A farewell to offshore: 2019 Registration Company rules for Seychelles with St. Vincent and Grenadines

The change in the laws of the two island jurisdictions - Seychelles, as well as Saint Vincent and the Grenadines - is worth noting quite serious. Since January 2019, the governing bodies of these countries have changed not only the rules for registration and the work of the tax system, but in fact they are gradually transforming their offshore jurisdictions into zones with minimal taxes.

Law and Trust International present a list of changes that have already been introduced in these two island states. Please pay attention to the mandatory requirements for company registration in the Seychelles, as well as the rules to register a company in St. Vincent and the Grenadines.

Saint Vincent and the Grenadines (SVG)

On December 27, 2018, the government of the island state of Saint Vincent and the Grenadines introduced a number of changes to the activities of registered companies in the country. This decision was based on the accepted recommendations from the EU (the so-called EU COCG Pact), as well as on the conditions for the implementation of the BEPS framework program. The main reasons for the introduction of new rules were warnings about the possibility of including the state in the black list of EU offshore areas, as well as strengthening the fight against money laundering and attempts to withhold taxes.

From January 1, 2019, Saint Vincent and the Grenadines introduced a territorial taxation regime, which will be valid until the end of the 1st quarter of 2019 (until March 31 of the current year). By its terms, companies that have been registered within the jurisdiction of SVG do not fall under their significant legislative changes (except for some formal procedures). They were offered the possibility of an “offshore vacation” until the beginning of 2021 with certain conditions.

As for the new rules, starting from January 1, 2019, all companies that will be registered from this date will have to:

1. Accept the name change from International Business Company (IBC) to Business Company (BC) until March 31, 2019;
2. All persons who will claim the director and secretary of the company are required to submit applications for approval of candidates;
3. BC companies are required to complete annual reports (only large companies);
4. Business Companies can no longer issue bearer shares;
5. For BC companies, direct tax exemption is removed;
6. Local residents have the right to register a BC company;
7. Custom and other duties are retained.

In the administrative part there have also been changes. Now companies in Saint Vincent and the Grenadines at registration require:

• New Forms to be filed for the incorporation of BCs as of January 1“, 2019;
• Obtain at registration Certificate of Incorporation and Certificate of Exemption from Import Duties;
• Certificate of Taxing Exemption will NOT be issued.

This means that companies formed in 2019 will be subject of taxation in SVG and would need to file a tax return. The current local corporate rate is 30%. However, SVG will adopt a territorial tax regime before the end of Q1 2019 regime meaning that BC's will only be taxed on income earned in SVG and NOT worldwide. For IBCs formed before 2019, these entities may be required to file tax returns in the future but this will not be ready for at least another 2 years according to the FSA.

As for Economic Substance, the government of SVG will see what is acceptable to the EU in short order and enact legislation that complies with their requests. Economic substance means:

1. The physical presence on the islands;
2. Hiring staff for the company (at least 2 people);
3. Opening an account in a local bank;
4. The presence of an agent of the company or its authorized representative;
5. Reporting about taxes and fees.

For more information on changes regarding the change in the procedure for registering a company in St. Vincent and the Grenadines, please contact our managers.

Seychelles (SC)

Since January 1, 2019, a number of important changes have occurred in the legislation of the Seychelles. They will deal with two important aspects – 1) regulation of the activity of companies with local companies and 2) preferential parameters for IBC companies.

Based on the International Business Company Act 2004 (the latest changes in which took place on November 26, 2018, and entered into force on January 1, 2019), an IBC type company now has no right:

1. To attract to the acquisition of their own goods or services, the local target audience. The company can interact only with non-residents of the Seychelles from any regions.
2. To acquire ownership of real estate or another business in the Seychelles. The concept of "real estate" includes: land, buildings for industrial and residential purposes, garages, warehouses, etc.
3. Can not carry out banking or insurance activities; in order to advance in these areas, registration in another organizational and legal form is required, as well as additional licensing.

In other words, if the IBC conducts any financial activity in the Seychelles, this should be displayed in the tax return. It is also important to know that according to the rules of the local FSA regulator, the submission of tax documentation can be initiated by the FSA under the AML program.

Also, this Companies Act in the new edition abolishes the income tax benefit in the amount of 1.5% in full. This Act also removes the exemption from withholding tax. However, companies operating under a special license (CSLs type of license) registered before October 16, 2017, may still fulfill the tax benefits and are exempt from taxation until June 30, 2021.

As in Saint Vincent and the Grenadines, a system of territorial (local) taxation will be introduced on the territory of the Seychelles. However, as we have said, some companies will be exempted from its operation until 2021, but those companies that will be registered in 2019 fall under this principle from the second quarter of 2019.

For more information on changes regarding the change in the procedure for registering a company in the Seychelles, please contact our managers.