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Guidance Notes on Sections 5(1A), 5(1B), 5(5) and Schedule 11 – Business Tax Act (2009) Table of Contents Introduction 1.1 Background on the Seychelles territorial regime 1.2 Changes to the Seychelles territorial regime given Presidential assent on 28 December 2020 1.3 Outline of these guidance notes When to apply Section 5(1A): Is the company both a ‘resident company’ and a ‘covered company’? 2.1 Is the company tax resident in Seychelles? 2.2 Is the company a “company to which Schedule 11 applies” (i.e. a “covered company”)? How to apply Section 5(1A) to income: which sub-section applies? How to apply Section 5(1A) to income: ss (a) to (d) Schedule 11 substance test Miscellaneous Appendix – Flowchart 1. Introduction These guidance notes have been prepared by the Seychelles Revenue Commission (“SRC”) concerning the amendments to the sourcing rules introduced by the Business Tax (Amendment) Act, 2020. These notes provide guidance on the new conditions imposed for “covered companies” in respect of the Seychelles’ sourcing rules set out in Sections 5(1A), 5(1B) and 5(5) of Business Tax Act (Cap 20), including a substance test for foreign passive income in Schedule 11. “Covered companies” are those companies that meet the test set out in Paragraph 1 of Schedule 11. Where a covered company fails to meet the new conditions, including the new substance test, the foreign income derived by the company will be deemed to be Seychelles sourced income. These guidance notes supplement those on the Seychelles sourcing rules in general which are set out in the SRC guidance notes “Income sourced in and from Seychelles”. The sourcing rules set out in Section 5(1) will continue to apply to companies that are not “covered companies”. The broad guiding principles set out in that guidance will also be helpful in considering the new conditions applying to the sourcing rules for “covered companies”. Many of the key concepts around what is, and is not, Seychelles’ sourced income apply as much to the new sourcing rules in Section 5(1A) as they do to the rest of Section 5. The Seychelles operates a self-assessment tax regime. As with other tax provisions, it is the responsibility of a company incorporated or operating in Seychelles to determine if it has Seychelles sourced income in a tax year. These guidance notes are intended to assist in understanding when and how to apply the new provisions at Section 5(1A). Where the provisions apply, a company may need to account for tax on additional sources of income in its annual Business Tax Return (see the SRC’s “Business Tax Guide” on completing these returns). In some cases, companies may be completing a Business Tax Return for the first time. 1.1 Background on the Seychelles territorial regime The Seychelles has historically operated a territorial tax regime, meaning that only income sourced in Seychelles was liable to tax in Seychelles. Income was considered Seychelles’ sourced income exclusively where it arose from business “activities conducted, goods situated or rights used” within the physical territory of Seychelles. This meant that income was considered non-Seychelles sourced income (i.e. “non-taxable business income”) where the income was: from activities conducted by a Seychelles business in an overseas jurisdiction (through a branch, office, shop or otherwise); and in the form or dividends, interest, royalties, rents and other “passive income” received by a Seychelles resident from a non-resident. The changes of law applying from 16 September 2021 adopts a revised approach for covered companies, including the adoption of an economic substance test for passive income received from a non-resident. 1.2 Changes to the Seychelles territorial regime given Presidential assent on 28 December 2020 On 28 December 2020, the President of the Republic of Seychelles gave his assent to the Business Tax (Amendment) Act, 2020 which amended the Business Tax Act (Cap 20). However, the Business Tax (Amendment) Act, 2020 only came into operation on 15 September 2021, and Schedule 11 was amended by Regulation the next day. Consequentially, Sections 5(1A), 5(1B) and 5(5) and Schedule 11 (and consequential amendments) therefore came into effect on same aforementioned dates. 1.3 Outline of these guidance notes These guidance notes are designed to help a company’s directors or, where applicable, registered agents to understand when and how to apply the new rules. It does this, by: Focusing on when a company will need to consider the application of Section 5(1A) Business Tax Act (Cap 20), and How it should apply its provisions to income arising to the company in the year. In doing so, it also: Discusses the application of Sections 5(1B) and 5(5), and Considers the application of the adequate economic substance test in Schedule 11. All legislative references in these guidance notes are to the Business Tax Act (Cap 20), unless otherwise stated. Does Section 5(1A) apply to the company? Which sub-sections apply, and how, to income arising to the Company? If applicable, how do you apply the adequate economic substance test? See Part 2 See Parts 3 and 4 See Part 5 2. When to apply Section 5(1A): Is the company both a ‘resident company’ and a ‘covered company’? As a first step, it will be necessary to determine whether Section 5(1A) applies at all. This Part provides some guidance on when to apply Section 5(1A). Section 5(1A) only applies to: (i) a resident company;(ii) to which Schedule 11 applies (i.e. a “covered company”). 2.1 Is the company tax resident in Seychelles? Any company incorporated in Seychelles is tax resident in Seychelles under Seychelles law. However, tax treaties may apply to deem a Seychelles-incorporated company to be tax resident outside Seychelles. This will be the case where: the “place of effective management” of the company is located in an overseas jurisdiction with which Seychelles has a double tax treaty, and that overseas jurisdiction asserts taxing rights according to where the company is “managed and controlled”. The terms of the specific tax treaty should be checked to confirm the relevant treatment. The place where a company is managed and controlled is likely to be the

Contents Subject Heading Paragraph Activities Conducted, Goods Situated and Rights Used in Seychelles 1-19 Activities conducted 20-22 Services performed in Seychelles 23-27 Goods situated in Seychelles 28-31 Rights used in Seychelles 32-35 Dividends 36-43 Royalties 44-50 Interest 51-56 Carrying on Business in Seychelles and Carrying on Business from Seychelles 57-62 Explanation 63-73 Trading stock 74-78 Other income 79 Activities Conducted, Goods situated and Rights used in Seychelles Section 5(1) of the Business Tax Act 2009 as Amended (hereafter BTA) defines income sourced in Seychelles as: “An amount derived by a resident person in carrying on business is derived from sources in Seychelles if derived from activities conducted, goods situated or rights used in Seychelles, regardless of the residence of the parties participating in the transactions and regardless of the place where the agreements are executed.” Seychelles general taxation system is based on the source principle (which Seychelles describes as a territorial system of taxation). Accordingly, income is taxable when activities are performed, goods and assets are situated, located or rights are exploited for economic purposes in Seychelles, irrespective of the nationality, domicile or residence of those involved or the place where contracts are concluded. Section 2 of the Revenue Administration Act 2009 defines person as: “Person” means an individual, entity, partnership, trust, estate, government, political subdivision of a government, or public international organisation. Section 5(2) of the BTA also defines income sourced in Seychelles as: “An amount derived by a non-resident person in carrying on a business is derived from sources in Seychelles to the extent that it is attributable to a business carried on through a permanent establishment of the person in Seychelles.” The net income derived from business activities conducted in Seychelles, obtained by resident persons in Seychelles and non-residents operating through a permanent establishment (hereafter PE) in Seychelles, is taxed in Seychelles at a business tax rate as specified in either the First, Seventh, Eight or Tenth Schedule of the BTA. Section 2 of the BTA defines PE as: “Permanent establishment”, in relation to a person, means a fixed place of business through which the business of the person is wholly or partly carried on and, without limiting the generality of the foregoing, includes — (a) a place of management, branch, office (other than a liaison officer), factory, warehouse, or workshop of the person; (b) a mine, oil or gas well, quarry, or other place of extraction of natural resources of the person; (c) a building site, or a construction, assembly or installation project of the person, or supervisory activities conducted by the person in connection with such site or project, but only if the site, project or activities continue for more than ninety days; (d) the furnishing of services by the person, including consultancy services, through employees or other personnel engaged by the person for such purpose, but only if activities of that nature continue for the same or a connected project for a period or periods aggregating more than ninety days within any twelve-month period; (e) an agent of the person (other than an agent of independent status), if the agent — (i) has and habitually exercises an authority to conclude contracts on behalf of the person; or (ii) habitually maintains a stock of goods or other merchandise from which the agent regularly delivers goods or merchandise on behalf of the person; or (f) any substantial equipment used by the person, but does not include a place of business maintained by the person solely for the purposes of purchasing goods or merchandise; “resides” means normally resides in Seychelles or who has resided in Seychelles for at least 183 days in a tax year or is domiciled in Seychelles.” The application of the PE provision however, may differ in the case where Seychelles has a Double Taxation Avoidance Agreement (hereafter DTAA) with another state and the application of the PE provision may also differ from DTAA to DTAA. A person deriving Seychelles sourced income (aka taxable business income) and foreign sourced income (non-taxable business income) is required to declare in their business tax return their foreign sourced income. Where a person derives both Seychelles sourced income and foreign sourced income. Out of the total income of the person, the portion not sourced in Seychelles is not subject to business tax. In order to determine the net taxable income, all accrued expenses that are necessary for the generation of Seychelles sourced income and that are duly documented are allowed as deductions. Expenses related to foreign sourced income are non-deductible for the Seychelles taxpayer. In the case where expenses generate both Seychelles sourced income as well as foreign sourced income. The expense for the Seychelles sourced income is deductible. Expense for the foreign sourced income is non-deductible. Withholding tax (hereafter WHT) is imposed on Seychelles sourced income obtained by non-residents persons, except in cases where the income is obtained through the operations of a Permanent Establishment of the non-resident person in Seychelles. Such income is liable to business tax under Section 5(2) of the BTA. WHT on an item of income of a resident person is a final tax and that item of income shall not be included in the assessable income thereafter. WHT shall not be applicable where remittance of an amount of income is made to a resident or non-resident person out of foreign sourced income. The right to tax income and the rate of tax applicable may also depend on the existence of a DTAA between Seychelles (State of Source) and another State (State of Residence) or vice versa. Example 1: The rate of WHT payable by a non-resident person in the case of royalty under Section 8(1) of the BTA is 15%. However, Paragraph 1 and 2 of Article 12 of the Belgium and Seychelles DTAA states; “Royalties arising in a Contracting State (Seychelles) and paid to a resident of the other Contracting State (Belgium) may be taxed in that other State (Belgium).” “However, such royalties may also be taxed in the Contracting

1. What is an Offshore Company? Think of an offshore company like a beach house you own in another country. It’s legally yours, but it’s not in your neighborhood. An offshore company is a legal business entity set up outside your home country, often for tax efficiency, privacy, or international operations. Read Also:- Offshore Company Formation- Simple, Private and Affordable 2. Why Consider an Offshore Company Setup? So, why go offshore? Here’s the scoop: If you’ve ever wished to escape the heavy hand of local business regulations, Offshore Company Setup might be your golden ticket. 3. Popular Offshore Jurisdictions Just like tourists have favorite vacation spots, entrepreneurs have favorite offshore destinations. Some popular ones include: Each offers its own benefits like low costs, strong privacy laws, or ease of setup. 4. Choosing the Right Country for Offshore Company Set up Picking a jurisdiction is like choosing a university. You want one that fits your goals. Tip: Compare based on tax laws, reporting requirements, and startup costs. 5. Step-by-Step Guide to Offshore Company Formation Here’s the simplified playbook: Step 1: Choose Your JurisdictionPick a country that aligns with your needs. Step 2: Select a Business StructureMost offshore companies are either IBCs (International Business Companies) or LLCs. Step 3: Hire a Registered AgentThis is your local representative in the chosen jurisdiction. Step 4: Submit DocumentsUsually includes ID, proof of address, and application forms. Step 5: Register with the GovernmentYour agent does this part. Once approved, you get your incorporation certificate. Step 6: Open a Bank Account(Optional but recommended) in the same or another country. Step 7: Maintain ComplianceAnnual fees and minimal reporting keep your company active. 6. Documents Required for Offshore Company Setup You won’t need a mountain of paperwork, but here’s what’s typically required: Some jurisdictions may ask for more, some less. 7. Legal Aspects & Regulations You Must Know Let’s keep it real—this isn’t the Wild West. Even offshore companies have rules: The takeaway? Go legit. It’s the smart and safe way. 8. Offshore Bank Accounts: Do You Need One? Not always, but having an offshore bank account offers perks: Banks in the same jurisdiction as your offshore company usually make the process smoother. 9. Common Myths About Offshore Companies Let’s bust some myths: 10. Costs Involved in Offshore Company Formation Cheap Here’s a breakdown of potential costs: Yes, Offshore Company Formation Cheap is possible—especially in places like Seychelles or Belize. 11. Offshore Company vs. Onshore Company Feature Offshore Company Onshore Company Taxation Low or zero Local tax rates Privacy High Limited Regulation Less strict More compliance-heavy Operating Cost Lower Higher If you aim to go global, offshore might be the smarter choice. 12. Who Should Set Up an Offshore Company? Not just big sharks—this is for: If any of this sounds like you, an Offshore Company Set up could be a game changer. 13. Pros and Cons of Offshore Companies Pros: Cons: It’s not a magic bullet, but for the right person, it’s a rocket ship. 14. How to Maintain Compliance Annually? Here’s your offshore to-do list each year: Think of it as light housekeeping—just to keep things running smoothly. 15. Final Tips Before You Begin The best part? Once you’re set up, managing your offshore company can be smoother than managing a lemonade stand in July. Conclusion There you have it—Offshore Company Setup in plain English. No confusing laws, no shady schemes. Just a smart way to build your business or protect your wealth. With a little planning, setting up your Offshore Company Set up can be as simple as planning your next vacation—just with way better returns. Frequently Asked Questions (FAQs) 1. Is it legal to set up an offshore company?Yes! Offshore companies are legal as long as they comply with both the jurisdiction’s and your home country’s laws. 2. How much does an offshore company cost to maintain annually?It varies, but generally between $300–$1000, depending on the jurisdiction and services used. 3. Can I open a bank account with my offshore company?Yes, many offshore companies open bank accounts in the same or different jurisdictions for easy transactions. 4. Do I have to pay taxes if I set up an offshore company?In many offshore jurisdictions, local taxes are zero or very low. However, you may still owe taxes in your home country based on your laws. 5. How long does it take to set up an offshore company?Usually 3 to 10 business days if all documents are ready and verified.