Aspiring towards a free market economy
Divino Sabino
Pardiwalla Twomey Lablache
Port Victoria
Seychelles' economy has traditionally been based on agriculture and fishing. However, numerous business and financial legislations enacted in the past 15 years have projected the country into the international limelight as a competitive and forward-looking offshore business centre and also attracted significant foreign direct investment (FDI), especially in the tourism and real-estate industries.
More recently, laws have been enacted to promote a more open and fairer business environment and provide increased protections to investors as well as consumers.
Offshore business centre
The following legislations laid the foundation for the development of Seychelles as an international business centre:
(i) the Seychelles International Business Authority Act 1994, creating the Seychelles International Business Authority (SIBA);
(ii) the International Business Companies Act 1994, providing for International Business Companies (IBC);
(iii) the International Trust Act 1994;
(iv) the Protected Cell Companies Act 2003, allowing for segregation of corporate assets liabilities;
(v) the Companies (Special Licences) Act 2003, allowing tax resident companies to benefit from the double taxation agreements; and
(vi) the Foundations Act 2009.
SIBA is the regulator of offshore business and also functions as the registry of international business entities, including international trusts and foundations. It also regulates the professional firms engaged in the formation and administration of those entities. SIBA also acts as the securities authority.
The IBC, one of the most widely used vehicles, owes its popularity to its tax-exempt status and the identity protection afforded by law to its members and directors, and also the speed with which it may be incorporated (within 24 hours). The IBC is used increasingly in tax mitigation structures and together with the international trust and the foundation, as a vehicle for wealth protection.
DTAA and Companies with Special Licence (CSL)
The Seychelles has entered into double taxation avoidance agreements (DTAAs) with several states, including Indonesia, China and Cyprus. The tax-resident CSL, created under the Companies (Special Licences) Act 2003, is the ideal vehicle to enable investors to take advantage of the tax relief under these DTAAs.
The CSLs are liable to Seychelles business tax at a flat rate of 1.5% on their taxable worldwide income, and are popular as holding companies for business concerns in Indonesia and China.
Financial services
The Securities Act 2007 and the Mutual Fund and Hedge Fund Act 2008 have lain down the legal framework for Seychelles to tap into the equities and securities markets and provide for rigorous regulatory control of such activities.
The development of this area of investment has generated much interest from investment professionals both locally and abroad, securities and funds investments are expected to add value to the existing Seychelles offshore products and act as a medium to increase foreign direct investment. With the ongoing process of privatisation of state-owned or controlled concerns in the country, the regulatory authority is actively encouraging proposals for the formation of a Seychelles Stock Exchange.
Foreign Direct Investment (FDI)
The Government of Seychelles has been encouraging foreign investment into the country and in particular in the tourism industry, which has been the lead foreign exchange earner for the past 30 years. The enactment of the Seychelles Investment Act 2010 has sought to encourage FDI through the creation of a Seychelles Investment Board with a view to facilitating FDI and providing increased protections to investors.
The Tourism (Incentives) Act 2003 provided for substantial tax concessions to investors and was decisive in attracting a number of international hotel chains and developers of Integrated Resorts Scheme (IRS) to Seychelles over recent years.
The IRS schemes target high net-worth individuals from Europe and the Middle East seeking a second or holiday home. These investments have created substantial legal work for local lawyers, most notably in real estate and project financing.
The purchase of the luxury villas or apartments in the IRS is now the surest way for foreigners to acquire residential property in Seychelles, which is otherwise permitted sparingly by the government. IRS residence purchasers and their families are entitled to Seychelles residency on fulfillment of certain formalities.
Increased protection of Intellectual Property
The enactment of the Copyright (Amendment) Act 2010 has sought to step up protection of copyrighted material and provide for the creation of institutions whose mandate is to actively seek the protection of copyrighted material. Amendments to the Trade Marks Decree have also increased the scope of classes in service industries, which may now be subject to trademark protection. The overall trend is a move towards greater protection of intellectual property.
Deregulation and consumer protection
The Licenses Act 2010 has sought to deregulate several areas of trade, which were previously the subject of stringent licensing requirement with a view to increase open market competition. However, to ensure that standards are not lowered, the enactment of the Consumer Protection Act 2010 has placed an onus on businesses to be more transparent in their dealings with the public especially in relation to the quality of goods and services on offer. To ensure compliance, the Act provides rigorous enforcement mechanism and harsh penalties.
Plans to join the WTO
For the past few years the Seychelles Government has been working to join the World Trade Organisation and has now reached an advanced stage of negotiations and compliance. It is expected that the Seychelles will be admitted to the WTO membership in the near future and achieve its ambition to move towards a free market economy.