The Seychelles Special License Company – (or “CSL” as it is better known) – is a relatively new product which came about by virtue of the passing of the Seychelles Companies (Special Licenses) Act in 2003.
Having seen the success enjoyed by the Mauritius International Financial Services sector (which utilized its “DTA” – its Double Tax Avoidance Treaty – with India as the basis for creating a lucrative company product) Seychelles, with a number of favorable DTAS (including with behemoths China and Indonesia) saw the potential for creation of a similar product hence the passing into law of the Seychelles Companies (Special Licenses) Act. (A copy of the Act can be viewed by visiting the Downloads section of our website at Our Services).
Of added advantage is the CSL’s ability to sidestep blacklisting by onshore jurisdictions by virtue of its classification as a low-tax (as opposed to zero-tax like the IBC) Domestic Company. This helps facilitate easier conduct of its business abroad, attracting less suspicion and unwanted attention.
The CSL also has significant appeal to multi-national players as a tax-efficient vehicle for use in a number of areas including as an Intellectual Property Holding/Licensing company, as an intermediary holding company and/or as a services company (eg for provision of management services, consultancy services and more).
Modeled on the Mauritius GBC1 (which has been used extensively as a vehicle for tax effective inward investment into India and China) the Seychelles Special License Company as a Domestic Company (unlike the IBC) is able to access the growing number of double tax avoidance treaties concluded by Seychelles. Unlike the Mauritius version the Seychelles CSL is far easier to incorporate, costs less and has a noticeably more favorable tax regime.
The Main Benefits of the CSL include:
- Substantial Tax Savings on Withholding Tax (“WHT”) when repatriating dividends etc to clients investing in countries where Seychelles has favorable DTA treaties (Seychelles has extremely favorable treaties with China, Indonesia, South Africa, UAE and Belgium, amongst others, and soon will have a more favorable treaty with India than Mauritius once that treaty runs its term)
- Limited Physical Presence is required in Seychelles. The Company simply requires a Registered Office, a Local Secretary and two Local Directors (which can be Nominees)
- Ownership Privacy is Guaranteed – Details of beneficial owners are not publicly available and Nominee Directors can be used
- Nil Business Tax in real terms – Although the base rate of taxation is 1.5% a 100% credit is available for any taxes paid abroad which in the vast majority of cases results in a nil rate of taxation in Seychelles (and no WHT is applied when funds depart the Seychelles/CSL entity)
- Residency rights are available in Seychelles making it an extremely effective option for clients looking to shift their personal or Company’s place of tax residence
- No Personal Tax in Seychelles meaning dividends paid to owners living in Seychelles can be received tax free
- Low Cost: For clients looking to shift residence the cost is around a third of what it costs to set up tax residence in Dubai (and about a tenth of what it costs to shift to say Monaco).
Categories of Business that may be established as a CSL
Seychelles CSLs can carry on business in a number of specified categories including as:
- An international holding company
- A headquarters company
- A franchise company
- A marketing company
- A human resource services company
- A company holding intellectual property
- A Company in the business of providing investment management and advice
- An Offshore Bank
- An Offshore insurance/reinsurance company
- An investment company
- An International Trade Business (eg re-export, international trading in goods and services etc)
Directors & Secretaries
- 2 Directors are required as a minimum (NOTE: Corporate Directors are not permitted – only Natural persons can act as a Director of a Seychelles CSL)
- Directors need not be Seychelles resident (NOTE: It would be advisable for all or at least a majority of Directors to be Seychelles resident where a CSL is being established to gain access to a Seychelles Double Taxation Avoidance Treaty)
- Director’s meetings can be held anywhere
- Director’s names are recorded on a Public Register
- A CSL must have a Seychelles resident Licensed Company Secretary and a Registered Office in Seychelles
- Presently the Minimum number of shareholders required is two (NOTE: The Seychelles Government is reviewing this and has stated that the legislation will be amended shortly to reduce the minimum number of shareholders to 1).
- A Company may hold the shares of a CSL
- Shareholders do not have to be Seychelles resident
- Shareholders meetings can be held anywhere
- The names of shareholders must be filed with the Registry (note however this information is held subject to a privacy law and cannot made available to the general public)
- Registered shares must be established (Bearer shares are not permitted)
- Nominee shareholders are permissible
- The names of the underlying owners of the Company must be filed with the Registry (again this information is held subject to a privacy law and cannot be made available to the general public)
- Whilst in practice USD is normally nominated as the Company’s share capital currency any other convertible currency may be so nominated
- At least 10% of the authorized share capital must be issued and paid up on Incorporation (We recommend as standard , unless a client specifically requires a larger share capital, establishing a CSL with authorized share capital of $US100 ie 100 shares of $1 each – at least 10 shares must be paid for upon Incorporation)
- Audited accounts and an annual return must be filed yearly (but note the Accounts and Annual return, although filed, are not accessible by the general public)
Tax Savings which Seychelles CSLs are entitled to include exemptions:
- from withholding taxes on dividends, interest and royalties
- from stamp duty on property transfers, share transfers and other business transactions
- from trades tax on all furniture and equipment imported into Seychelles for office use
- from payments for workers under the Social Security Act
- on work permit fees for expatriate workers
The above referred exemptions are guaranteed by law for ten years from the date of incorporation of a CSL and shall continue in force thereafter unless otherwise provided for by law (the guarantee period is expected to be extended by law shortly to 20 years)
- A CSL is regarded locally as a Seychelles resident for taxation purposes
- A CSL can be deployed as a Mutual Fund structure but will need to be licensed as a Seychelles Mutual Fund
- A CSL must keep at its Registered Office a Share Register & a Register of Directors and Secretaries
- A non-Seychelles company (including a Seychelles IBC) can be continued as a CSL in Seychelles – and a CSL can shift its HQ to another location
- Any charge, mortgage or other security over a CSL’s assets must be registered in Seychelles
- A CSL must hold an Annual General Meeting
- A company seal/stamp is optional
- A CSL has the same powers as a natural person and has the right to sue and be sued. It is a separate legal body with limited liability and perpetual existence
- A CSL’s name must contain the word “LIMITED”, to confirm that it’s a Limited Liability Corporation
- The government Application fee and License fee for First year for a CSL is $1400 (and $1200 per year license fee each year thereafter)
Seychelles CSL For Investment Into China
In 2008 China passed the Enterprise Income Tax (“EIT”) Law. This law introduced a new standard income tax regime which applies to both non-Chinese owned and domestic businesses. As a result of the EIT Law, foreign investors are now subject to larger Chinese taxes than previously. China is also pursuing the process of tax collection more diligently (For example in 2007 China collected over 25% more in taxes than it had ever done before)
By virtue of the EIT Chinese corporations are usually liable to 20% tax on payments to non-Chinese resident persons/entities. It is expected however that many non-Chinese owned businesses will receive a specially discounted 10% withholding tax rate. This however may be limited further using a DTA.
The Seychelles China Double Taxation Avoidance Treaty
The Seychelles CSL (by virtue of the provisions of the Seychelles-China DTA) provides an ability to reduce Chinese tax liability.
The Seychelles-China DTA limits Chinese WHT on dividends to 5% and to 10% on interest and royalties. To achieve this however the CSL must be effectively managed and controlled from within Seychelles.
Compare this with the widely regarded Hong Kong-China DTA:
- This DTA limits Chinese withholding tax to 5% provided that the Hong Kong company owns 25% or more of the shares in a Chinese company.
- If the Hong Kong company owns less than 25% of the shares in the Chinese company then withholding tax is levied at 10%
The Seychelles-China DTA therefore has a notable advantage over the Hong Kong / China DTA in such cases (which may have particular applicability to Chinese mutual funds and other foreign investors).
Another advantage of the Seychelles / China DTA is the ability it provides to avoid Chinese tax on capital gains made by a CSL divesting itself of shares held by the CSL in a Chinese company (provided the CSL owns less than 25% of the Chinese company and provided the assets of the Chinese company do not consist primarily of real estate).
This feature will be of particular interest to China focused mutual funds and other foreign investors. (It should be noted that China has indicated it intends in future to pursue collection of capital gains tax on the sale of Chinese shares).
Note also: Provided that at least 1.5% Withholding Tax is paid in China on payments made by the Chinese company to the CSL then no tax is payable in Seychelles.
Seychelles & Indonesia
The DTA between Seychelles and Indonesia cedes the right to tax Capital Gains (eg on property sales) to Seychelles.
However Seychelles has no Capital Gains Tax.
Thus the Seychelles CSL may also be used a vehicle to lawfully avoid payment of Capital Gains tax on the sale of Indonesian property particularly including Real Estate.
How to Incorporate a CSL
To Incorporate a CSL you need to:
- Complete and submit a Statutory Application Form
- Submit a Summary Business Plan document setting out:
- Objective/s of the company
- Type of business activities to be undertaken by the company
- Three years cash flow projections (an estimate will suffice)
- Estimated initial working capital and/or debt funding
- Proposed markets/clients
- Marketing strategy (a brief summary will suffice)
- Proposed commencement date
- Submit for each beneficial owner, a certified copy passport and a document proving the client’s residential address. The Certified copies need to be certified by a notary public, or a lawyer or a police officer (above lieutenant rank). The full name, address and stamp of the party certifying should be included. The proof of address document can be either a bank/credit card statement or a utility bill, no more than 3 months old, addressed to and showing the client’s usual place of residence
- A copy of the client’s CV
- A basic banker’s reference as regards the client
- Director Consent forms (if the client/owner wishes to be nominated as a Director)