Seychelles Economic Substance Requirements Explained

Economic substance rules are now key for offshore companies globally. Seychelles has aligned its 2025 rules with these standards. This ensures companies show real activities within Seychelles. These are the requirements you need to know if you own or intend to start a Seychelles IBC. Now the question is, what is meant by the term Seychelles economic substance? Who must comply? This article explains that clearly. It also shows how to stay compliant while operating there.

Why Do Economic Substance Rules Matter in 2025?

Economic substance rules require offshore companies to prove they have real business operations in their claimed location. This helps prevent tax evasion and ensures Seychelles meets important global standards set by organizations like the OECD and EU.

What's the point of these rules?

Economic substance rules stop companies from being just 'paper' entities in low-tax places. They make sure businesses have real operations, staff, and decision-making where they claim tax residency. This helps fight tax avoidance. It also keeps Seychelles aligned with key global standards set by the OECD and EU.

What does this mean for Seychelles IBCs?

Since 2021, certain Seychelles IBCs must prove real activity locally. This is needed to keep tax breaks on foreign income. Failing to comply brings serious consequences:

• Fines: Financial penalties apply.
• Lost Benefits: You could lose tax exemptions.
• Information Sharing: Details may be shared with foreign tax authorities.

Therefore, meeting Seychelles economic substance is a legal must, not just a formality.

Who Comes Under The Economic Substance Regulations in the Seychelles?

Which Seychelles IBCs must follow the rules?

Not all Seychelles IBCs face full economic substance requirements. The rules mainly target companies within multinational groups earning specific passive foreign income. This includes money from:

• Dividends
• Interest
• Rents
• Royalties
• Capital gains

Are any companies exempt or have lighter rules?

Yes. Simpler requirements apply to:

1. Pure Equity Holding Companies: Mainly holding shares? You often just need a local office and agent.
2. Active Trading Companies: Earning overseas income from services or sales? You're generally exempt.

How do I know if my company must comply?

Ask yourself these questions-

1. Is your IBC part of a multinational group?
2. Does it earn significant passive foreign income?
3. If both answers are yes, you must establish real economic substance in Seychelles to keep tax benefits.

Defining “Core Income-Generating Activities” (CIGA)

What Are "Core Income-Generating Activities" (CIGA)?

Think of CIGA as essential tasks that actually earn your Seychelles IBC its money. For example:

• Holding Companies: Managing investments and making key decisions count as CIGA.
• Trading/Service Firms: Negotiating contracts and handling daily business are core activities.

Importantly, these must happen within Seychelles. You need proper local support: adequate staff, premises, and spending.

Simply having a mailbox or virtual office won’t cut it. Show real activity, like local staff making decisions or board meetings held there.

Key Requirements for Compliance

What must a Seychelles IBC do to meet economic substance rules?

To comply, your company generally needs:

• A physical office or premises in Seychelles.
• Adequate full-time employees or directors who are physically present in Seychelles.
• Board meetings are conducted in Seychelles, with minutes recorded.
• Local expenditure is proportional to the company’s income and activities.
• Proper accounting and record-keeping in Seychelles.
• Filing an annual economic substance declaration with the Seychelles Revenue Commission by June 30 each year.

Pure equity holding companies have simpler requirements, mainly maintaining a registered office and agent. Other companies must demonstrate full substance based on their business activities.

What Can I Do to Have My Seychelles IBC Compliant in 2025?

Getting compliant with Seychelles' economic substance rules is simpler than it seems. Use the following convenient guidelines to create a credible local presence without jeopardising your tax advantages. The following quick-reference guideline describes the most important steps:

So, to make it simple, here is just the breakdown of every step in simple language:

1. Enquire whether you are liable to the rules

First of all, you need to make sure whether your company is a subject of the Seychelles economic substance regulations. In case yes, you will have to:

2. Build a real local presence

Establish proper operations in Seychelles:

• Physical Base: Rent office space or use a serviced office.
• Local Management: Hire or appoint qualified staff/directors based there who actively run things.
• Key Activities: Hold regular board meetings in Seychelles and keep detailed minutes.

3. Maintain proper records & work with your agent

• Keep accurate accounts showing local spending that matches your business scale.
• Partner closely with your registered agent. They'll handle timely filings and declarations.

4. Stay updated

Keep informed about Seychelles Revenue Commission updates. Preparing early avoids penalties and keeps your tax benefits safe.

Beyond Compliance: Turning ES into an Advantage

Can economic substance requirements benefit my business?

Yes. While economic substance rules may seem like extra work, they also enhance your company’s credibility and reputation. Having a real presence in Seychelles can improve your relationships with banks, investors, and partners. It demonstrates the legitimacy and sound management of your company.

Offshore compliance also helps you stay out of trouble with the law and avoid fines. It also positions your company well for future regulatory changes and international cooperation. You can transform a regulatory burden into a business-strategic opportunity by adopting economic substance.

To Summarise

Meeting economic substance requirements in Seychelles now lies at the heart of managing offshore companies. If your IBC earns passive income within a multinational group, then IBC laws say you must show real substance locally to retain tax benefits. This means hiring actual personnel, working out of physical space and taking critical management decisions onshore.

Understanding these rules and responding to them in time will save your business and ensure compliance. Moreover, effective evidence of substance will boost the reputation of your company and provide new opportunities. These requirements will mean both legal compliance and smart business in 2025.

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