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The European Council has removed Seychelles from the EU’s list of non-cooperative jurisdictions for tax purposes. The Seychelles’ Finance Minister expressed satisfaction with this development, noting that it reflects Seychelles’ commitment to tax transparency. The country had been previously rated as “partially compliant” by the Global Forum but has since made progress in addressing the EU’s concerns. The removal from the blacklist is expected to alleviate pressures on Seychelles’ financial sector, especially concerning banking relationships. Seychelles has been actively urging for a review of the assessment methodology to ensure fair and current reflection of a country’s compliance. Seychelles’ efforts include a demonstration to the OECD of their progress in meeting transparency standards, which has resulted in the country moving from the blacklist to a watchlist. This watchlist is for jurisdictions that are enacting tax reforms and are monitored closely. The EU updates this list biannually, with Seychelles aiming for an improved compliance rating by 2025. The country is set to undergo a supplementary review in 2024. The previous blacklisting was partly due to issues with a single Registered Agent in 2018, which was linked to the Panama Papers. Seychelles is committed to ongoing reforms to meet international standards and is working towards ensuring its legal frameworks are robust and compliant with global norms. The Corruptions Perceptions Index 2023 issued by Transparency International on the 30th January 2024 placed Seychelles 20th worldwide, the same rank as the United Kingdom and France, and (still) top in the sub-Saharan Africa region. Links: https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/?utm_source=x.com&utm_medium=social&utm_campaign=20240220-tax&utm_content=visual-cardhttps://www.transparency.org/en/cpi/2023/index/lva

The Seychelles has been upgraded on five recommendations by the Financial Action Task Force (FATF) following the 45th meeting of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). The upgrade shows progress in strengthening measures to tackle money laundering and terrorist financing. Seychelles has made progress in addressing deficiencies against recommendations 5, 19, 25, 28, and 34, relating to terrorist financing offense, higher-risk countries, transparency and beneficial ownership of legal persons, regulation and supervision of designated non-financial business or professions, and guidance and feedback. Seychelles is now compliant or largely compliant with 34 of the 40 FATF recommendations. The Seychelles delegation attended the task force meeting to build on bilateral and multilateral relationships with international partners and counterparts to increase efforts in the international fight against money laundering and terrorist financing. The delegation also took part in sub-committee meetings, with the deputy director of the Seychelles Financial Intelligence Unit presenting a national risk assessment on virtual assets and virtual assets service providers done in the island nation. The ESAAMLG meeting also included briefings on ongoing preparations for the third round of mutual evaluations, which will start in June 2025.

Seychelles has been assessed as having a low risk of non-profit organisations (NPOs) being used to finance terrorist activities, according to a national risk assessment report. The report was validated at a workshop at the Eden Bleu hotel, and is part of the National Risk Assessment for Non-Profit Organisations (NPOs) launched in 2022. The assessment is intended to identify and understand the risks to the NPO sector and to determine whether Seychelles is compliant with international standards set by the Financial Action Task Force (FATF). The validation of the report showed that Seychelles has a very low risk of NPOs being misused for terrorist financing, but certain laws and policies may still need to be revised to maintain this status. The report will be finalised in the next two months and will be used to identify any technical deficiencies that need to be resolved before the third round of evaluation. The aim is to ensure that all laws and policies are up to date and in line with the recommendations of FATF when it comes to anti-money laundering and counter-terrorism financing measures.

Fitch Ratings has announced that Seychelles’ credit ratings remain at ‘BB-‘ with a stable outlook in 2023. The ratings reflect the country’s solid tourism recovery, stable growth prospects, low inflation, and a stable economic framework. The Seychelles tourism sector had a solid recovery in 2022, with tourist arrivals surging by 82% YoY, reaching 86.4% of 2019 levels. However, Fitch warned that global economic uncertainty and competition from other high-end tourism destinations may lead to a slowdown in visitor growth to an estimated 5% in 2023-2024. Despite continued visitor growth, Fitch expects tourism receipts to decline by about 14% in 2023 and 7% in 2024, reaching 41.3% of GDP, given the expected tapering in arrivals of high-spending tourists from Russia and other countries.

Seychelles is developing a national policy on virtual assets in response to an increasing number of complaints regarding activities using cryptocurrency. The country’s finance minister, Naadir Hassan, revealed that a report on a national risk assessment done by the Financial Services Authority (FSA) had prompted the move. The policy will aim to provide a legal framework for virtual asset activities to be better regulated in Seychelles and to safeguard the public. The objectives of the framework will be to establish legal provisions to register virtual asset businesses and provide licenses depending on the activities allowed in the country.

The Seychelles Tax System operates on a territorial tax regime where only income sourced in Seychelles is liable to tax. The definition of Seychelles sourced income includes income from business activities conducted, goods situated or rights used within Seychelles’ physical territory. Any income earned outside of Seychelles is considered non-Seychelles sourced income, also known as non-taxable business income. This includes income earned by a Seychelles business in an overseas jurisdiction or passive income, such as dividends, interest, royalties, rents, and other forms of income received by a Seychelles resident from a non-resident. However, effective September 16, 2021, the Seychelles Tax System has undergone changes to its law. A revised approach has been adopted for covered companies, including the introduction of an economic substance test for passive income received from a non-resident. Additionally, the Self-Assessment regime was introduced in 2010 to encourage voluntary compliance. The regime places the responsibility of tax on the taxpayer operating in Seychelles. Taxpayers must determine if they have Seychelles sourced income in a tax year, declare and report their taxable income for the relevant tax period, including permitted deductions and exemptions, in line with applicable laws. In summary, the Seychelles Tax System is a territorial tax regime where only Seychelles sourced income is liable to tax. However, recent changes in the law have introduced an economic substance test for passive income received from a non-resident. The Self-Assessment regime places the responsibility of tax on the taxpayer operating in Seychelles to declare and report their taxable income in compliance with applicable laws.