EU removes Seychelles on tax haven blacklist, a positive change for businesses
(Seychelles News Agency) - The European Union has removed Seychelles from tax haven blacklist after the island nation amended its legislation to bring it in line with international standards, a top government official said on Wednesday.
The Secretary of State in the Ministry of Finance, Patrick Payet, told reporters that "the government has welcomed the good news and remains engaged to work with international institutions to ensure that our legal framework is in conformity with international standards."
Payet said the removal of Seychelles from the list is good news for the nation's business community.
Countries on the blacklist face reputational risks and this may affect their ability to access funds from international development lenders.
Seychelles was removed from the blacklist to the EU's grey list after a meeting of the Economic and Financial Affairs Council on Tuesday. The island nation in the western Indian Ocean was blacklisted by the European Council in February last year for having a harmful preferential tax regime.
Payet said that Seychelles was blacklisted because the EU was concerned with the territorial tax system adopted in December 2018 as it felt that "this can facilitate double non-taxation and that there can be revenue that is not being taxed in any jurisdiction."
Befoe the amendments in the Business Tax Act, only revenue amassed in and coming from Seychelles were to be taxed in line with the Business Tax law.
Another concern of the EU was that Seychelles did not get a rating at least largely compliant with the Organisation for Economic Co-operation and Development (OECD) global forum on the exchange of tax information with other countries.
"In April last year, Seychelles got a rating partially compliant in its review and since then the government has brought forth new laws and amendments in some laws to ensure that we are in conformity with international standards," added Payet.
Amendments were made to the Business Tax Act in which a review was done in the definition of permanent establishment relating to the location of a business or where the business activity is taking place.
Under the amendments, if a 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.
All amendments became effective on September 16 and with this development, Seychelles has requested a supplementary review on its exchange of information framework.
"The OECD has asked that a visit is done by experts to evaluate the request. That is why the EU has kept Seychelles on the gray list for this criteria until the experts complete their review," said Payet.
The removal of Seychelles on the blacklist will be good news for the banking system.
"We saw that when people were making overseas payment a lot of questions were being asked. There was revenue coming from abroad especially in the tourism sector and many questions were being asked so it took more time. There was also pressure on corresponding banking relationships. The removal from the blacklist will open the door for the business community and that will allow our economy to recover," said Payet.