Why use Seychelles?. Contents  Where is Seychelles?  Tax system in Seychelles  Why use Seychelles as an offshore jurisdiction?  Offshore in Seychelles.

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  • Why use Seychelles?
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  • Contents Where is Seychelles? Tax system in Seychelles Why use Seychelles as an offshore jurisdiction? Offshore in Seychelles Seychelles International Business Company and its possible uses Special License Company and its possible uses Other offshore products and their uses Population 80,000 South of Equator +4Hrs GMT Abacus Seychelles
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  • Where is Seychelles? Independent nation comprising of a group of islands situated in the Indian Ocean Democratically elected Government Strategically located 7 degrees south of equator Modern reliable infrastructure Currency: Seychelles Rupee English, Creole and French are official languages Gujarati widely spoken Situated at GMT +4 hours; i.e. one and half hours behind India Population of 80,000 Large Indian presence in telecommunication, construction, tourism, health and retail sector Bharti and Tata Groups have presence Double tax treaty with India being negotiated Population 80,000 South of Equator +4Hrs GMT Abacus Seychelles
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  • Tax system in Seychelles +4Hrs GMT Source based Only income earned from doing business in Seychelles is subject to tax (one exception to the source based rule the Special License Company) Only one head of income subject to tax - business tax No taxation of salaries, house properties, capital gains or income from other sources No transfer pricing regulations Tax rate for domestic companies upto 40 per cent Abacus Seychelles
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  • Why use an offshore jurisdiction like Seychelles? Reasons for going offshore and utilising offshore companies for tax planning include: Ease of setting up companies and doing business Residence of intangible and intellectual property Free remittance of profits and capital Access to tax treaties Security of property rights Low transaction costs for example zero capital / stamp duty on share transfers Banking privacy Enhanced privacy Customs and duty exemptions Fewer restrictions Sanctity of contracts Foreign investments inducements Higher yields and returns Bank facilities Population 80,000 South of Equator Abacus Seychelles
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  • Offshore in Seychelles Offshore legislation introduced in 1994 Initial offshore legislation provided for International Business Companies (IBC) or non resident Seychelles company Success of the IBC lead to development of more value added areas of offshore business Since 2003, Seychelles started a rapid expansion of its treaty network Use of domestic companies called Special License companies to avail of treaty network No sanctions imposed against it by OECD Other products include Free trade zones Trusts Limited liability partnerships Abacus Seychelles
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  • IBC Unique type of company which can undertake any activity outside the Seychelles except for banking, insurance, mutual funds and trusts Minimum of one shareholder and director Zero tax liability in Seychelles Can be incorporated within 24 hours Competitive license fee fixed for life No requirement to disclose shareholder No requirement to file annual returns with the Registrar No filing requirements Minimum paid up share capital USD 1 All civil proceedings heard by Judge in Chambers Change of domicile can be effected easily Confidentiality is guaranteed Is considered as a non resident company and cannot avail treaty benefits Abacus Seychelles
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  • IBC incorporation till December 2005 Abacus Seychelles
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  • Possible uses of an IBC Offshore recruitment agency and outsourcing Domestic recruitment agency in India Seychelles IBC Offshore recruitment agency Customer overseas Supplying manpower under contract Manpower Manpower recruited by offshore agency Supplies manpower to offshore recruitment agency Abacus Seychelles
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  • Possible uses of an IBC Advantages of this structure Ability of the offshore recruitment agency to assume responsibility for non-wage obligations: Employees retirement and savings plans Superannuation liabilities No fringe benefit tax, perquisite taxation, etc No withholding taxes on salary paid to employee As a result employees take home pay higher No service tax / VAT or GST or other domestic taxes payable on fees received by offshore recruitment agency from customer Zero tax in Seychelles on fees received from customer Zero tax liability for employee in Seychelles on salary received Could simplify employees tax liability ie avoid being taxed both in the country of receipt of salary and in the country to which deputed too under the contract but this would need to be examined on a case to case basis as is dependent on the residential status of each employee Structure could also be used by large companies who regularly depute individuals to overseas branches / group concerns Issues Ensuring an arms length price between the domestic recruitment agency in India and the Seychelles IBC Abacus Seychelles
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  • Royalty / Intellectual property (IP) company Possible uses of an IBC Seychelles IBC Transfer IP / royalty to a Seychelles IBC Company XCompany Y Company Z Pays royalty/ income for use of IP to IBC Royalty / IP income exempt from tax in Seychelles IP protected from competitors no publicly available information about the Company However, the ability to transfer an IP to an offshore jurisdiction depends on domestic laws
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  • Possible uses of an IBC International trading company Case study Mr X an Indian businessman, resident in India buys from Bangladesh, processes it in Pakistan and sells it in Japan Mr X wonders if he can structure the business in a tax effective manner using offshore Possible Offshore solution (Indian tax implications to be examined by Indian tax advisors) Mr X Seychelles IBC Zero tax liability in Seychelles on profits accruing Bangladesh Purchases raw material Pakistan processes leather Sold in Japan
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  • International e-training Mr Y, a leading international tax expert based in India wishes to offer international tax training courses over the internet The participants will be from countries all over the world who will pay via the internet; lecturers will also be from all over the world He structures the business in a tax effective manner using offshore Possible uses of an IBC Mr Y Seychelles IBC Zero tax liability in Seychelles Hosts training website Student A Student B Offshore bank Pay directly into the offshore bank Lecture A Europe Lecturer B US Paid directly by IBC Abacus Seychelles
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  • Advantages of structure Profits from the e-training course are exempt from tax in Seychelles Easier to pay lecturers no exchange controls Lecturers not liable to pay tax on money received by them from the IBC in Seychelles no withholding taxes, etc Mr Y is liable to pay tax in India on only income received by him from the IBC ie salary or dividends distributed to him Possible uses of an IBC Abacus Seychelles
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  • Possible uses of IBC Other possible uses Service based activities like marketing, sales and distribution, agency agreements Financial and consultancy services Combined with larger structures to make them more tax efficient Invoicing and reinvoicing Few of the large companies undertaking activities from Seychelles Heinz, Lehman brothers, Chelle Medicals (listed on the Singapore Stock market) Regional headquarters (eg for Asia Pacific or EMEA) - No PE risk or risk of attribution of regional profits Abacus Seychelles
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  • Special license companies (CSL) Seychelles domestic company Used to avail treaty benefits Taxation Liable to Seychelles business tax at the rate of 1.5% on its world-wide taxable income (exception to source based rule) Exempt from withholding taxes on dividends, interest and royalties Exempt from stamp duty on property transfers, share transfers and other business transactions Compliance Minimum of 2 Directors preferably Seychelles resident to prove management and control in the Seychelles Seychelles resident Company Secretary required Annual company return, tax returns and audited accounts to be filed Abacus Seychelles
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  • Comparison of tax rates among different Seychelles entities Tax regimeTax rateWHT / cap gainsTax treaties Normal companies Territorial40%Div.: 15% Int.: 10/40% Roy.: 0/15% Yes IBCN.A.0% No CSLWorld-wide1.5%0%Yes Abacus Seychelles
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  • Treaty network Ratified/In Force China Indonesia Oman South Africa Botswana Mauritius Malaysia Thailand Vietnam Signed Zimbabwe Vietnam Belgium Cyprus Qatar Negotiations Concluded Egypt UAE Bahrain Russia Czech Republic Tunisia Namibia Kuwait Negotiations in Progress Lesotho Cuba Bahrain Ivory Coast Burundi Malta Morocco Philippines Uganda Agreement to Negotiate Israel Portugal Turkey Tanzania Zambia Sweden Kenya India Abacus Seychelles
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  • Treaty network CountryProject duration for permanent establishment purposes Maximum Tax Rates applicable in the country of source DividendsInterestRoyalties Botswana>183 days5% & 10%(b)7.50%10% China>12 months5%10% Indonesia> 6 months10% Malaysia>6 months10% Mauritius>12 months0% Oman>6 months5% 10% South Africa>6 months0% Thailand>6 months10%10% or 15% (e)15% Vietnam>6 months10% (a) Lower rates applies to companies holding at least 10% capital. (b) Lower rates applies to companies holding at least 25% capital. (c) Lower rates applies to companies holding at least 20% capital. (d) Lower rates applies to companies holding at least 15% capital. (e) Lower rates applies if paid to any Bank carrying on a bona fide banking business. (f) Higher rates applies to companies holding investment other than portfolio investment. Abacus Seychelles
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  • International Trade Zone Undertaking redistribution, light assembly, manufacturing, processing and export services from the Seychelles Can undertake management services from Seychelles and offer the following benefits: Tax free operations of regional headquarters eg (for Asia Pacific or EMEA) - No PE risk or risk of attribution of regional profits License fee fixed for life Residency guaranteed for owners and operators Benefit from trade agreements which Seychelles has signed Preferential access to EU and US markets using the Lorne convention and African Growth Opportunities in America Member of the Common Market for Eastern and Southern Africa Abacus Seychelles
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  • Offshore Trusts What assets can be held by an offshore trust? Shares and stocks in both quoted and unquoted companies. Investment portfolios. Real and intellectual property Bank deposits. Life assurance policies issued on the life of the Settlor Most other types of asset Advantages of Offshore Trusts Confidentiality Wealth protection Tailored to specific family requirements Recognized in all common law jurisdictions Increasing recognition in important civil law jurisdictions An important tool in international income, capital gains and estate tax planning Used by corporations for employee benefit plans, retirement and stock option schemes, insurance plans and special financing arrangements Abacus Seychelles
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  • Seychelles Trusts Key features Seychelles trust legislation is modern, comprehensive and provides for the formation of versatile offshore trusts Simple process facilitated through a Seychelles licensed trustee A copy of trust deed not required to be filed One off registration fee of USD 115 payable to Registrar Advantages Zero tax on income An international trust can hold property worldwide (except for land in Seychelles) Transfer or disposition be a person creating an international trust cannot be invalidated by any foreign rule of forced heirship No restrictions on the accumulation of income Settlors or trustees can themselves be beneficiaries Law governing an international trust is the law chosen by the settlor to be the proper law No requirement to mention the name of the settlors or the beneficiaries (except for beneficiaries who are Seychellois nationals) Provision for discretionary trusts, purpose trusts, charitable trusts, etc Abacus Seychelles
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  • Seychelles trusts.. Possible solution? Pre migration tax planning RETURNING NRIs DR C, a prominent Indian Doctor who worked in UK for 25 years wishes to retire and return to India DR C wonders if he can mitigate his tax liabilities through pre migration tax planning Possible solution 1 Dr C transfers all his foreign assets to a trust established by him prior to moving to India Trust administers the assets for the beneficiaries as determined by Dr C Issues If the beneficiaries are Indian tax residents, would they be subject to tax on income accumulated in the trust but not distributed by the offshore trust? Abacus Seychelles
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  • Re visit Where is Seychelles? Tax system in Seychelles Why use Seychelles as an offshore jurisdiction? Offshore in Seychelles Seychelles International Business Company and its possible uses Special License Company and its possible uses Other offshore products and their uses Population 80,000 South of Equator +4Hrs GMT Abacus Seychelles
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  • THANK YOU FOR YOUR INTEREST IN SEYCHELLES Lets keep the dialogue on Seychelles going Write to us at: anuj@abacus-offshore.com malika@abacus-offshore.com Abacus Seychelles Ltd Mont Fleuri Mahe, Seychelles www.abacus-offshore.com +248 610 780 Abacus Seychelles


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