Seychelles, paradise territory for your holidays would they also be a paradise for your finances? Creating an offshore company in Seychelles seems indeed very advantageous: a cost of minimalist creation in a simple and reassuring regulatory framework. But is this paradise really one? The question must be studied carefully and the answer may not be as idyllic as that.
Offshore company in Seychelles: a very well-functioning operation with many advantages
You have surely heard about Seychelles, this paradise with turquoise waters and sandy beaches. But do you know that this island archipelago, independent since 1976 and a former British Commonwealth colony, is also in a good position for tax havens and even in fourth place? A place of choice whereas this activity did not start until 1994, under the impulsion of liberal reforms initiated president France-Albert René, which allowed to authorize more privatization as well as the multipart, in this initially socialist country Marxist tendency.
It must be said that the country has worked well on its subject with a series of serious advantages: offshore registration fees among the weakest , speed of the procedure (24 hours), no VAT or tax (just a small annual fee), minimalist and confidential accounting, possibility of using a nominee or to make more serious a ” Nominee Director “, no mandatory annual general meeting, presence of offshore banks .
The cherry on the cake: a time zone advantageous between Europe and Asia, a local staff who speaks perfect French and English, and finally the political and social stability of a small country quiet and hardworking. The two dominant economic sectors remain tourism and tuna fishing, with offshore activity still playing a relatively minor role.
Since 1994, more than 150,000 companies have been registered, with more than 600 new offshore companies per month. The type of company that created most frequently is the International Business Company (IBC), logical as internationally oriented forbidden to do business on the same soil Seychelles or own real estate, renting office is however possible. This is the model most present in the country because the leaders have no nationality constraint or no minimum capital to bring. There are about 70,000 IBCs currently operating.
How much does it cost to create an IBC? Between $ 500 and $ 900, this varies according to the specialized service companies and the options they offer in their “packs”. You may need to pay extra for a “Nominee Director”, a designated shareholder, a virtual office and other services at your convenience. It will also pay the annual fee of $ 110 the first year and $ 107.50 in the following years.
As for the administrative formalities, nothing very complicated: a certified copy of the passport or identity document, as well as proof of residence of fewer than three months and the turn is played!
The target profiles to set up an IBC are quite diverse: entrepreneurs, traders, online retailers, consultants, expatriates, intellectual property rights holders, real estate owners, individuals who want to transmit wealth in order to prepare their succession … will be limited to a list of “honest” profiles. There is still an “entry ticket” to this kind of editing for it to be profitable: 50,000 USD seems to be a minimum.
If you want to become a tax resident in Seychelles, it is, of course, possible and advantageous thanks to the creation in Special License Companies (CSL), always for activities located outside Seychelles. Only, it is necessary to check if your country of origin signed a treaty of not double taxation, but for Europe, it is oddly European tax havens that have signed (Monaco, Luxembourg, Cyprus, Isle of Man, Jersey, and Guernsey) and therefore no big country in Europe.
The cost of a CSL is higher than for an IBC, 1000 USD of an annual license, as well as 1.5% of global income tax.
Finally, to support this business environment, Seychelles has six commercial banks as well as two foreign exchange agencies and a credit institution. Only two of these banks hold the license for offshore activities.
So if you are an honest entrepreneur or expatriate, non-resident tax in Europe or the US, you do business in the Africa-India-Pacific zone, then go for it! Install your offshore company in Seychelles, learn more at offshorecitizen.net/offshore-company/.
Disadvantages to know before launching
The advantages of setting up an offshore company in Seychelles, therefore, seem to be numerous: very low cost of creation and maintenance, confidentiality, the security of the country. But as any medal has its flip side, there are not only advantages to owning an offshore structure in Seychelles.
Firstly, the relations between some countries of the European Union and Seychelles are not all good. The lack of transparency, banking secrecy, and non-cooperation with some EU countries explain the presence of Seychelles in the gray list of tax havens, made public on 5 December 2017 by Brussels.
The country, like the 47 other jurisdictions on this list, has promised to improve by 2019, having made the commitment to subscribe to the recommendations of the European Union on its fiscal policy, this which probably means the end of the little secrets that cover Europeans with offshore accounts in Seychelles.
For now, some transactions with Europe can be complicated or impossible or taxed at very high levels (30%). Finally, some European banks no longer want to work with Seychelles to safeguard their reputation (so Barclays closed its Seychellois branch in 2015).
If you are European or resident in Europe, not declaring an offshore company in a tax haven can lead to severe penalties. Take the example of this Reunion businessman who had set up an offshore company in Seychelles in order to benefit from capital from Dubai and which ended up with 200,000 euros of a tax adjustment. Too bad luck, he said he lost the original 200,000 euros invested in this company, stolen by his “partner”, but nothing has done, the tax was relentless. He lost 400,000 euros for this game.
An exemplary case that comes to remember that the world of offshore finance is sometimes attended by unsavory individuals.
Moreover, the name of this person appeared during the investigation of the “Panama Papers “, this gigantic case of leak of documents from a Panamanian offshore law firm: “Mossack Fonseca”. A scandal that revealed what we already knew, namely that tax havens are often used as paravents for illegal financial activities: tax evasion and money laundering.
These are more than 11 million documents about 214,000 offshore companies that have found themselves in the public square, involving politicians of all origins, billionaires, stars of variety or sport and – more boring for the reputation of Panama – dangerous criminals.
In 95% of cases, the hidden names of the shareholders involved complete strangers, perhaps present in these files for reasons quite honorable, for example, to do business with Asia. In many cases, they were “little people” who decided to shelter some of their savings from the Inquisitor Tax. Thus, no less than 560 tax audits have been launched in France against the unlucky French present in these files.
What guarantees that someday Seychelles will not be affected by such a scandal?
Alternatives to a solution in Seychelles
That is why it is quite interesting because it is not illegal, as part of the tax optimization of your company if you have one, to open a holding company in one of the few European countries where corporate taxes are very low. For example, Ireland and Luxembourg have recently become known for hosting European headquarters which receive all the profits made in Europe. This system is also quite valid in the context of a small company, French for example, which would derive revenue from sales made in other countries of Europe or the world.
By creating a holding company in Luxembourg or elsewhere, it can optimize its tax burden and reinvest this money for its development. Be careful however, it is watched closely by the tax judges who control the economic reality of editing. There is no question of creating an empty shell for purely financial purposes and falling for abuse of rights.
The other tax havens of Europe are numerous and are even part of the EU for some: Andorra, Cyprus, Estonia, Guernsey, Gibraltar, Liechtenstein, Malta, Isle of Man, Principality of Monaco. Thus Cyprus has long been a place of choice for the recycling of money from Russia, only the crisis of 2012-2013 has lifted the veil on a more or less dirty money economy, at the very heart of ‘Europe.
The interest of the existence of tax havens
Who should all these tax havens be addressed to if they are banned from OECD citizens? In non-Western only, this while the developing countries and see spinning 80 to 90% of their potential tax revenue? To dictators and their entourage, ministers or officials who have received bribes, arms dealers, criminals, drug barons, and other ugly people?
A lot of honest people and well -established companies need tax havens to protect their business, to conclude contracts, to gain market share, to develop internationally. Are they more numerous than dishonest ones? As such the investigation of the “Panama Papers” can leave us on our hunger. Admittedly, we had the right to confirm fraud, for example concerning the Balkany, as well as the proof that tax havens were often not very close to the probity of their clients but what percentage does it represent in the mass? Mystery!