-island nation of the western Indian Ocean was blacklisted by the European Council in February because it has a "harmful preferential tax regime and the jurisdictions along with three others, did not implement the tax reforms to which they had committed by the agreed deadline of December 2019."
The EU's decision came two months after France blacklisted the Seychelles because it did not provide adequate information about some French offshore entities operating in its jurisdiction.
One of the criteria being used by the EU to place countries on its list of non-cooperative jurisdictions is the Organisation for Economic Co-operation and Development's (OECD's) rating for 'exchange of information on request' (EOIR) assessment by the Global Forum. Countries having an overall rating of 'Partially Compliant' or lower by OECD are automatically included or remain, on the EU list of non-cooperative jurisdictions.
Following a review carried out in April 2020, the overall rating for Seychelles was a downgrade from "Largely Compliant" to "Partially Compliant."
Once the necessary reforms are completed, substance tests for companies seeking to rely on the territorial exemption for foreign passive income will be incorporated in the Business Tax Act. These rules will be combined with corresponding reporting, supervision, monitoring and enforcement systems.
"The effect of the substance rules transitions Seychelles into taxing the foreign profits of its resident companies where these companies do not sufficiently demonstrate substance in Seychelles commensurate with managing the foreign income they are generating," said the finance ministry.
The identification of beneficial owners is one of the main deficiencies identified in the regulatory framework.
The Seychelles' government believed it had addressed these deficiencies by implementing the new Beneficial Ownership Act 2020 that came into operation on August 28, 2020. The Act requires all legal persons and legal arrangements to maintain a register of beneficial owners, at the principal place of business of its resident agent.
The availability of accounting information for companies operating in the offshore sector is another deficiency that was identified. In line with the internationally accepted standards of best practices, the current legislation requires the International Business Companies (IBCs) to keep their accounting information either in or outside of Seychelles. In cases where it is kept outside of Seychelles, the address has to be known by the registered agent in Seychelles.
Once the legislation comes into force, Seychelles will request an 'exchange of information on request' supplementary review from OECD for a re-rating.