The Seychelles Government is currently passing into law substantial amendments to its International Trusts Act (which was initially published in 1994).
The main changes include that Seychelles Trusts may now be for an indefinite period (ie removal of the rule against Perpetuity) and the Trustee may now be a Seychelles Licensed Trustee or, for “connected” trusts (including the typical Family Trust), the client may form an IBC Private Trust Company (“PTC”) to serve as Trustee.
This article reveals and discusses in depth the full raft of changes to the Seychelles International Trusts Legislation.
1.1 A trust is a legal arrangement created when the owner of assets (known as the settlor) transfers ownership of those assets to a trustee to hold and administer under the terms of a trust instrument (also known as a trust deed) for the benefit of: (i) one or more beneficiaries; or (ii) a charitable or non-charitable purpose; or (iii) one or more beneficiaries and for a charitable or non-charitable purpose.
1.2 A trust is not a separate legal entity: it operates and owns assets through its trustee, who holds the trust assets in accordance with the terms of the trust deed for the benefit of the trust’s beneficiaries or purpose. The settlor of a trust may in the trust deed reserve to a protector or other person certain rights relating to the trust, such as the right to appoint or remove trustees or beneficiaries.
1.3 Seychelles trusts are provided for by the Trusts Act 2021 (the Act), which repealed and replaced the International Trusts Act 1994 as amended (the former Act). Former trusts (a trust registered under section 75 of the former Act and subsisting as at the commencement of the Act, 6 August 2021) are deemed to be re-registered as registered trusts under the Act with effect from 6 August 2021 (section 96(2) of the Act).
BENEFITS OF TRUSTS
1.4 The benefits of trusts primarily flow from the divestment of ownership and control of assets by the settlor. As the assets of a trust do not form part of the settlor’s personal property or estate, trusts are a useful vehicle for tax and estate planning as well as for asset protection purposes. Trusts are commonly used to hold investments such as company shares, bonds and real estate or as part of a family office structure.
Wealth Protection
1.5 On transferring assets into a trust (acting by its trustee), the settlor ceases to own the assets and they become trust assets, which (in the absence of fraud) are protected from attack by the settlor’s personal creditors. The Act puts in place strong trust asset protection provisions, including a two year claim limitation period protecting trust assets from attack by creditors of the settlor and exclusion of foreign forced-heirship laws.
Outside estate succession planning
1.6 Trusts are often formed as a means by which an individual owning wealth can make arrangements for the enjoyment of certain assets by designated beneficiaries during his or her lifetime and succession arrangements for the transmission of the assets to one or more beneficiaries after his or her death without reference to a will and avoiding the cost and complications of probate.
Privacy
1.7 A Seychelles trust is registered with the Seychelles Financial Services Authority (FSA) and a registration number allocated, but the trust deed is not filed with the FSA or with any other Seychelles governmental body. Details of trust settlors, beneficiaries and protectors, if any, are required to be filed with the Seychelles Financial Intelligence Unit (FIU), but are not publicly accessible.
No Seychelles tax on foreign income or profits
1.8 There is no Seychelles taxation on foreign income or profits of a Seychelles trust.
Protectors (optional)
1.9 The trust deed may appoint a protector and reserve certain powers to the protector, such as the right to appoint or remove trustees or to approve the addition or removal of beneficiaries or amendment to the terms of the trust deed.
1.10 Unlimited duration
A Seychelles trust, including a non-charitable trust with beneficiaries, may continue in existence for an indefinite period.
Requirement for licensed Seychelles resident trustee or private trust company trustee
1.11 A Seychelles trust is required to have an approved trustee: (i) a corporate trustee licensed under the International Corporate Service Providers Act by the FSA to provide trustee services (licensed trustee) or, (ii) in the case of a connected trust (as defined in the International Corporate Service Providers Act), a licensed trustee or a private trust company (section 21(1) of the Act). Additionally, one or more non-resident co-trustees may be appointed.
Independence and stability of Seychelles
1.12 Seychelles is a stable and independent Country, having gained independence from the UK in 1976.
2. TYPES OF TRUSTS
In order to accommodate specific needs or wishes of settlors, various types of trust are accommodated under Seychelles law, including:
2.1 Discretionary Trust – The discretionary trust provides flexibility and is the most common type of offshore trust. Under the terms of a discretionary trust the trustee is given wide discretionary powers as to when, how much and to which beneficiaries he should distribute the income and capital of the trust. Such a form of trust is useful where at the time of creation of the trust the future needs of beneficiaries cannot be accurately determined. The beneficiaries are not regarded as having any direct legal rights over any particular portion of the trust fund but only a right to be considered to benefit when the trustee exercises his discretion.
- Letter of wishes – The settlor does not have any ownership interest in trust property. The trustee of a discretionary trust administers the trust at its absolute discretion, subject to the terms of the trust deed, but a letter of wishes is usually provided by the settlor, setting out his or her wishes in relation to administration of the trust. The letter serves as a non-binding guide to the trustee. A letter of wishes will typically contain the settlor’s wishes with respect to beneficiary entitlements, including who gets what, when and if any conditions are to be imposed. See Annexure 1 to this Guide for a sample “letter of wishes” (each letter should be tailored to reflect a settlor’s specific circumstances / wishes).
- Dealings through the Trustee - Once a trust is created, the settlor should not be exerting control over the trust assets as if it remained his or her own property. This is a factor a Court may consider in deciding if a trust is valid or is a ‘sham’. If there are to be dealings with trust property, these should occur via the trustee or with the trustee’s knowledge and approval.
- Company and Trust – A trust may be used together with a company. Often a company and trust dual structure is used, where the company is the active entity and the trust is passive in that its main role is to hold and own the shares in the company; with the company owning any property, funds or other assets/investments.
2.2 Fixed Interest Trust – Under a fixed interest trust, the principal beneficiary will normally be granted a vested interest in the income of the trust fund throughout his or her lifetime and the discretion of the trustee regarding the disposition of the trust fund will be limited. For example, the trust instrument may specify that the trustee is required to distribute all of the income of the trust fund to a particular individual during that person’s lifetime and subsequently to distribute the capital of the trust fund in fixed proportions to named beneficiaries (such as the settlor’s children). In view of potential tax reporting obligations, the proposed settlor and beneficiaries should seek prior expert legal and tax advice where they are resident and domiciled.
2.3 Purpose Trust – A purpose trust means a trust for the fulfillment of one or more non-charitable purposes and without beneficiaries. For those clients who are looking for a neutral party in a network of commercial transactions, the purpose trust, in combination with a company wholly- owned by such a trust, has provided the means by which bankruptcy remoteness can be achieved, while enabling the transaction to be effected “off balance sheet” or as an “orphan” structure in relation to its originator. Purpose trusts have been used in conjunction with asset financing transactions, securitisations and private trust companies. For example, the purchase by a specially incorporated company of a ship or aircraft with finance provided by a lending institution. They are also used in credit enhancement and in financing transactions.
2.4 Charitable Trust – A trust may be established for charitable purposes under the Act. These include (among others) the relief of poverty, advancement of education, religion, health, arts, sport, animal welfare, human rights and fundamental freedoms or the protection of the environment (section 17 of the Act). A charitable purpose trust is not to be confused with a public charity established under the applicable law of charities in any given jurisdiction. We do not provide trustee services for charitable trusts.
3. ESTABLISHMENT OF SEYCHELLES TRUST AND REGISTRATION OF TRUSTEE APPOINTMENT
3.1 A Seychelles trust is established when a settlor with legal capacity to contract provides trust property during the person’s lifetime (inter vivos) or by will to one or more trustees (section 4(1) and section 8(1) of the Act) to hold such property: (i) for the benefit of one or more beneficiaries; or (ii) for any charitable or non-charitable purpose which is not for the benefit only of the trustee; or (iii) for both the benefit of one or more beneficiaries and for any purpose referred to in paragraph (ii) (section 3(1) of the Act).
Seychelles trusts to be in writing
3.2 A Seychelles trust shall be of no effect unless created in writing by either: (i) a declaration of trust executed by the original trustees of the trust in which the trustees acknowledge that they are holding the trust property in accordance with the terms of the trust; or (ii) a trust deed executed by the settlor and the original trustees of the trust by which the trust property is transferred to the trustees and they acknowledge that they shall hold the trust property in accordance with the terms of the trust (section 8(2) of the Act).
Registration of trustee appointment declaration
3.3 An approved trustee, on appointment as trustee of a Seychelles trust, is required to make a trustee appointment declaration and to apply for registration of the trustee appointment declaration by submitting it to the FSA with the registration fee of US$200 (section 11(1) and First Schedule of the Act). Pursuant to section 11(2) of the Act, the trustee appointment declaration is required to be in writing and state:
(a) the name of the trust;
(b) the date of formation of the trust;
(c) the name and address of each approved trustee of the trust;
(d) that the property of the trust does not include any: (i) immovable property in Seychelles; or (ii) shares or other interests in any company or other entity which owns or has any interest in immovable property in Seychelles;
(e) that the instrument creating the trust is in writing; and
(f) the proper law of the trust.
3.4 The trust instrument (deed or declaration creating the trust) is not required to be filed with the FSA.
3.5 On receipt of a trustee appointment declaration accompanied by the registration fee, the FSA will: (i) register the trustee appointment declaration in the Register; (ii) allocate a reference number to the trust; and (iii) issue to the approved trustee who submitted the trustee appointment declaration a letter stating the name of the trust, the reference number of the trust and the date of registration of the trustee appointment declaration (section 11(3) of the Act).
Duration of trust
3.6 Unless its terms provide otherwise, a trust (including a non-charitable trust for beneficiaries) may continue in existence for an indefinite period (section 15(1) of the Act). No rule against perpetuities or excessive accumulations shall apply to a trust or to any advancement, appointment, distribution or application of assets from a trust (section 15(2) of the Act).
4. TRUST PROPERTY
Property held on trust
4.1 Subject to sections 10(2) and 14(2) of the Act (see paragraphs 4.2 and 4.3 below), any property worldwide may be held by or vested in a Seychelles trust (via its trustees) and, subject to the terms of the trust, a trustee may accept from any person property to be added to the trust property (section 10(1) of the Act).
Prohibitions relating to Seychelles trusts
4.2 Pursuant to section 10(2) of the Act, a Seychelles trust shall not:
(a) carry on any activity which is unlawful, immoral or contrary to any public policy of Seychelles;
(b) own or otherwise hold an interest in: (i) immovable property (real estate) in Seychelles; or (ii) shares or other interests in any company or other entity which owns or has any interest in immovable property in Seychelles.
Invalidity of trusts
4.3 Pursuant to section 14(2) of the Act, a Seychelles trust shall be invalid and unenforceable to the extent that:
(a) it purports to do anything which is contrary to the law of Seychelles;
(b) it purports to confer any right or power or impose any obligation the exercise or carrying out of which is contrary to the law of Seychelles;
(c) it purports to apply to immovable property (real estate) situated in Seychelles in contravention of section 10(2)(b) of the Act;
(d) it is created for a purpose in relation to which there is no beneficiary identifiable or ascertainable, unless: (i) it is a charitable trust; or (ii) it is a purpose trust and if the terms of the trust provide for: (A) the appointment of an enforcer in relation to the trust’s non- charitable purposes; and (B) the appointment of a new enforcer at any time when there is none; or
(e) the Court declares that: (i) the trust was established by duress, fraud, mistake, undue influence or misrepresentation or in breach of fiduciary duty; (ii) the trust is immoral or contrary to public policy; (iii) the terms of the trust are so uncertain that the performance is rendered impossible; or (iv) the settlor was, at the time of its creation, incapable of creating the trust.
Protection of trust property
4.4 An important matter relating to trusts, especially when established for asset protection purposes, is the extent to which trust property is safe from attack by litigants or other claimants seeking to pursue claims relating to the settlor or beneficiaries. The Act provides a number of robust provisions aimed at protecting trust assets.
Anti-Forced Heirship
4.5 In some countries, the law imposes restrictions on the freedom of an individual to dispose of their property by will (often referred to as forced heirship). The Act defines heirship rights as claims or interests in, against or to property of a person arising or accruing in consequence of his or her death, other than rights, claims or interests created by will or other voluntary disposition by such person or resulting from an express limitation in the disposition of property (section 66(1) of the Act). In countries imposing heirship rights, statutorily-designated relatives of a deceased are entitled to claim a fixed percentage of the estate.
4.6 No claim against a trust on the basis of foreign forced heirship rights shall be recognized or enforced under Seychelles law as the Act expressly provides that any questions in respect of a Seychelles trust (including as to the validity of a trust, the validity or effect of any transfer of property to a trust, capacity of the settlor or the administration of a trust), shall be determined in accordance with the law of Seychelles and no rule of foreign law shall apply (section 66(1) to (3) of the Act), and such questions shall be determined under Seychelles law without consideration of whether or not:
(a) any foreign law prohibits or does not recognise the concept of a trust; or
(b) the trust or disposition avoids or defeats rights, claims, or interests conferred by any foreign law upon any person by reason of a personal relationship to the settlor or by way of heirship rights, or contravenes any rule of foreign law or any foreign judicial or administrative order or action intended to recognize, protect, enforce or give effect to any such rights, claims or interests.
4.7 No foreign judgment with respect to a trust shall be enforceable in Seychelles to the extent that it is inconsistent with section 66 of the Act (see preceding paragraph): section 66(4) of the Act.
Claims against a trust by creditors of the settlor
4.8 The general rule is that a disposition of property to a trust shall not be void, voidable or otherwise liable to be set aside, or subject to any implied condition, by reason of: (i) bankruptcy or liquidation of the settlor; or (ii) any action, proceeding or other claim by a creditor of the settlor (section 67(2) of the Act).
4.9 However, in narrow circumstances, a creditor of the settlor of a trust may bring an application in the Supreme Court of Seychelles (the Court) seeking to set aside a disposition of property to a trust. If the Court, in respect of a claim by a creditor is satisfied beyond reasonable doubt that the disposition of property to the trust was made: (i) with an intent to defraud and at an undervalue; or (ii) the transferor was insolvent or became insolvent as a result of the disposition, the Court shall declare the disposition void and set aside to the extent necessary to satisfy the obligation of the claimant creditor together with such costs as the Court may direct (section 67(3) of the Act). In respect of such a claim against a trust:
(a) The burden of proving an intent to defraud shall be upon the creditor seeking to set aside the disposition to the trust (section 67(4) of the Act); and
(b) No legal action or proceedings under section 67(3) of the Act shall be commenced after two years from the date of the relevant disposition to the trust (section 67(5) of the Act).
5. SETTLORS
5.1 Subject to the Act, any person, known as a settlor, who has the legal capacity to contract may create a trust by providing trust property or by making a testamentary disposition on trust or to a trust (section 4(1) of the Act).
5.2 A settlor may also be a trustee, a beneficiary, a protector or an enforcer, but shall not be the sole beneficiary or trustee of a trust of which he or she is a settlor (section 4(2) of the Act). The preceding requirement (section 4(2) of the Act) is not contravened if a settlor is the sole beneficiary of a trust during the settlor’s lifetime, provided that the terms of the trust provide for the trust to have one or more persons as beneficiary upon the settlor’s death (section 4(3) of the Act).
5.3 A settlor shall be deemed to have had the capacity to create a trust if, at the time that he or she transfers or otherwise vests trust property in a trust, he or she is not a minor, is of sound mind and not incapacitated under: (i) the laws of Seychelles; or (ii) the laws of his or her domicile or nationality; or (iii) the proper law governing the transfer or disposition (section 4(4) of the Act).
Reservation of powers by settlor
5.4 A settlor may (but is not required to) reserve or grant, for himself or herself or another person, certain powers in relation to the administration of the trust. Under section 16(1) of the Act, a Seychelles trust is not invalidated by the reservation or grant by the settlor (whether to the settlor or to any other person) of all or any of the following powers or interests:
(a) a power to revoke, vary or amend the terms of a trust or any trusts or powers arising wholly or partly under it;
(b) a power to direct or approve the advancement, appointment, distribution or application of income or capital of the trust property;
(c) a power to act as, or to direct the appointment or removal of, a director or officer of any corporation wholly or partly owned by the trust;
(d) a power to direct the trustee in connection with the purchase, retention, sale, management, lending, pledging or charging of the trust property or the exercise of any powers or rights arising from such property;
(e) a power to appoint or remove any trustee, enforcer, protector or beneficiary;
(f) a power to appoint or remove a professional person acting in relation to the affairs of the trust or holding any trust property;
(g) a power to change the proper law of the trust or the forum for the administration of the trust;
(h) a power to restrict the exercise of any powers or discretions of trustee by requiring the trustee that they shall only be exercisable with the consent of the settlor or any other person specified in the terms of the trust;
(i) a beneficial interest in the trust property.
Recommendation to obtain prior independent expert legal and tax advice
5.5 The role of the trustee (who legally holds trust property) is to manage and control the trust and trust property in accordance with the terms of the trust instrument. If a settlor (or someone appointed by the settlor other than the trustee) is given very wide powers in respect of a trust (e.g. the power to direct or approve ‘fiscal’ matters such as investment activities or distributions and the power to revoke the trust) this may potentially undermine the trustee and may cause the trust to be viewed as a sham or a mere nominee vehicle of the settlor or may constitute ‘management or control’ so as to make the trust ‘tax resident’ where the settlor is resident or domiciled, which may have adverse tax consequences for the trust or settlor where the settlor is resident or domiciled. It is recommended that an intended settlor seek expert legal and tax advice in his or her country of residence and domicile before establishing a trust, including as to the scope of any powers the settlor proposes to reserve in respect of the trust.
6. BENEFICIARIES
6.1 A beneficiary shall be: (a) identifiable by name; or (b) ascertainable by reference to: (i) a class, or (ii) a relationship to some person whether or not living at the time of the creation of the trust or at the time which under the terms of the trust is the time by reference to which members of a class are to be determined (section 18(1) of the Act).
6.2 The terms of a trust may provide for the addition or removal of a person as beneficiary or for the exclusion of a beneficiary from benefit (section 18(2) of the Act). The terms of a trust may impose upon a beneficiary an obligation as a condition for benefit (section 18(3) of the Act).
6.3 The terms of a trust may make the interest of a beneficiary liable to termination (section 68(1) of the Act). Without prejudice to section 68(1) of the Act, the terms of a trust may make the interest of a beneficiary in the income or capital of the trust property subject to: (i) a restriction on alienation or disposal; or (ii) diminution or termination in the event of the beneficiary becoming bankrupt or any of his or her property becoming liable to sequestration for the benefit of his or her creditors (section 68(2) of the Act).
Beneficiary’s entitlement to information
6.4 Subject to the terms of the trust (which may restrict a beneficiary’s right to trust information), a beneficiary is entitled, on written request to the trustee of the trust, to inspect or obtain: (i) a copy of the instrument creating the trust, any amendment thereto and any deed supplemental to the instrument creating the trust; and (ii) a copy of the annual audited financial statements of the trust, if any, or, in the absence of annual audited financial statements, a summary of the financial position of the trust, with reference to the assets, liabilities, income and costs of the trust (section 19(1) of the Act).
6.5 Subject to section 29 of the Act and an order of the Court, the terms of a trust may: (i) confer upon any person a right to request the disclosure of information or a document concerning the trust; (ii) determine the extent of the right of any person to information or a document concerning the trust; or (iii) impose a duty upon a trustee to disclose information or a document concerning the trust to any person (section 37(1) of the Act). Subject to the terms of the trust and to any order of the Court, a beneficiary or an enforcer may request disclosure by the trustee of documents which relate to or form part of the accounts of the trust (section 37(2) of the Act).
6.6 Pursuant to section 37(4) of the Act, subject to the terms of the trust and to any order of the Court, a trustee shall not be required to disclose to any person information or a document which:
(a) discloses the trustee’s deliberations as to the manner in which the trustee has exercised a power or discretion or performed a duty conferred or imposed upon the trustee;
(b) discloses the reason for any particular exercise of a power or discretion or performance of a duty referred to in paragraph (a), or the material upon which such reason shall or might have been based; or
(c) relates to the exercise or proposed exercise of a power or discretion, or the performance or proposed performance of a duty, referred to in paragraph (a).
6.7 Notwithstanding the terms of the trust, on the application of the trustee, an enforcer, a beneficiary or, with leave of the court any other person, the court may make such order as it thinks fit determining the extent to which any person may request or receive information or a document concerning the trust, whether generally or in any particular instance (section 37(5) of the Act).
6.8 Notwithstanding the terms of a trust, where a trustee of a trust is requested pursuant to a written law of Seychelles to furnish all or any of the trust’s records or copies thereof (including a request by the FSA under the Financial Services Authority Act, the Seychelles Revenue Commission to meet a request for information under a tax treaty or the FIU under the Anti-Money Laundering and Countering the Financing of Terrorism Act), the trustee shall furnish the records or copies thereof to the requesting party within the time period specified in the request (section 29(1) of the Act).
Disclaimer of interest
6.9 A beneficiary may, irrespective of the terms of a trust, disclaim in writing, either permanently or for such period as he or she may specify, the whole or any part of his or her interest under the trust (section 20(1) of the Act).
7. TRUSTEES – GENERAL
Role of Trustee – Trust assets
7.1 The trustee occupies a pivotal role in relation to the assets of a trust as a trust is not a separate legal entity and may only act and hold assets through its trustee(s). Section 83(1) of the Act provides that:
(a) legal title to trust property shall be in the name of the trustee or in the name of another person on behalf of the trustee;
(b) the interest of a trustee in trust property is limited to that which is necessary for the proper administration of the trust; and
(c) trust property shall constitute a separate fund and shall not form part of the trustee’s own property (except in the rare event where a trustee is also a beneficiary of the same trust).
Number and type of trustees
7.2 Every trust must have a trustee (sections 3(1) and 21(1) of the Act). Every trust shall have an approved trustee and may have one or more co-trustees who may be persons resident outside Seychelles (section 21(1) of the Act). An approved trustee in relation to:
(a) a Seychelles trust, other than a connected trust, means a licensed trustee (namely, a trustee licensed under the International Corporate Service Providers Act by the FSA to provide trustee services);
(b) a connected trust, means a private trust company or a licensed trustee (see paragraph 8 for details relating to connected trusts and private trust companies).
Appointment of new or additional trustee
7.3 Typically, the terms of trust (express provisions of the trust instrument) will provide for the appointment of a new or additional trustee by the existing trustee or by the protector, if any. The terms of trust may require the prior written consent of the settlor or protector as a pre-requisite to the appointment of a new or additional trustee.
7.4 If, subsequent to registration of a trust under section 11(3) of the Act, a new approved trustee is appointed to a registered trust, the new trustee shall within 21 days file a written notice thereof with the FSA in the approved form (section 12(1) of the Act).
7.5 If: (i) the terms of a trust do not provide for the appointment of new or additional trustee; (ii) any such terms providing for any such appointment have lapsed or failed; (iii) the person who has the power to make any such appointment is not capable of exercising the power; or (iv) there is no other power to make the appointment, without prejudice to the Court’s power to appoint a new or additional trustee pursuant to an application made under section 71 of the Act, a new or additional trustee may be appointed by: (a) the trustees for the time being; (b) the last remaining trustee; or (c) the personal representative or liquidator of the last remaining trustee (section 22(1) and (2) of the Act).
Resignation or removal of trustee
7.6 A trustee, not being a sole trustee, may resign from office by notice in writing delivered to the co-trustees, which resignation shall take effect on the delivery of the resignation notice (section 24(1) and (2) of the Act). If two or more trustees purport to resign simultaneously, the effect of which would mean that there would be no trustee, the resignations shall have no effect (section 24(3) of the Act).
7.7 A trustee shall cease to be a trustee of the trust immediately upon: (i) the trustee’s removal from office by the Court; or (ii) the trustee’s resignation becoming effective; or (iii) the coming into effect of a provision in the terms of a trust under which the trustee is removed from office or otherwise ceases to hold office (section 24(4) of the Act). A person who ceases to be a trustee under section 24(4) of the Act shall execute all documents necessary for the vesting of the trust property in the new or continuing trustees (section 24(5) of the Act).
7.8 Where an approved trustee of a registered trust ceases to be a trustee of the trust, the trustee shall within 21 days file a written notice thereof with the FSA in the approved form (section 12(2) of the Act).
Duties of trustee
7.9 A trustee shall in the execution of his or her duties and in the exercise of his or her powers and discretion: (i) act with due diligence, prudently, to the best of the trustee’s ability and skill and (ii) observe the utmost good faith (section 25(1) of the Act).
7.10 Subject to the Act, a trustee shall carry out his or her functions as trustee and administer the trust: (i) in accordance with the terms of the trust; and (ii) in the interest of the beneficiaries or in the fulfillment of the purpose of the trust as the case may be (section 25(2) of the Act).
7.11 Subject to the terms of the trust, a trustee shall: (i) so far as is reasonable preserve the value of the trust property; (ii) so far as is reasonable enhance the value of the trust property (section 25(3) of the Act).
7.12 Except with the approval of the Court or as permitted by the Act or expressly provided by the terms of the trust, a trustee shall not: (i) directly or indirectly profit from the trustee’s trusteeship; (ii) cause or permit any other person to profit directly or in directly from such trusteeship; or (iii) on the trustee’s own account enter into any transaction with the trustees or relating to the trust property which may result in such profit (section 25(4) of the Act).
7.13 A trustee shall keep trust property separate from his or her personal property and separately identifiable from any other property of which he or she is a trustee (section 25(5) of the Act).
7.14 The trustee of a trust shall disclose its status as a trustee to a financial institution or a designated non-financial business or profession when forming a business relationship or carrying out an occasional transaction in an amount equal to or above to the amount prescribed under the Third Schedule of the Anti-Money Laundering and Countering the Financing of Terrorist Act 2020 (section 25(6) of the Act). A trustee who contravenes section 25(6) commits an offence and shall on conviction be liable to a penalty fee of US$500 and to an additional penalty fee of US$25 for each day or part thereof during which the contravention continues (section 25(8) of the Act).
7.15 Subject to the terms of the trust, where there is more than one trustee all the trustees shall join in administering the trust (section 30(1) of the Act). Where there is more than one trustee no power or discretion given to the trustees shall be exercised unless all the trustees agree on its exercise, provided that the terms of a trust may empower trustees to act by a majority and a trustee who dissents from a decision of the majority may require the trustee’s dissent to be recorded in writing (section 30(2) and (3) of the Act).
Powers of trustee
7.16 Subject to the terms of the trust and the trustee’s duties under the Act, a trustee shall in relation to the trust property have the same powers as the beneficial owner of such property (section 32(1) of the Act). A trustee shall exercise the trustee’s powers only in the interests of the beneficiaries and in accordance with the terms of the trust (section 32(2) of the Act). The terms of a trust may require a trustee to obtain the consent of another person (e.g. a protector or settlor) before exercising a power or discretion (section 32(3) of the Act).
7.17 It is customary for a trust instrument to clearly stipulate the powers and their extent which a trustee is entitled to exercise. Nonetheless, the Act expressly confers, subject to the terms of the trust, various powers on trustees including (without limitation):
(a) a power to delegate the execution or exercise of any of its trusts or powers (both administrative and dispositive) (section 33(1) of the Act);
(b) a power to appropriate trust property (without the consent of any beneficiary) in or towards satisfaction of the interest of a beneficiary in such manner as the trustee thinks fit (section 35 of the Act);
(c) a power of accumulation of income and advancement in the case of beneficiaries who are minors (section 45(3) of the Act).
7.18 The terms of a trust may confer on the trustee or any other person power to appoint or assign all or any part of the trust property or any interest in the trust property to, or to trustees for the benefit of, any person, whether or not such person was a beneficiary of the trust immediately prior to such appointment or assignment (section 46 of the Act).
Remuneration and expenses of trustee
7.19 A trustee shall be entitled to such remuneration as may be specified in the terms of the trust, for the trustee’s services (section 34(1) of the Act). Where the terms of a trust is silent as to the remuneration, a trustee shall be entitled to reasonable remuneration for services that the trustee provides (section 34(2) of the Act). A trustee may reimburse himself or herself out of the trust, all expenses and liabilities reasonably incurred by him or her in connection with the trust (section 34(3) of the Act).
Liability for breach of trust
7.20 Subject to the Act and the terms of the trust, a trustee shall be liable for a breach of trust committed by the trustee or in which the trustee has concurred (section 38(1) of the Act). A trustee who is liable for a breach of trust shall be liable for: (i) the loss or depreciation in value of the trust property resulting from such breach; and (ii) the profit, if any, which would have accrued to the trust property if there had been no such breach (section 38(2) of the Act).
7.21 A trustee shall not be liable for a breach of trust committed prior to the trustee’s appointment (section 38(5) of the Act). A trustee shall not be liable for a breach of trust committed by a co- trustee unless: (i) the trustee becomes aware or ought reasonably to have become aware of the commission of such breach or of the intention of his or her co-trustee to commit a breach of trust; and (ii) the trustee actively conceals such breach or such intention or fails within a reasonable time to take proper steps to protect or restore the trust property or prevent such breach (section 38(6) of the Act). Nothing in the terms of a trust shall relieve, release or exonerate a trustee from liability for breach of trust arising from the trustee’s own actual fraud, dishonesty or wilful misconduct (section 38(9) of the Act).
7.22 Where a trustee in good faith and without negligence makes a delegation, appointment or consultation under section 33 of the Act, the trustee shall not be liable for any loss to the trust arising from such delegation, appointment or consultation (section 33(3) of the Act).
Power of the Court to relieve trustee from personal liability
7.23 Pursuant to section 74(1) of the Act, the Court may relieve a trustee either wholly or partly from personal liability for a breach of trust where it appears to the Court that:
(a) the trustee is or may be personally liable for the breach of trust;
(b) the trustee has acted honestly and reasonably; and
(c) the trustee ought fairly to be excused for the breach of trust or for omitting to obtain the directions of the Court in the matter in which such breach arose.
8. TRUSTEES – PRIVATE TRUST COMPANIES & CONNECTED TRUST BUSINESS
8.1 As an alternative to appointing a professional licensed trustee (licensed under the International Corporate Service Providers Act by the FSA to provide trustee services), in the case of a connected trust, a settlor may form a private trust company (see below) to act as trustee of a Seychelles trust. This may be attractive for family office arrangements and other situations where it is desirable to keep the trustee functions in-house.
8.2 A private trust company or PTC means an international business company (IBC) incorporated or continued in Seychelles under International Business Companies Act 2016 as amended (IBC Act): (i) whose memorandum of association states that it is a private trust company; and (ii) which shall not carry on any business other than providing of the connected trust services in relation to a trust to which it is a trustee (see section 2 of the Act, section 2 of the International Corporate Service Providers Act and section 2 of the IBC Act).
8.3 Pursuant to paragraph 1 of Schedule 5 of the International Corporate Service Providers Act, connected trust services means the trust services provided in respect of:
(a) a single trust where each beneficiary of the trust is: (i) a connected person in relation to the settlor of the trust; or (ii) a charity; or
(b) a group of two or more connected trusts.
8.4 Meaning of connected trusts (paragraphs 2(2) and 2(3) of Schedule 5 of the International Corporate Service Providers Act):
(a) A trust (the first trust) is connected to another trust (the second trust) where the settlor of the first trust is a connected person with respect to the settlor of the second trust.
(b) A group of two or more trusts are connected trusts where each trust in the group is connected to all of the other trusts in the group.
8.5 A company shall be treated as a subsidiary (the subsidiary) of another company (the holding company) where: (i) the holding company is a member of the subsidiary and controls the composition of the board of directors of the subsidiary; (ii) the holding company, directly or indirectly, controls more than half of the votes which may be cast at general meetings of the subsidiary; or (iii) the subsidiary is a subsidiary of any other company which is itself a subsidiary of the holding company (paragraph 2(4) of Schedule 5 of the International Corporate Service Providers Act).
8.6 Meaning of connected persons (section 2, and paragraph 3(1) to (4) of Schedule 5, of the International Corporate Service Providers Act):
“(1) A person is a connected person in relation to another person if:
(a) each is in a group of companies;
(b) one is a company and the other is a beneficial owner of shares or other ownership interests of that company or of any other company in the same group of companies;
(c) each is the trustee of a related trust; or
(d) one individual is related to the other by virtue of any of the following relationships: (i) spouse; (ii) the descendants of the individual and their spouses; (iii) parents, including step-parents; (iv) grandparents; (v) parents-in-law, including step-parents-in-law; (vi) brother, step-brother, sister, step-sister and their spouses and children; (vii) spouse’s grandparents; (viii) spouse’s brother, step-brother, sister, step-sister and their spouses and children; (ix) parent’s brother, step-brother, sister, step-sister and their spouses; (x) children of the brother, step-brother, sister or step-sister of the individual’s parents, both present and future, including step-children and their spouses; or (xi) children of the individual’s brother, step-brother, sister or step-sister, both present and future, including step-children and their spouses.
(2) For any of the relationships specified in subparagraph (1)(d) that may be established by affinity or consanguinity, that same relationship may be established by adoption. In subparagraph (1)(d)(ii), the terms “descendants of the individual”, means the individual’s children, the children of his children, the children of those children, and so on. For such purposes, “children” includes step-children.”
8.7 A private trust company does not require a trustee services licence under the International Corporate Service Providers Act, but a private trust company shall not provide any connected trust services without obtaining an authorisation from the FSA (sections 3(1)(iii-a) and 3A(1) of the International Corporate Service Providers Act).
8.8 Before it commences providing connected trust services, a private trust company shall make an application to the FSA for obtaining an authorisation under section 3A(1) of the International Corporate Service Providers Act, which shall be accompanied by: (a) a declaration stating: (i) the name of the private trust company and its registration number; (ii) the name of its registered agent or company secretary; and (iii) that it is in compliance with the requirements of the International Corporate Service Providers Act, including Schedule 5; and (b) an application fee of US$1,000 (section 3A(2) of the International Corporate Service Providers Act). The FSA may grant or reject the application for authorisation and may at any time revoke the authorisation granted under section 3A of the International Corporate Service Providers Act (section 3A(3) of the International Corporate Service Providers Act).
8.9 A private trust company shall, on or before the date of each annual anniversary of it being authorised under section 3A of the International Corporate Service Providers Act: (a) file with the Authority a compliance declaration in the form provided by the FSA; and (b) pay an annual fee of US$1,000 (section 3A(4) of the International Corporate Service Providers Act).
8.10 A private trust company shall not: (a) provide any trust services that is not connected trust services; or (b) solicit trust services from members of the public (section 3B(1) of the International Corporate Service Providers Act).
8.11 A private trust company shall ensure that at all times its registered agent is a company which: (a) holds both an international corporate services licence and a trustee services licence under the International Corporate Service Providers Act; or (b) holds an international corporate services licence and is wholly owned by one or more persons who wholly own another company which holds a trustee services licence under the International Corporate Service Providers Act (section 3C of the International Corporate Service Providers Act).
8.12 A private trust company shall, in relation to each trust of which it is trustee, keep at its registered office: (i) copies of the trust deed, or other document creating or establishing a trust, and any deed or document varying the terms of the trust under the Act; and (ii) the trust register required to be kept under section 28 of the Act (section 3D of the International Corporate Service Providers Act).
9. PROTECTORS
9.1 The appointment of a protector is optional rather than mandatory. The terms of a trust may (but are not required to) provide for the appointment of a person as a protector of the trust (section 52(1) of the Act).
9.2 Some settlors appoint a protector (often a family member or a professional advisor known to the settlor) to oversee operation of the trust by the trustee. While a protector should not control or operate a trust (that is the trustee’s role), the trust instrument gives the protector certain powers and/or may require the trustee to obtain the protector’s prior consent relating to certain trust decisions. Where a trust has a protector, it is common to give the protector power to appoint or remove trustees and to approve the addition or removal of beneficiaries.
9.3 More specifically, pursuant to section 53(1) of the Act, if provided for in the terms of a trust instrument, the powers vested in the protector may include:
(a) the power to remove, or appoint a new trustee or additional trustee;
(b) power to add or exclude a beneficiary;
(c) power to approve or change the proper law of the trust;
(d) power to approve proposed trust distributions;
(e) power to approve proposed trust investments;
(f) power to appoint replacement protectors;
(g) power to approve the termination of the trust upon distribution of all of the trust’s property; and
(h) such further powers as are conferred on the protector by the terms of the trust or the provisions of the Act.
9.4 A protector of a trust may be a settlor or an enforcer of the trust, but not a trustee of the trust (section 52(2) of the Act). A protector of a trust may be a beneficiary of the trust, but not a sole beneficiary (section 52(3) of the Act).
9.5 The role of the trustee (who legally holds trust property) is to manage and control the trust and trust property in accordance with the terms of the trust instrument. If a protector is given very wide powers in respect of a trust (e.g. the power to direct or approve ‘fiscal’ matters such as investment activities or distributions and the power to revoke the trust) this may potentially undermine the trustee and may cause the trust to be viewed as a sham or may constitute ‘management or control’ so as to make the trust ‘tax resident’ where the protector is resident or domiciled, which could have adverse tax consequences for the trust or protector, especially if the protector is resident or domiciled in a high tax country with a worldwide tax system. It is recommended that each intended protector (and settlor) seek expert legal and tax advice (in his or her country of residence and domicile) before establishing a trust, including as to the scope of any protector powers reserved in respect of the trust.
9.6 A protector of a trust shall be entitled, on a written request to the trustee of the trust, to: (i) a copy of the instrument creating the trust, any amendment thereto and any additional deed supplemental to the instrument creating the trust; and (b) access to and copies of the accounting records of the trust (section 55(1) of the Act). A protector shall not disclose information or document referred to in section 55(1) to a beneficiary, if any, or to any third party unless such beneficiary or other party is entitled under the terms of the trust to have or receive such information or document (section 55(2) of the Act).
9.7 A protector or a person acting as an officer, employee or agent of the protector or performing any duty on behalf of the protector shall not be liable for damages done or omitted to be done in the discharge of the duties of the protector under the Act or under the terms of the trust, unless it is proved that the act or omission constituted or arose from the person’s own fraud, dishonesty or willful misconduct (section 57 of the Act).
10. KEEPING OF ACCOUNTING RECORDS
10.1 Accounting records, in relation to a trust, means documents relating to the trust’s assets and liabilities, receipts and expenditure of the trust and sales, purchases and other transactions to which the trust is a party, e.g., bank statements, receipts, title documents, agreements, vouchers, etc (section 2 of the Act).
10.2 While trusts are not required to prepare or file annual audited accounts in Seychelles (unless they earn Seychelles-sourced income), a trustee of a trust is required to keep or cause to be kept proper accounting records that: (i) are sufficient to show and explain the trust’s transactions; (ii) enable the financial position of the trust to be determined with reasonable accuracy at any time; and (iii) allow for financial statements of the trust to be prepared (section 26(1) of the Act).
10.3 The trustee shall, in respect of each trust (including a terminated trust) to which it was or is acting as trustee, preserve accounting records for at least 7 years from the completion of the transaction or operation to which it relates (section 26(3) of the Act).
10.4 Pursuant to section 27(1) of the Act, where the approved trustee of a trust is:
(a) a licensed trustee, the trustee shall:
(i) prepare an annual financial summary to be kept at the licensed trustee’s principal place of business in Seychelles within 6 months from the end of the trust’s financial year; and
(ii) on a bi-annual basis, keep its accounting records at the licensed trustee’s principal place of business in Seychelles.
(b) a private trust company, the trustee shall:
(i) prepare an annual financial summary to be kept at the private trust company’s registered office in Seychelles within 6 months from the end of the trust’s financial year; and
(ii) on a bi-annual basis, keep its accounting records at the private trust company’s registered office in Seychelles.
10.5 It shall be sufficient compliance with section 27(1) of the Act, if a copy of the accounting records or financial summary is kept in electronic form at the approved trustee’s principal place or business or registered office in Seychelles (section 27(2) of the Act).
10.6 The financial year of a trust shall be the calendar year, unless it is determined otherwise by the trustee (section 27(4) of the Act).
10.7 Where an approved trustee keeps a copy of its accounting records at its principal place of business or registered office in Seychelles, the approved trustee shall keep a written record of the physical address of the place where the original accounting records are kept, and of any change thereto (section 27(3) of the Act).
11. TRUST REGISTERS required by the Act
11.1 Pursuant to section 28(1) and (2) of the Act, each trustee, in relation to every trust of which it is the trustee, shall keep or cause to be kept at the principal place of business in Seychelles of the trust’s approved trustee, a register to be known as the trust register (Trust Register) specifying the following information in respect of each: (i) trustee; (ii) beneficiary or class of beneficiaries; (iii) settlor; (iv) protector (if any); (v) enforcer (if any); and (vi) regulated agent and service provider of the trust including, but not limited to, investment advisors, investment managers, accountants and tax advisors of the trust:
(a) the person’s full name and address;
(b) the person’s nationality or place of incorporation, as the case may be;
(c) the date on which the person was appointed or otherwise became a trustee, beneficiary, settlor, protector, enforcer, agent or service provider to the trust as the case may be, and in the case of a natural person identified under section 28(1) of the Act, the date upon which such a person began exercising control over the trust;
(d) the date on which the person ceased to be a trustee, beneficiary, settlor, protector, enforcer, agent or service provider to the trust as the case may be, and in the case of a natural person identified under section 28(1) of the Act, the date upon which the person ceased to exercise control over the trust.
11.2 Where the approved trustee of a trust is a licensed trustee, the Trust Register shall be kept at the licensed trustee’s principal place of business in Seychelles; where the approved trustee of a trust is a private trust company, the Trust Register shall be kept at the private trust company’s registered office in Seychelles (section 28(3) of the Act).
11.3 Subject to the terms of the trust, the Trust Register shall, during business hours, be open to inspection by any trustee, protector, enforcer, settlor or beneficiary of the trust, and shall be open for inspection for a period of not less than two hours on each business day (section 28(4) of the Act).
11.4 The Trust Register may be in such form as the approved trustee of the trust approves, but if it is in magnetic, electronic or other data storage form, the approved trustee shall be able to produce legible evidence of its content (section 28(5) of the Act).
11.5 The Trust Register is prima facie evidence of any matters directed or permitted by this Act to be contained therein (section 28(6) of the Act).
11.6 An approved trustee shall, in respect of each trust (including a terminated trust) to which it was or is a trustee, preserve the Trust Register specified under section 28(1) for at least 7 years from the date: (i) it ceases to the trustee of the trust; or (ii) the trust fails, lapses or terminates (section 28(7) of the Act).
11.7 A trustee who fails to comply with section 28(1), (2), (3), (4) or (5) (trust register keeping requirements) shall be liable to a penalty fee of US$500 and an additional penalty fee of US$50 for each day or part thereof during which the contravention continues (section 28(10) of the Act). A trustee who fails to comply with section 28(7) or (8) shall be liable to a penalty fee not exceeding US$10,000 (section 28(11) of the Act).
12. REGISTER OF BENEFICIAL OWNERS required by the Beneficial Ownership Act
12.1 In addition to the Trust Register required to be kept by the Act (see paragraph 11), the Beneficial Ownership Act 2020 (the BO Act) and the Beneficial Ownership Regulations 2020 (the BO Regulations) require that a trust keep a Register of Beneficial Owners (see 12.3 below). For BO Act and anti-money laundering (AML) law purposes, pursuant to regulation 3(6) of the BO Regulations, the beneficial owner in relation to a trust means an individual who in respect of the trust is:
(a) a trustee;
(b) a settlor;
(c) a protector;
(d) a beneficiary;
(e) any other individual exercising ultimate effective control over the trust, including any person who has, under the trust deed of the trust or any similar document, power to: (i) appoint or remove any of the trustees of the trust; (ii) direct the distribution of funds or assets of the trust; (iii) direct investment decisions of the trust; (iv) amend the trust deed; or (v) revoke the trust; and
(f) any other person, known by the resident trustee/agent of the trust, who is exercising control over the trust.
12.2 The definition of a trust’s beneficial owner for the purposes of record keeping and requirements under the BO Act and customer due diligence under AML law includes (as well as beneficiaries), a trust’s settlor and, if any, protector, despite them having no ownership interest in the trust or its assets (see definition of “trust” in section 2 of the Act: trust property is not the property of the settlor once those assets have been gifted to the trust). Trust property is held by the trustee as legal owner for and on behalf of the beneficiaries, subject to the terms of the trust.
12.3 The trustee of a trust is required to keep at the principal place of business of its resident trustee in Seychelles, a Register of Beneficial Owners (see section 5(1) of the BO Act and regulation 12(1) and the First Schedule of the BO Regulations), containing the following information in respect of the trust:
(a) the name, residential address, service address, date of birth and nationality of each beneficial owner of the trust;
(b) the nature and details of each beneficial owner’s interest in the trust;
(c) the date on which a person became a beneficial owner of the trust;
(d) the date on which a person ceased to be a beneficial owner of the trust; and
(e) where a nominee holds any interest in or control of the trust on behalf of the beneficial owner:
(i) the name, residential address, service address, date of birth and nationality of each nominee holding the interest on behalf of the beneficial owner and the particulars and details of the interest held by the nominee; and
(ii) the identity of the nominator (who nominates the nominee to hold interests on his, her or its behalf), and where the nominator is a legal person, the identity of the individual who ultimately owns or controls the nominator (providing their name, residential address, service address, date of birth and nationality).
12.4 The Register of Beneficial Owners may be maintained in magnetic, electronic or other data storage form (section 7 of the BO Act) but the trustee of the trust must be able to produce legible evidence of its contents. Every trustee of a trust shall maintain accurate and up to date information required under section 5(1) of the BO Act in the trust’s Register of Beneficial Owners.
12.5 The registerable particulars of a trust’s Register of Beneficial Owners must be submitted to the Seychelles Financial Intelligence Unit (FIU) which submitted information is not publicly accessible (see sections 5(6) and 13(4) of the BO Act). The filing of the registrable particulars with the FIU is required to be done by a trust’s resident trustee in Seychelles.
12.6 A trust’s Register of Beneficial Owners kept at its resident trustee’s office in Seychelles is not open to public inspection. The persons entitled to inspect a trust’s Register of Beneficial Owners are a trustee, settlor or beneficiary of the trust and a person whose name is entered in the trust’s Register of Beneficial Owners as a beneficial owner, limited to inspection of the person’s name in the Register (section 11(1)(c) and (e) of the BO Act).
Declaration by person on becoming beneficial owner
12.7 Every person on becoming a beneficial owner of a trust shall within 14 days from the date of becoming a beneficial owner, submit to the trust a Declaration of Beneficial Ownership containing the registrable particulars relating to the person (section 10(1) of the BO Act and regulation 14 and Second Schedule of the BO Regulations). “Registrable particulars” means the particulars to be registered under the BO Act in relation to a trust including the particulars required by section 5 of the BO Act to be kept in a trust’s Register of Beneficial Owners.
12.8 Upon receipt of a Declaration of Beneficial Ownership, the trustee of the trust shall within 14 days cause its Register of Beneficial Owners to be updated on the basis of the Declaration (section 10(2) of the BO Act).
Notice of relevant change by beneficial owner
12.9 A relevant change in relation to a person occurs if: (i) the person ceases to be a beneficial owner in relation to the trust; or (ii) any other change occurs as a result of change in the registrable particulars of the beneficial owner (section 10(8) of the BO Act).
12.10 If a relevant change occurs in relation to a beneficial owner of a trust, the beneficial owner shall within 14 days of such change give written notice to the trustee of the trust providing the following details for changes to be made to the trust’s Register of Beneficial Owners: (i) the relevant change; (ii) the date on which it occurred; and (iii) any information needed to update the Register of Beneficial Owners (section 10(3) of the BO Act).
13. ENFORCERS OF PURPOSE TRUSTS
13.1 Settlors typically set up trusts in order to provide a long-term benefit to identified beneficiaries, often relatives. However, there are cases where a settlor has no individual beneficiaries in mind and instead wishes to provide for the achievement of a goal or purpose, be it charitable or non- charitable (e.g. commercial or recreational) (see section 3(1) of the Act). Charitable trusts aside, section 2 of the Act defines a “purpose trust” as a trust created for the fulfillment of one or more non-charitable purposes, whether or not it has any beneficiaries.
13.2 Noting that a purpose trust usually does not have beneficiaries, it is a global trust law norm that there must always be someone who if necessary can go to court to ensure the trust objects are being fulfilled. Accordingly, the Act requires that the terms of the trust in the case of a purpose trust shall provide for: (i) the appointment of one or more persons as an enforcer in relation to the trust’s non-charitable purposes; and (ii) the appointment of one or more persons as enforcer at any time when there is none (section 59(1) of the Act). A charitable trust can (but is not required to) have an enforcer, in which case the terms of the trust shall provide for the appointment of one or more persons as enforcer in relation to the trust’s charitable purposes (section 59(2) of the Act).
13.3 Subject to the terms of a trust, it shall be the duty of an enforcer of a purpose trust to enforce the trust in relation to its non-charitable purposes (section 60(1) of the Act). In the case of a charitable trust which has an enforcer, it shall be the duty of the enforcer to enforce the trust in relation to its charitable purposes (section 60(2) of the Act).
13.4 An enforcer of a trust can also be a settlor, a beneficiary or a protector of the trust, but the appointment of a person as enforcer of the trust shall not have effect if the person is also a trustee of the trust (section 59(3) of the Act). A trustee of a purpose trust shall, at any time when there is no enforcer in relation to those purposes, take such steps as maybe necessary to secure the appointment of an enforcer in accordance with the terms of the trust (section 59(4) of the Act).
13.5 An enforcer or a person acting as an officer, employee or agent of the enforcer or performing any duty on behalf of the enforcer shall not be liable in damages for anything done or omitted to be done in the discharge or of the duties of the enforcer under this Act or under the terms of the trust, unless it is proved that the act or omission constituted or arose from the person’s own fraud, dishonesty or willful misconduct (section 64 of the Act).
14. SEYCHELLES TAXATION
Trusts that only earn non-assessable (foreign sourced) income
14.1 A Seychelles trust, including the trustees of the trust, are not liable to tax in Seychelles in respect of the foreign sourced income or profits (non-assessable income) of a trust (see paragraph 15, Second Schedule of the Business Tax Act 2009 as amended read with the International Corporate Service Providers Act). Consequently, a Seychelles trust that only earns foreign sourced income is not liable for Seychelles tax on any of its income or profits.
14.2 A trust which does not earn Seychelles sourced income (assessable income) is not required to file a Seychelles tax return with the Seychelles Revenue Commission (SRC). The Act does not require trusts which only earn foreign sourced income to file a tax return or accounts in Seychelles.
Trusts that earn Seychelles sourced income
14.3 Pursuant to section 87(1) of the Act, if a Seychelles trust earns assessable income (income sourced from Seychelles) it is required to:
(a) within one month of deriving its first assessable income, notify the FSA in writing that it is deriving assessable income and the nature of the activities giving rise to the assessable income; and
(b) within one year of deriving the first assessable income, submit to the FSA an annual return accompanied by the annual audited financial statements complying with the requirements of sections 142 and 144 and the Sixth Schedule of the Companies Act 1972.
14.4 Pursuant to the Business Tax Act 2009 as amended (BTA), on commencing business in Seychelles the company will be liable for business tax on its assessable income (Seychelles sourced income) above the tax-free threshold and will be required to file with the SRC an annual tax return within 3 months after the end of the tax year and pay Seychelles tax on any assessable income above the tax-free threshold.
Stamp duty exemption
14.5 All instruments (documents) relating to the following are exempt from the payment of stamp duty: (i) the formation of a trust; (ii) transfers of property to or by a trust (acting by its trustees); (iii) transactions in respect of beneficiaries’ interests in a trust; (iv) the creation, variation or discharge of a charge or other security interests over any property of a trust; and (v) other transactions relating to the business or assets of a trust (acting by its trustees), provided that such stamp duty exemption does not apply to an instrument relating to: (a) the transfer to or by a trust (acting by its trustees) of an interest in immovable property (real estate) in Seychelles; or (b) the transfer to or by a trust (acting by its trustees) of shares or other interests in a company or other legal person which owns or has any interest in immovable property (real estate) in Seychelles (section 87(3) and 4) of the Act).
15. THE SUPREME COURT OF SEYCHELLES
15.1 A trustee of a Seychelles trust may apply to the Court for direction in respect of the manner in which the trustee may act in connection with any matter relating to the trust and the Court may make such order as it thinks fit (section 70 of the Act).
15.2 Pursuant to section 71(1) and (2) of the Act, an application to the Court may be made by the trustee, the settlor, the enforcer, a protector or a beneficiary, the FSA or, with leave of the Court, by any other person, for an order concerning:
(a) the execution or the administration of a trust;
(b) the trustee of a trust, including an order relating to the exercise of any power, discretion or duty of the trustee, the appointment or removal of a trustee, the remuneration of a trustee, the submission of accounts, the conduct of the trustee and distribution of property;
(c) a beneficiary or a person having a connection with the trust;
(d) the appointment or removal of an enforcer in relation to a non-charitable purpose of the trust; or
(e) the appointment or removal of a protector;
(f) a declaration as to the validity or the enforceability of a trust;
(g) the rescission or variation any order or declaration made under the Act, or make any new order or declaration.
OCI recommends that clients seek tax and legal advice in their countries of residence and domicile from an appropriate qualified expert prior to establishing a trust. Settlors, Beneficiaries and Protectors/Enforcers should ensure that they are professionally advised on any restrictions and reporting requirements that participation in or dealings with a trust may involve.
ANNEXURE 1
Letter of Wishes
- This document is for guidance and example purposes only. Any letter of wishes should be tailored to cover the client’s specific circumstances and intended beneficiaries and, as applicable, any restrictions.
To: [insert name and address of trustee], The Trustee of the Trust
Dear Sir or Madam
THE [ insert trust name] TRUST (the Trust), Seychelles
I, [ INSERT FULL NAME OF SETTLOR], of [ insert full address of settlor] , am writing to you as the Settlor the Trust, in order to express my non-binding wishes in respect of the Trust. This letter is not intended to create any legally binding trust obligation. This letter is a confidential communication between me and you (the Trustee) and supersedes any previous wishes given by me. I understand that the power to take decisions in relation to the Trust assets rests with you, the Trustee, and that I am not entitled to take any decisions myself or to order you to make decisions.
Subject to your discretion as trustee in accordance with the terms of the Trust, my intention is to make provision for the Trust’s Beneficiaries and it is my wish as settlor that the Trust’s assets (Trust Fund) should be held on the following trusts:
1. Subject as provided below, the Beneficiaries of the Trust are my wife [ insert full name ] and I as principal beneficiaries and my children, [ insert full names ], as ultimate beneficiaries.
2. It is my wish that after my death the Trust Fund be utilised for the benefit of my wife and children.
3. Should my wife survive me then, at your discretion, distributions of capital and/or income of the Trust Fund should be made available to my wife for her accommodation, maintenance and welfare and thereafter, on her death, I would like the entire Trust Fund to be distributed to my surviving children absolutely in equal shares, provided that:
(a) such final distribution to each surviving child shall be made on him or her attaining the age of [25]; and
(b) if any of my children have predeceased the survivor of my wife and I leaving their own children, then I would wish each such grandchild (on reaching [25] years of age) to receive per stirpes the entitlement his or her parent would have received.
4. After my death and before my children attaining the age of [25], you may use your discretion to advance part of the Trust Fund to any of the children at a younger age (including, for example, in respect of educational, maintenance or health purposes).
5. If my wife and children predecease me, upon my death to the persons and in the proportions as follows:
(a) [ insert full name, address and entitlement ]; and
(b) [ insert full name, address and entitlement ].
6. I request that you also have regard to any future expressions of wishes that I may make from time to time. I further ask that, in the event, of my death, that you have regard to any requests made by the Trust’s Protector or, if it has no Protector, by [ name and address of person ]. It should however be borne in mind that my above wishes may be overtaken by future events and I wish you to use your best judgement to decide how matters should be dealt with in the future. I certify that I am personally solvent, of sound health and give this letter of wishes of my own free will.
Dated:
Signed…………………………………….
Full name:
Settlor
