Seychelles

"THE SEYCHELLES
NOW THE MOST POPULAR OFFSHORE JURISDICTION"

We at Proform Offshore have long believed that the Seychelles offers the best all-round offshore jurisdiction in which to incorporate a company. The Seychelles provides a stable jurisdiction away from the prying eyes and influence of the UK, EU and the US, along with fast incorporation and some of the lowest fees in the offshore world.

It is no suprise then that the Seychelles is now our top selling jurisdiction. The many advantages that our customers have identified include:

• Fully Independent so no outside interference from the UK, EU or US
• Politically and economincally stable
• Fast incorporation process
• Very flexible company name rules
• Minimal compliance and accounting requirements
• Bearer shares allowed
• No foreign exchange controls
• Value for money
• Zero tax for IBCs
• Low tax rate for Special Licence Companies but with access to double taxation treaties which makes them ideal for investing in China etc
• Not influenced by the EU Savings Tax Directive
• Excellent for holding UK property investments by non-UK residents

Proform Offshore can provide a variety of different Seychelles company solutions such as:

• International Business Companies (IBC)
• Special Licence Companies (CSL)
• International Trusts
• "Dual" Structure (IBC + Trust)

Other services available include nominee director/shareholder, registered office and agent, mail forwarding and assistance with openuing a bank account.

ABOUT THE SEYCHELLES

Location

The Seychelles are a group of islands located in the Indian Ocean. The largest island is Mahé which contains the capital, Victoria.

Government

Seychelles is an independent republic within the British Commonwealth. The official languages are English, French and Creole although English is the main language for business. Company law is based on English Common Law and French Civil Law.

Types of Company

International Business Companies (IBC) are incorporated under the International Business Companies Act 1994.

Special Licence Companies (CSL) are formed under the Companies (Special Licence) Act, 2003. These pay a small percentage in tax but then have access to all of the Seychelles Double Taxation Treaties. Great for investing in China.

Trusts

We can assist with setting up Seychelles International Trusts, which may be used to hold the shares in a Seychelles IBC to give added security and confidentiality. These are irrevocable discretionary trusts, which are passive / non-trading. To find out more please email us.

Taxation

Seychelles International Business Companies (IBC) have no tax liabilities meaning the IBC tax rate is zero percent (0%). Neither are IBCs subject to capital gains taxes, inheritance taxes or death duties.

Seychelles Special Licence Companies (CSL) pay tax at the rate of 1.5% on their worldwide income.

Seychelles Trusts pay no income tax.

No Outside Interference

Seychelles is very independent and has no economic ties with the US, EU, UK or Australia. It has not signed (nor is it under any pressure to sign) any information sharing agreements with the US, EU, UK or the Australian Internal Revenue Services.

SEYCHELLES IBCs AND TRUSTS:
VERSATILE SOLUTIONS FOR UK PROPERTY INVESTMENT BY UK NON-RESIDENTS

There are many reasons for UK non-residents wishing to invest in the UK commercial real estate market. An individual may have built up wealth through business interests in his or her own country, yet have concerns as to the level of volatility or economic uncertainty in their country of residence. One answer and hedge against such own-country risk, has been (and continues to be) investing in blue-chip foreign markets. The buoyant UK property market has attracted many foreign investors over the years, particularly in view of favourable tax treatment in respect of non-residents.

Real Estate Ownership Vehicle

A Seychelles international business company (IBC) is an excellent choice of vehicle for the acquisition of UK property (especially where the underlying client is a UK non-resident). The company will be the legal proprietor of the property and be registered as such at HM Land Registry.

Avoidance of Inheritance Tax

The use of a company as the purchasing entity lawfully avoids the imposition of UK inheritance tax. If owned directly by an individual, the full value of the property will be subject to UK inheritance tax on the individual owner's death (irrespective of whether they are resident and domiciled inside or outside of the UK at the time of death) - unless a spouse exemption is applicable.

Avoidance of Capital Gains Tax

Another major fiscal incentive for UK property investment by non-residents is the exemption from UK capital gains tax (CGT), provided that the owner company is not trading or managed and controlled in the UK. As such, a capital gain (no matter how large) arising on the disposal of a UK property purchased and held as an investment would be free of CGT, as the UK does not assess non-residents on such gains (Sec 2 TCGA 1992). UK income tax will however be payable on any rental income derived from the investment property. Although, in appropriate cases, tax efficient financing from outside the UK can alleviate the income tax burden. That is, relief (by way of deduction in computing profits or gains or deduction or set off against income or total profits) is available in respect loan interest payments, subject to the restrictions under Section 787 ICTA 1988.

Stamp duty considerations

Another consideration in such a transaction is UK stamp duty. UK stamp duty rates on property transfers range from 1 percent (where the sale consideration is from £125,001 to £250,000) to as high as 4 percent (where the sale consideration is £500,001 or over). In other words, this levy can be quite substantial in a big-figure transaction; and, although payable by the buyer, can be relevant to total price negotiations. A prudent investor thinks ahead. Using a Seychelles IBC can smooth the path in relation to this issue. The sale of the property as a separate asset to a buyer, will certainly attract UK stamp duty. On the other hand, where the property is legally owned by an offshore company and in the case of a sale to another UK non-resident, the imposition of stamp duty may be legally avoided by selling the entire issued share capital of the offshore company to the purchaser (instead of the land per se).

Using our above example, if the UK property had been owned by a Seychelles IBC, under favourable Seychelles laws there is no stamp duty or any other tax or levy on the relevant share transfer and privacy is assured in that there is no requirement to file any shareholders' or beneficial owners' details with the Seychelles Government. Additionally, where a Seychelles IBC is used to own a UK property, the IBC is completely exempt from tax in Seychelles on all income and profits derived from the UK property.

Seychelles International Trusts

A UK non-resident property investor may also wish to consider using an IBC and Trust dual structure, where the IBC is the active entity and the Trust is passive in that its main role is to hold and own the shares in the IBC; with the IBC owning any property, funds or other assets/investments. This dual structure is commonly deployed in the offshore investment area, particularly because of strong tax planning, privacy and asset protection features.

With a mere IBC, the client remains (despite any nominee shareholder/director) the beneficial owner of the IBC and its assets; and this may be very relevant to the client's tax position in his or her country of residence. In contrast, a trust is a legal arrangement where the owner of property or other assets (known as the settlor) transfers ownership of those assets to a trustee to hold and administer under the terms of a Trust Deed for the benefit of other persons known as the beneficiaries (who will often be members of the settlor's family). As the assets of a valid Trust do not form part of the settlor's "personal" property, trusts are highly useful for tax and estate planning as well as for risk management purposes. Whereas a settlor can be a beneficiary under a Seychelles trust, he or she cannot be the sole beneficiary.

Apart from tax saving considerations, protection of assets from creditors of the settlor is another reason investors use offshore trusts. If ownership of property has been shifted from the settlor to third parties, then usually such assets cannot be executed against by any creditors of the settlor. The International Trusts Act 1994 (Seychelles) provides to the effect that notwithstanding any foreign law, a trust shall not be void by reason of the settlor's bankruptcy or liquidation of the settlor's property or in any legal action against the settlor by the settlor's creditors. The Act provides for a narrow exception for creditors of a settlor to attack trusts, namely, where the court finds "beyond reasonable doubt" that the trust was made with the intent to defraud creditors of the settlor or that the settlor was insolvent at the time when the property was vested in the trustee. The Act, however, makes it hard for "trustbusters" in that the onus of proof as to intent to defraud rests on the claimant creditor. Additionally, the Act provides that a legal claim by a creditor is not permitted against a trustee of a trust after 2 years from the date of transfer or disposal of assets into the trust.

There are clearly a variety of fiscal and other benefits to be derived from effective use of Seychelles-based offshore structures.

We do not provide legal advice and no reliance should be placed on this article. UK tax laws are subject to change. If you are considering acquiring UK property, we recommend that you take expert UK tax advice and tax advice in your country of residence and domicile.

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