The government of Seychelles plans to reduce its business tax rates beginning in January 2022 and is working on other business and international tax reforms, which were announced in the National Budget delivered November 12.
Transfer pricing and international reforms
The finance minister stated in his budget speech that the Seychelles government is working with the World Bank to propose amendments to business tax laws with respect to transfer pricing.
Also with respect to transfer pricing, the budget documents note that the Seychelles Revenue Commission is building tax audit capacity in transfer pricing with the help of Tax Inspectors Without Borders, which is providing technical assistance. Furthermore, the government of India is providing a tax expert for the next year to assist with building capacity in managing transfer pricing cases in the tourism and financial services sectors.
The finance minister also noted that the government is working with the OECD on the taxation of revenues collected by multinational entities and that it will begin consultations next year on a new regime.
The budget documents explain that one of Seychelles Revenue Commission’s current challenges is the need for specialist experience for implementing international obligations in tax relating to transfer pricing, base erosion and profit shifting (BEPS), the digital economy, and complex audit cases.
Business tax changes
Regarding business tax rates, the budget provides for the top rate to decrease from 30% to 25% for business profits above SCR 1 million (USD 74,000). For profits below this threshold, the rate drops from 25% to 15%. A higher top rate of 33% will apply for certain sectors, including telecommunications, banking, and insurance.
The budget will also generally end preferential tax rates currently in place for various sectors, such as international corporate service providers, businesses listed in Seychelles Securities Exchange, and businesses linked to medical services. However, there will be a “grace period” for the agricultural sector, and fisheries will continue to benefit from an exemption.
In addition, the government will diminish some tax expensing benefits. It will reduce the 145% accelerated depreciation rate for capital investments to 100%. Furthermore, tax deductions for salaries of employees who graduated from professional centers will be reduced from 200% to 125%.
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