(Seychelles News Agency) - In a move meant to comply with tax obligations of the European Union (EU), the National Assembly of Seychelles has approved amendments to the island nation's Business Tax Act.

Minister for Finance, Economic Planning and Trade Naadir Hassan presented the amendments to the Business Tax Act during the assembly's last sitting for the year on Friday.

Hassan explained that in 2019 the Business Tax Act was amended to cover a territorial tax system under which only revenue amassed in and coming from Seychelles were to be taxed in line with the Business Tax law.

According to Hassan the main reasons for the amendments were to meet European Union obligations concerning taxation and also to better protect the island nation.

Hassan added that this tax system was viewed by the European Union's Code of Conduct on Business Taxation grouping as 'harmful' or not in line with tax standards. As a result, Seychelles was placed on a list of countries not cooperating with the EU tax system.

"The EU has raised certain concerns to Seychelles' Territorial Tax system highlighting its potential to facilitate double non-taxation, noting that it is possible that some revenues are not being taxed in any jurisdiction," said Hassan.

The Minister pointed out that before the 2019 amendment to the Business Tax Act Seychelles was assessed in 2017 under the Base Erosion Profit Shifting from the Organisation for Economic Corporation and Development (OECD) to review different business tax systems for different sectors.

These included international business companies (IBC), offshore banking, Seychelles international trade zones (SITZ), overseas securities dealers, as well as insurance of non-domestic risks.

In 2018, Seychelles – 115 islands in the western Indian Ocean - moved to amend these laws to bring them in line with recommendations and standards required by the European Union. Considering the amendments, the Code of Conduct Group in 2019 informed Seychelles that the amendment in the Business Tax Act was harmful and this should have been addressed by December 2019.

But Minister Hassan pointed out that at that time there was no guidance or publication as to the new EU approach which made the task of the government more difficult to better understand what and where the problem was.

It was in September 2019 that Seychelles received guidance and clarification from the EU as to the tax requirements it wants Seychelles to implement about taxing revenues amassed from outside the country.

"The guidance was also revised in December 2019 and Seychelles was placed on the list in February 2020 because of the short time it had to implement the new tax regime with a significant impact," explained Hassan.

Through the amendments to the Business Tax Act Seychelles will meet EU standards and requirements. It will also provide for a review of permanent establishment relating to the location of a business or where the business activity is taking place.

For instance, if the business would be taxed, any tax exemption for activities taking place outside Seychelles by a company registered in Seychelles, the company must pay its taxes in the country where it is amassing revenue in line with the permanent establishment revision. There would be no exemption on revenue collected on intellectual rights.