Taxation of a Seychelles Offshore IBC Company

Seychelles companies are still 0% foreign income tax exempt, but there are a couple of simple considerations to understand the particularities of a Seychelles IBC Offshore Company Taxation to maintain this 0% income tax rate.

Tax Residency

Pursuant to Section 2 of the Business Tax Act, companies (IBCs) incorporated, formed, organised, or otherwise established in Seychelles are considered tax residents, as well as companies formed abroad but controlled and managed in Seychelles.

Seychelles Offshore Foreign Sourced VS Seychelles-sourced income 

Section 5 of such Act establishes that a tax resident company (company formed in Seychelles) will have Seychelles-sourced income if such income is derived from activities conducted in Seychelles, goods situated, or rights used in Seychelles.

Nonetheless, some companies, which are also called Schedule Eleventh Companies, have a special rule to determine if such income is Seychelles-sourced.

Permanent Establishment

The Permanent Establishment rules are highly important as they are one of the main aspects to determine if an income is foreign sourced. Most offshore companies normally operate under this description, so this is usually not an issue, but a study of your specific situation is recommended to make sure your specific situation meets these requirements, but in general, for you to have a foreign permanent establishment, you just have you carry most of your business activities offshore, exceptions to some companies apply.

What is a Seychelles Eleventh Schedule Company?

A Seychelles Eleventh Schedule Company is a company that on its own or as a part of a multinational group, meets one of the following conditions:

• balance sheet total in excess of €20 million;

• net turnover of in excess of €40 million; or

• an average number of employees in excess of 250 during the financial year.

Special Tax Rules for an Eleventh Schedule Company

Section 5 (1A) – Source Rules for Eleventh Schedule Companies

(1A) An amount derived by a resident person that is a company to which the Eleventh Schedule applies shall be regarded as derived from sources in Seychelles if it is derived from:

(a) activities conducted, goods situated, or rights used in Seychelles;

(b) activities conducted outside Seychelles, unless attributable to business carried on through a permanent establishment of the person outside Seychelles;

(c) income derived from an intellectual property right held in Seychelles, other than qualifying income from—

(i) a patent; or

(ii) a right functionally equivalent to a patent;

(d) passive income, other than that referred to in paragraph (c), generated outside Seychelles, except to the extent that the resident company is a qualifying company in accordance with the Eleventh Schedule.

Passive income earning companies need to be a qualifying company, these companies must have Economic Substance in Seychelles. Check the following articles to learn more about these Economic Substance Requirements in Seychelles.

Read about Seychelles Economic Substance Requirements