Many economists are predicting Africa to be one of the fastest, if not the fastest growing region in the world for the next 40 years presenting an excellent opportunity for the growing financial services sector of Seychelles. According to IMF economists, seven of the top 10 fastest growing countries in the world from 2011 to 2015 will be in Africa. Situated 1000 miles off of the east coast of Africa in the Indian Ocean Seychelles is ideally located between the business hours of Western Europe/Africa and Asia and is positioning itself to be the premier financial services hub of the Indian Ocean/Africa region to capture this opportunity.
Seychelles offers an excellent portfolio of laws providing for formation and administration of mutual funds and hedge funds, securities licenses, tax exempt IBC companies, tax resident CSL companies which pay only 1.5 per cent business tax, protected cell companies, limited partnerships, captive insurance, reinsurance, foundations and trusts. Seychelles has no capital gains tax or tax on dividends. There are no capital controls, currency controls, withholding taxes on dividends, interest payments or royalties paid to non-residents. Lastly, as a former British colony and current independent member of the British Commonwealth, English common law is prevalent in the Seychelles legal system as it pertains to business, which will be familiar to international investors and financial services companies.
Long desired as an idyllic holiday destination and known for its pristine beaches, Seychelles is gaining traction as an international financial centre. To date this has been primarily due to the popularity of its international business companies of which well over 100,000 have been established in the last 10 years and over 20,000 last year alone, but the full breadth of the available Seychelles financial services portfolio is yet to be fully utilised. The private and public sector stakeholders are intent on seeing this change and one way is to focus on the huge opportunity presented by Africa.
Seychelles vs Mauritius
Inevitably when looking at Seychelles, comparisons are drawn to Mauritius which is its neighbour in the Indian Ocean and fellow international financial centre. Mauritius has greatly benefited from the Double Tax Avoidance Agreement (DTAA) in place between Mauritius and India with some estimates as high as 70 per cent of the financial services economy of Mauritius being derived from this one DTAA alone. Perhaps unsurprisingly Mauritius is now focusing much of its marketing and promotion efforts toward being the ‘Gateway to Africa’, partly due to the African opportunity but also at least in part for mere survival due to the perceived instability of the Mauritius/India DTAA coming under attack every election cycle in India.
On a like for like basis, Seychelles stacks up quite well to Mauritius in terms of its benefits as a ‘Gateway to Africa’. Both jurisdictions offer products for private clients, such as trusts and foundations. In terms of tax structuring, the Seychelles CSL is quite similar to the Mauritius GBC1 but with some comparative advantages. Both are tax resident for DTAA purposes and are used for DTAA structuring, however the Seychelles CSL pays only 1.5 per cent business tax on taxable income (and does not include dividends or capital gains) while the Mauritius GBC1 pays 15 per cent and with foreign income exemptions may be as low as three per cent. Accounting trickery may reduce this but no accounting trickery is needed with the Seychelles CSL. The Seychelles IBC is also favoured by the market by nearly a 10:1 margin, judging by the number of formations over its rival in Mauritius that being the GBC2.
Many are seeing the new licensed Seychelles securities exchange as a potential catalyst to propel the Seychelles financial services sector to the next level and to help Seychelles establish itself as the ‘Gateway to Africa’. A license was awarded to Trop-X (Seychelles) Limited which is part of the Quote Africa Group, also based in Seychelles. Trop-X launched its multi-currency equities boards at the end of 2012 including a pioneering new Venture Capital Board as well as a Small and Medium Enterprises Board and Main Board. Further ‘boards’ will be launched during 2013 and 2014 including currency and commodity derivatives, equities CFDs and an African Board for trading of securities listed on other African markets.
In terms of the equities offering, Trop-X and Quote Africa Group are focused on providing an internationally accepted listing and trading platform for African issuers to raise capital from international investors without having to go to places like Canada, London, Australia, etc. Not only are these issuers having to pay enormous fees for these listings on these exchanges, the financial services revenues being lost outside of Africa are a lost opportunity for the African fiscus. Trop-X and the Quote Africa Group feel that Seychelles is an ideal location to host this Pan-African platform and intend to leverage the other financial services industry participants and products in Seychelles to make this happen. This should provide an opportunity for Seychelles based financial services practitioners to develop a broader spectrum of services across the breadth of the Seychelles financial services product portfolio to be used for an expanded clientele including asset managers, brokerage firms, high net worth individuals and more.