Seychelles Flaunts its International Appeal

By Conrad Benoiton, Managing Director, Appleby Corporate Services (Seychelles) Ltd, Seychelles (01/03/2012)

Globalisation has much to answer for. The breakdown of commercial and financial frontiers continues even after the disasters of 2008 while the liberalisation of capital markets and the other incidents of globalisation are having significant effects both upon multinational companies and on the international financial centres.

On one hand the multinational company is faced with the complexities caused by a panoply of regulations in each of the territories in which it does business in addition to the compliance demands of its home country.

On the other the international centres are faced with the pressures of multinationals’ ability to choose to centre a region’s business, in whole or in part, in the country that is most compatible to its expansion.  Multinationals can be very persuasive when it comes to withholding business. The old concept of state sovereignty is diminishing and being replaced by the persuasive power of the international bank or multinational. The challenge is on for each international centre to provide the most compatible procedures. Confidentiality, amounting to secrecy, and a no-tax regime  has not survived globalisation. ‘Tax Havens’ as they used to be called have disappeared.

One consequence is the drawing closer together of international financial centre’s financial regulations. This makes choosing the best location more difficult; combinations of factors need to be examined.  No longer is the choice made simply on tax reasons based on the treaty network. This is all part of the consequences of what international lawyers recognise as the fragmentation of international law following globalisation of financial relationships between states that were formerly clear-cut based on the concept of sovereignty.

The international financial regulatory system needs a major rethink and revision; the current world crisis is now understood to have been due to a system failure of international regulation.

The current remedial efforts of the European Bank and the IMF are not yet accompanied by positive thinking to put some globalisation capabilities into the remedial system of international financial regulation.

An appreciation of the longer term factors is therefore crucial to developing the use of an international financial centre, for example, to the expansion of Seychelles as a focus for the China-Africa trade and investment.

So in other words why Seychelles?

Why, the BRIC countries  and others will ask themselves, should we focus on Seychelles; globalisation works both ways; the regulations and financial rules will be similar so on what shall we base our choice?

These are questions that Seychelles by its fortunate geographical position and the careful design of its international appeal can answer with confidence.

In the first place the appeal of Seychelles is down to the country’s   commitment to innovation. Following the remarkable success of its international corporate operation, attention is turning to establishing new major initiatives.

The first of these has been the issue of the first licence under the Securities and Hedges Funds Act for the setting up of a fourth generation stock exchange to operate world wide through dedicated brokers. This will not go unnoticed by thrusting operations targeting Africa. At least two other initiatives of this significance are at the development stage. This will be further supplemented with the launch of Seychelles’ undersea safe cable that will not only provide massive growth in its data transmission capability but provide eventually an ‘east – west’ connectivity and thus improve on the redundancy factor across the Indian Ocean. The spirit of the country is positive and optimistic.

Natural and historic reasons are behind the second reason for a  preference for Seychelles. Stability and reliability are key features derived from a cautious expansion over 20 years; careful law reform has been the principal followed. Some natural phenomenon comes within this category, such as the hurricane free climate and all year round port facilities.

Finally, there is the existence of a useful portfolio of commercial legislation. Of growing significance is the Special License Company (CSL) as the the leading business vehicle in the Indian Ocean and Asia. An international corporation has the advantage of a very low rate of taxation in Seychelles on the condition that it does no business there. As such this type of company comes within the categories of the taxes that are covered by the Seychelles network of double taxation treaties, based on the OECD Model Treaty- a good alternative under suitable circumstances to the international business company. Add to this the international trust law and the more recent introduction of international foundations and Seychelles can be appreciated as having a range of international investment vehicles that are unbeatable.

Within this structure the network of double taxation treaties continues to expand. Treaties exist with 14 countries with a further 17 countries having concluded discussion and entering into ratification process. To date a total of nine Exchange of Information Agreements have been signed with of the OECDs Global Forum (although the preference is for a treaty). The treaties provide for the avoidance of double taxation with a wide range of taxes.

Seychelles has further advantages under its membership of COMESA and that of SADC, providing ease of trading between a Seychelles entity and corresponding entities in countries that are grouped within these two regional blocks.

From its corporate, trust and foundation structure to the advantages of high end product assembly,  along with significant activities with the use of ‘electronic transmission basis , internet gambling legislation now in place and the opportunities and synergies provided by the SITZ, Seychelles is inevitably an international centre of choice for trade into Africa.

Its appeal is unlimited.