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· Seychelles has adopted a new legislation to reform its tax regime so as to ensure it is removed from the European Union’s list of non-cooperative jurisdictions later this year
· The first step Seychelles took was to update the definition of permanent establishment to align it with the latest model definitions of the Organization for Economic Cooperation and Development (OECD) and the United Nations
· The Council puts countries on its list of non-cooperative jurisdictions if the country does not meet OECD’s rating for ‘exchange of information on request’ assessment by the Global Forum
Seychelles has adopted a new legislation to reform its tax regime so as to ensure it is removed from the European Union’s list of non-cooperative jurisdictions later this year. Foreign passive income, according to the new law, will be exempted from tax under the territorial regime where the Seychelles’ company receiving the passive income has adequate economic substance in the country. The first step Seychelles took was to update the definition of permanent establishment to align it with the latest model definitions of the Organization for Economic Cooperation and Development (OECD) and the United Nations.
The OECD considers that if the company is not paying tax in Seychelles and nor in the country where it is performing its financial activities, it can be treated as non-double taxation, revealed Patrick Payet, the Secretary of State for finance.
Seychelles was blacklisted by the European Council in February last year because of its harmful preferential tax regime and the jurisdictions. The Council also said that the country did not implement the tax reforms to which it had committed by the December 2019 agreed deadline. The Council puts countries on its list of non-cooperative jurisdictions if the country does not meet OECD’s rating for ‘exchange of information on request’ 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. The EU’s decision came two months after France blacklisted Seychelles because it did not provide adequate information about some French offshore entities operating in its jurisdiction. Countries on the blacklist face reputational damages, higher scrutiny in their financial transactions and risk of losing EU funds.
Seychelles has undertaken a three-pronged reform approach that included amending legislation as needed to set out the legal foundations of change, issue guidance and work with stakeholders to understand the new requirements, and importantly build government capacity to facilitate practical implementation. The government will be introducing a bill in the National Assembly in the coming weeks which will come into force once receiving the assent of the president. Once the legislation comes into force, Seychelles will request an exchange of information on request supplementary review from OECD for a re-rating in April.
