The Seychelles Special Licence Company has certain elements of a domestic company together with a traditional offshore company, forming a unique financial licence that in the world of offshore company formation.
A Seychelles CSL is a domestic company, incorporated under the Companies Act 1972, which is granted a special licence under the Companies 'Special Licence' Act 2003 (CSL Act).
Unlike the Seychelles IBC (which is a tax-exempt entity and non-resident for Seychelles tax purposes) the CSL is a tax resident of the Seychelles and may carry on 'permitted' business inside as well as outside of Seychelles.
However, the permitted business requirements are such that CSL status is only granted where the Company is to hold investments or provide services to clients, outside of Seychelles.
The CSL has substantial appeal, particularly to international groups, as a tax-efficient vehicle for permitted uses under the CSL Act, including in particular, use as an intermediary holding company to hold and license out intellectual property or as a services company (e.g. management, consultancy, etc.)
For more information on Seychelles:
A CSL is liable for Seychelles business tax at the rate of 1.5% on its world-wide taxable income (which, when a CSL is accessing a Seychelles Double Taxation Avoidance Agreement, may be fully avoided when tax credits apply – for example, if not less than 1.5% foreign withholding tax has been paid in respect of income received by a CSL). 'Taxable income' means assessable (gross) income less allowable deductions.
A CSL is exempt from Seychelles withholding taxes on dividends, interest and royalties.
A CSL is exempt from stamp duty on property transfers, share transfers and other business transactions.
The fiscal exemptions granted to a CSL under the CSL Act shall be guaranteed for ten years from the date of incorporation of a CSL and shall continue in force thereafter unless otherwise provided for by written law (the statutory guarantee period is anticipated to be extended to 20 years)
The CSL (unlike the IBC) has access to Seychelles' steadily expanding network of double taxation avoidance agreements (DTA) – including China, Thailand, Indonesia, Malaysia, Cyprus, South Africa, Botswana, Mauritius, Oman, etc. Details of any specific Seychelles DTA are available upon request. Seychelles DTAs with China and Indonesia are particularly attractive in terms of available tax relief.
|Seychelles Special Licence Company |
|Political Stability ||Very Good |
|Legal System ||Hybrid (Common Law/Civil Law) |
|Disclosure of Beneficial Owner to Registrar ||Yes |
|Disclosure of Beneficial Owner to Registered Agent ||Yes |
|Migration of Domicile Permitted ||Yes (Incoming and Outgoing) |
|Non-English Language Names Allowed ||Yes |
|Operational Objects ||Specific to intended business |
|Tax Resident ||Yes |
|Tax on Worldwide Profits ||1.5% |
|Access to Double Taxation Avoidance Treaties ||Yes |
|Corporate Requirements |
|Minimum Shareholders ||Two |
|Minimum Directors ||Two |
|Bearer Shares Allowed ||No |
|Corporate Directors Allowed ||No |
|Company Secretary Required ||Yes |
|Standard Authorized Share Capital ||USD 1,000 (up to USD 100,000) |
|Minimum Paid Up Capital ||10% of authorized share capital |
|Corporate Seal ||No |
|Local Requirements |
|Registered Office/Agent ||Yes |
|Local Secretary ||Yes |
|Local Directors ||No |
|Local Meetings ||No |
|Government Registry of Directors ||Yes, not public |
|Government Registry of Shareholders ||Yes, not public |
|Annual Requirements |
|Audited Accounts ||No |
|Annual Filing of Returns ||Yes |
|Annual Meeting ||No |
|Meeting Location ||Anywhere, proxy also allowed |
|Incorporation Time ||2-4 weeks |
China tax changes
China's recently enacted Enterprise Income Tax 'EIT' Law, effective 1 January 2008, introduced a new uniform income tax regime which applies to both foreign and domestic enterprises.
Under the EIT Law, foreign investors are now exposed to higher Chinese taxes than in the past. China is also becoming increasingly serious about tax collection (Chinese tax collection was up by approximately 30% for year ended 2007).
Under the EIT Law Chinese companies are generally subject to 20% Chinese tax on payments to non-residents. It is anticipated that many foreign owned businesses will enjoy a concessionary 10% withholding tax rate, but which may be further reduced using a Double Taxation Avoidance Agreement (DTA).
Seychelles / China DTA
Use of a Seychelles CSL, in conjunction with the Seychelles / China DTA, provides significant scope to reduce Chinese tax exposure. The Seychelles / China DTA caps Chinese withholding tax on dividends at 5% and 10% on interest and royalties, provided that the CSL has its effective management in Seychelles (and the CSL is not tax resident in China).
In contrast, while the Hong Kong / China DTA also caps Chinese withholding tax at 5% if the Hong Kong company owns 25% or more of the shares in a Chinese company, the Hong Kong / China DTA only caps Chinese withholding tax at 10% if the Hong Kong company owns less than 25% of a Chinese company.
The Seychelles / China DTA therefore has a distinct advantage over the Hong Kong / China DTA in such cases, which will be relevant to Chinese investment mutual funds and other non-controlling foreign investors.
Another significant benefit under the Seychelles / China DTA is avoidance of Chinese tax on capital gains made by a CSL selling shares held by it in a Chinese company if the CSL holds less than 25% of the issued shares in the Chinese company and the assets of the Chinese company do not principally consist of immovable property (real estate).
Once again, this will be of interest to China oriented mutual funds and other non-controlling investors.
China has already indicated plans to enforce taxing of capital gains on Chinese share disposals.
A further attractive benefit under the Seychelles / China DTA is that no tax is payable in Seychelles (on Chinese-sourced income of the CSL) if Chinese withholding tax of at least 1.5% is paid on payments made by a Chinese company to a CSL.
That is, under the Seychelles / China DTA withholding tax paid in China can be credited and set-off against the 1.5% Seychelles business tax payable by the CSL to fully discharge all business tax liability in Seychelles.
Annual fees start at USD 2,000 in addition to any nominee director or shareholder fees that may apply.
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