The Republic of Seychelles has implemented significant amendments to its Business Tax Act, marking a major step in aligning its tax framework with international transparency and anti–base erosion standards. The changes, introduced through the Seychelles Business Tax (Amendment) Act, broaden the scope of what is considered Seychelles-sourced income and introduce a new compliance framework for companies incorporated in Seychelles that are part of multinational groups.

These developments have direct implications for corporate taxpayers, particularly those operating cross-border structures or managing intellectual property through Seychelles entities. Below is a detailed overview of the legislative changes and what they mean in practice for companies with Seychelles incorporation.

1. Broader Definition of Seychelles-Sourced Income
   
   

One of the most notable updates in the revised Business Tax Act is the expansion of the definition of Seychelles-sourced income.
Previously, Seychelles operated on a territorial tax system, taxing only income that arose from or was derived within Seychelles. However, under the new framework, certain categories of foreign income can now be deemed Seychelles-sourced when earned by specific entities known as covered companies.

This change reflects Seychelles’ effort to comply with evolving international tax standards, including the OECD’s Base Erosion and Profit Shifting (BEPS) principles and the EU’s tax good governance requirements.

2. Introduction of the “Covered Company” Concept

The revised Act introduces the term “covered company”.
A company incorporated in Seychelles will be classified as a covered company if it is part of a multinational group — defined as a group that includes two or more enterprises that are tax residents in different jurisdictions.

This distinction is critical. It means that Seychelles-incorporated companies belonging to multinational groups will now be subject to additional tax scrutiny, even for income generated outside Seychelles.

For companies that are not part of a multinational group, the traditional territorial approach remains applicable — only income with a clear Seychelles nexus will be taxable.

3. What Counts as Seychelles-Sourced Income Under the New Rules

The amended Act outlines four primary categories of income that are now treated as Seychelles-sourced when derived by a covered company:

1. Income from activities, goods, or rights connected to Seychelles
   Any income generated from business activities conducted in Seychelles, goods located in Seychelles, or rights used within Seychelles will continue to be taxable as Seychelles-sourced income.
   
   
2. Income from activities conducted outside Seychelles
   Income derived from operations carried out abroad may still be treated as Seychelles-sourced unless it can be clearly attributed to a permanent establishment (PE) maintained outside Seychelles.
   This provision effectively shifts the burden of proof to the taxpayer to demonstrate that foreign activities are conducted through a genuine PE abroad.
   
   
3. Income from intellectual property (IP) rights held in Seychelles
   Income arising from IP rights registered or held in Seychelles — such as trademarks, copyrights, and other intangible assets — will be treated as Seychelles-sourced, except for qualifying income from patents or equivalent rights that meet specific functional criteria.
   
   
4. Passive income generated outside Seychelles
   This includes interest, dividends, royalties, and other forms of passive income earned abroad. Such income will be treated as Seychelles-sourced unless the company qualifies as a “qualifying company” under the Eleventh Schedule of the Act — which requires the entity to meet certain substance requirements (e.g., physical presence, local management, and operational activities in Seychelles).
   
   
   
5. Substance Requirements and the “Qualifying Company” Exemption

To mitigate the broader tax exposure, Seychelles allows companies that meet prescribed economic substance conditions to qualify for certain exemptions.
A qualifying company is one that can demonstrate it has sufficient operational substance in Seychelles — typically through locally based management, employees, and expenditure proportionate to its business activities.

This mirrors international trends under which low-substance entities face higher tax risks. The Seychelles Revenue Commission (SRC) has signaled that it will closely review compliance with these conditions as part of its oversight of multinational structures.

5. Self-Assessment and Compliance Obligations

Seychelles operates under a self-assessment tax system, which means companies are responsible for assessing their own tax position, identifying Seychelles-sourced income, and ensuring timely filing and payment.

Under the new rules, covered companies must carefully evaluate:

• Whether they fall within the definition of a multinational group;
• The nature and geographic location of their income-generating activities; and
• Whether they maintain sufficient substance to qualify for relief.

Given the broadened scope of taxable income, companies may need to revisit existing structures, review intercompany arrangements, and maintain clear documentation supporting their tax positions.

6. New Survey on Multinational Enterprises and Country-by-Country Reporting

In conjunction with these legislative changes, the Seychelles Revenue Commission (SRC) has issued a self-assessment form and survey on Multinational Enterprises (MNEs) and Country-by-Country Reporting (CbCR).
The initiative forms part of Seychelles’ commitment to transparency and information exchange under the OECD’s BEPS Action Plan.

Companies identified as relevant entities will be required to complete and submit the form by 28 November, either through their directors or authorized legal representatives. This marks the beginning of a more structured approach to monitoring cross-border operations and related-party transactions.

7. Strategic Considerations for Seychelles-Incorporated Companies

The new framework presents both compliance challenges and strategic opportunities for Seychelles-based entities. Key steps companies should consider include:

• Assess group status: Confirm whether the company forms part of a multinational group as defined by the Act.
  
  
• Review income sources: Identify all streams of income and determine which may now be considered Seychelles-sourced under the revised rules.
  
  
• Evaluate substance: If the company wishes to qualify for exemptions, ensure that economic substance requirements are met and documented.
  
  
• Establish documentation protocols: Maintain detailed evidence of permanent establishments abroad, intellectual property management, and intercompany transactions.
  
  
• Engage with professional advisors: Seek legal and tax advice to ensure compliance with the Business Tax Act, Economic Substance regulations, and SRC reporting requirements.
  
  
  

8. The Broader Context

These amendments reflect Seychelles’ transition toward greater fiscal transparency and international cooperation. The jurisdiction aims to maintain its attractiveness as an investment destination while ensuring compliance with global tax standards set by the EU and OECD.

For responsible corporate taxpayers, the reforms offer a path toward long-term sustainability and credibility, provided that they adapt their structures and governance practices accordingly.

Conclusion

The amendments to the Seychelles Business Tax Act represent a significant evolution in the country’s tax landscape. By expanding the definition of Seychelles-sourced income and introducing the concept of covered companies, Seychelles is modernizing its framework to align with international best practices.

Companies incorporated in Seychelles — particularly those engaged in cross-border operations — should take immediate steps to understand their classification, review income attribution policies, and ensure compliance with the new regime.

Proactive assessment and sound governance will not only reduce compliance risk but also reinforce confidence among regulators, partners, and investors in the evolving Seychelles business environment.