Seychelles is one of a select few countries that offer non-resident legal entities, officially known as International Business Companies (IBC). These entities differ from conventional entities in the sense that they are always considered non-resident for tax purposes and as such, cannot have a tax liability in their country of registration (for this reason, they are often barred from doing business locally). Other differences include better privacy protection and fewer compliance requirements. While IBCs have typically been used as holding entities, they have also become increasingly popular with location independent business owners in recent years. In this article, I cover how to register a Seychelles IBC, how to open a business bank account for it, process payments, how the taxation system works, how to dissolve a company and offer insights into the future of doing business with an IBC.
Seychelles IBCs were created for one single purpose: to help grow the local economy. How can a tax-exempt company contribute to the local economy? Via fees and the mandatory use of local service providers. Those fees are the main reason why registering an IBC in Seychelles is a lot more expensive than it is to register a company in countries like the US, UK and Canada. It is also more of a hassle because you need to hire a local registered agent to do so. Because there is no transparent business registry, you will also need to hire a local attorney to apostille all your business documents before they can be used. In most cases, all these layers of fees add up to between 700-1000 USD at the moment of registration and a further 500-600 USD annually. Documents-wise, you will need a certified proof of ID, a certified proof of address and ideally, some reference letter. Most registered agents will complete the registration process within a week once they have your documents. You will then be courried the company documents and will be able to bring them to a bank to open an account.
Privacy-wise, Seychelles is fairly decent. Unless you commit a major crime, your information will never be made public or shared with the authorities in your home country. With that said, to open a bank account for your company you will need to provide the bank with your real information (even if using a nominee director / shareholder). This means that in practice, true privacy is only possible if you do not open any bank accounts. This is true even if you bank locally as Seychelles has implemented CRS.
For owners of Seychelles IBCs, banking is where things will often get complicated. Real complicated. It used to be easy to open bank accounts for IBCs but not anymore. Basically, you have the choice of either going with a crappy Seychelles-based bank or a better one in a foreign country. In both cases, opening an account will involve gathering a ton of documents, having them certified, having to visit the bank in person (not necessary in Seychelles) and then waiting for weeks (sometimes months) to learn whether the bank wants to do business with you. In most cases (Hong Kong and Singapore especially), you will need to pay a company search fee, which can go as high as 2000 USD, with no guarantee that the account will be opened.
Another problem you will encounter is payment processing. To protect themselves against money laundering, most payment processing companies will only deposit funds to a bank account in the country where a company is registered. Because using a Seychelles bank essentially means being ripped off, you are left with only a few payment processing options, those who will deposit to a bank in a third country. Such options include PayPal (ridiculously high fees for Seychelles companies) and Cybersource (pretty good, owned by Visa).
While Seychelles IBCs are exempt from taxation in Seychelles, they are not exempt elsewhere. Unless you have taken care of your personal tax situation already, your Seychelles IBC is likely to fit within one of two scenarios.
Scenario one: CFC rules
If your country of personal tax residence has CFC rules and you use your Seychelles IBC as a holding entity, it will likely fall under those rules. This will result in you being liable to tax on your share of the Seychelles IBC’s profits, even if undistributed.
Scenario two: place of management rules
If you run an active business using your Seychelles IBC, it will likely be considered resident in the country where it has physical operations (usually where you live). This means that it will have the same tax liabilities as a locally-registered company although without many of the benefits. A way around place of management rules is to move to a true tax haven, or establish physical operations in one.
While dissolving a Seychelles IBC is usually simple, one should not underestimate the cost of doing so (it starts from around 1000 USD). To initiate the process, simply send the request to your registered agent. They will handle everything and notify you when the company has officially been struck off. Please note that from the moment the process is initiated, it becomes illegal to continue using the IBC.
A word of warning (2023)
I know that Seychelles sounds great on paper and that its IBC structure offers many benefits worth having. The problem, as I hope my article has made clear, is that in practice most of those benefits will not be available for various technical and legal reasons. What will be available is plenty of red tape and complications.
I instead recommend looking into registering a tax neutral entity in a country like the UK, US or Canada. As long as your personal tax residency situation has been taken care of, you will likely be able to run your company tax-free or nearly so, same as with a Seychelles IBC but with none of the drawbacks and at a lower cost.