The Seychelles have taken the next step to disclosure of information following the British Virgin Islands. We have repeatedly addressed the topic of transition of offshore jurisdictions to European information disclosure practice.
In 2006 The International Business Companies Act 2016 (hereinafter – the Act) superseding The International Business Companies Act 1994 was published in the Seychelles.
This act has introduced a number of changes, among which there are two main requirements – submission of information about directors and ultimate beneficiary owners – beneficiaries.
The Act introduces a mandatory requirement to submit information about directors of all companies in the Seychelles to a registration authority in the Seychelles. The period of submission of information about the Directors will start from December 01, 2016, the submission is mandatory both for new and existing companies. The register of Directors will be open for public access from December 01, 2018. Until then, the register will not be open for public access, the access will be granted by virtue of a court decision or written request of a competent government authority of the Seychelles.
Existing companies registered before December 01, 2016 should submit information about directors within 12 months. The information is submitted only about their current director.
New companies registered or reorganized after December 01, 2016 should provide information within 30 days from the day of appointment of the director. Any changes of information about directors shall be submitted within 30 days from the day of appointment.
Penalty sanctions for untimely submission of information shall apply both to companies and directors of companies. The minimum amount of fine is 500 USD; subsequently, the amount may be increased depending on the duration of delay.
From December 01, 2016, representatives of beneficiaries shall submit information about beneficiaries holding more than 25% of shares to registration agents. The information shall be kept only with the registration agents.
Existing companies registered before December 01, 2016 shall provide information about beneficiaries within 12 months. New companies registered after December 01, 2016 shall provide the information within 30 days from the date of registration. Any changes in information about beneficiaries shall be submitted within 30 days from the date of documentation of such changes. Information about beneficiaries may be deleted from the register of beneficiaries in 7 years after the termination of ownership.
Penalty sanctions for untimely submission of information shall apply both to companies and directors of companies. The minimum amount of fine is 500 USD; subsequently, the amount may be increased depending on the duration of delay.
Currently, the register of beneficiaries shall be kept only with registration agents. However, it is believed that the disclosure of beneficiaries to registration authorities is only a matter of time.
On July 14, 2016, the Parliament of Cyprus decided upon complete abolishment of real estate tax from January 01, 2017. It has been found that the tax base over the 2016 tax period will be calculated according to the market value of real estate in 1980, moreover, the following benefits shall apply:
Taxpayers who failed to settle accounts with the budget as of December 31, 2016 shall pay the fine in the amount of 10% of the tax amount reduced by 72.5%.
A number of international tax agreements will enter into force from 2017.
On April 13, 2016, the Governments of Latvia and Hong Kong signed a Double Taxation Agreement. According to the terms of the Agreement, the tax at source on dividends and interest will be reduced to 0% for companies, in all other cases it will equal 10%. Current rate of tax withheld in Latvia from payments in favor of Hong Kong may reach 30%. The tax at source withheld from royalties shall be reduced to 0% for the company and 3% in other cases (current tax rate applied in Latvia reaches 23%).
The Agreement shall apply to income received from January 01, 2017 in Latvia and from April 01, 2017 in Hong Kong. Conclusion of the Agreement between Latvia and Hong Kong means that Latvian fiscal authorities no longer consider Hong Kong an offshore jurisdiction, payments for the benefit of which are taxed at higher rate.
On July 03, 2016, a Double Taxation Agreement between Russia and Hong Kong was signed. The signing of this Agreement and its further ratification is a sign of serious changes in the status of Hong Kong, which Russia had considered an offshore jurisdiction for a long time. Russian tax authorities no longer consider Hong Kong a country failing to provide a proper level of information disclosure and exchange. It was excluded from the “black list” of offshore jurisdictions compiled by the Ministry of Finance of the Russian Federation.
The Agreement establishes the following rates of the tax at source:
Law on ratification of the Protocol to amend the existing Double Taxation Agreement between Russia and Singapore has been signed. Amendments introduced by the Protocol are aimed at the reduction of tax burden at payment of income from one contracting state to the other. Thus, the clause on the minimum amount of investment required for the application of a reduced rate of the tax at source on dividends has been deleted from the Agreement. Now, 15% of participation in the capital of the paying company regardless of the amount of invested funds is enough to apply the reduced rate. Taxation at source in respect of interest is prohibited in all cases. Tax rate for royalties is reduced from 7.5% to 5%. After the revised version of the Agreement becomes effective, tax benefits provided by virtue thereof will make Singapore one of the most promising areas for investment.
The Agreement stipulates exemption from the tax at source on all types of passive income if the payment beneficiary is a company (but not partnership) located in the other contracting states. In all other cases the rate of the tax at source on dividends and interest equals 10% and 5% on royalties. It should be remembered that since both contracting states are European Union members, the Agreement shall apply only if the EU Directive 90/435/EEC on the taxation of dividends of subsidiaries and the EU Directive 2003/49/EC on interest and royalty taxation do not apply to the legal relationship. These two regulations of the European Union set up the conditions for complete exemption from the tax at source.
The Agreement will become effective after the ratification procedure in both countries is complete and will apply to legal relationship created from January 01 of the year following the year of entry of the Agreement into force.
On July 11, 2016, a Double Taxation Agreement between the governments of two island states was first signed. It was the 60th signed agreement for Cyprus and the 11th – for Jersey. According to the Agreement, all passive types of income: dividends, interest, royalties, – shall not be taxed at source. Income from the alienation of shares of companies shall also be taxed only in the country where the seller is deemed a resident. Since the Agreement provides for more favorable conditions than the EU Directive 90/435/EEC on the taxation of dividends of subsidiaries and the EU Directive 2003/49/EC on the interest and royalty taxation, the Agreement shall prevail in relations between the residents of the two countries.
On May 10, 2016, the Governments of both countries signed the Protocol to Amend the Double Taxation Agreement, which has been in force since 1983. While currently no income from the sale of shares of Indian companies is taxed at source, the Protocol provides that the exemption will not apply to the shares acquired from April 01, 2017. Alienation of shares of an Indian company acquired after the specified date shall result in payment of tax at the rate stipulated by laws of India. A transition period from April 01, 2017 to March 31, 2019 is stipulated: shares acquired and sold during this period will be taxed at the reduced rate in the amount of 50% of income (profit) tax rate currently in force in India.
The Governments of India and Cyprus have also signed Double Taxation Agreement superseding the Agreement dated June 13, 1994. The provisions of the Agreement related to taxation of income from the sale of shares reflect the abovementioned Agreement between India and Mauritius. Royalty tax rate has decreased from 15% to 10%. The agreement is expected to become effective on April 01, 2017, after which Cyprus will no longer have the “special jurisdiction” status as an offshore granted by the Government of India in 2013. In the event of payment from India to Cyprus, the dividend tax rate will be 15% (it is reduced to 10% if the receiver is a parent company owning not less than 10% of shares), the interest tax rate will be 10%. Dividends, interest and royalties will not be taxed in the event of payment from Cyprus to India as to the non-resident state of Cyprus under the laws of Cyprus.
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