🇪🇺Seychelles IBC: Territorial Tax, Substance and Banking

How Seychelles Became an Offshore Hub

The Seychelles offshore industry was born in 1994. Parliament adopted a package of laws—the International Business Companies Act and the Seychelles International Business Authority (SIBA) Act—creating both the IBC structure itself and the body that regulated and simultaneously promoted it. The bet was on simplicity and price: a company in a couple of days, no tax, no public reporting. On this basis, Seychelles, together with BVI and Belize, grew into one of the most massive factories of cheap offshore companies.

In 2014, SIBA gave way to the Financial Services Authority (FSA): from an industry promoter, the regulator became a supervisory body with an emphasis on licensing and compliance. Two years later, the 1994 law was replaced by the International Business Companies Act 2016—a modern corporate code. By that time, the global agenda had already shifted: the OECD with its BEPS project and the European Union with its list of jurisdictions stopped tolerating companies that pay nowhere. The subsequent history of the Seychelles IBC is a consistent adjustment of the local regime to these requirements, and the overall logic is clearly visible against the backdrop of the general shift to tax transparency.

Over thirty years, the IBC regime has been rewritten several times to meet international standards. The basic company structure has remained the same; what changed were the tax conditions, presence requirements, and the extent of beneficial owner disclosure.

Concept

The Seychelles International Business Company (IBC) is a basic offshore vehicle: a cheap and fast-to-register company used as a holding, holder of assets and shares, for international trade and ownership of intellectual property. For thirty years, its attractiveness rested on complete tax exemption and owner confidentiality. The 2018–2021 reforms preserved the company form itself but switched it to territorial taxation and, for companies of large groups, made the exemption of foreign passive income depend on real presence—more on this below.

IBC Act 2016

Companies are created under the International Business Companies Act 2016 through a licensed registered agent—direct registration in the registry is not possible, and it is the agent who remains the company's point of contact with the state. Registration takes a matter of days. No minimum capital is required, shares without par value are permitted, and redomiciliation to another jurisdiction and back is provided for. The register of members stays at the registered office and is not filed with the Registrar; the register of directors is filed with the Registrar but kept confidential. That changes from 1 January 2027: under the International Business Companies (Amendment) Act 2026 the names and appointment dates of current directors enter the Register of International Business Companies, which is open to inspection, and official search certificates, and by 31 December 2026 the register of directors must record whether a director is a nominee and who the nominator is. Beneficial owner data is stored with the agent and in a closed state database accessible to competent authorities. The combination of corporate flexibility and low cost made the Seychelles IBC a mass product.

Territorial Tax

Before the reform, the Seychelles IBC was completely exempt from tax—that was its main product. Under pressure from the OECD (BEPS project) and the European Union, the islands adopted the Business Tax (Amendment) Act 2018 and switched to the territorial principle from January 1, 2019. Income from Seychelles sources is taxed; income from sources outside the islands is not taxed. For a typical IBC that conducts all its activities externally and does not derive income in Seychelles, the effective rate on foreign income remained zero. Legally, the company transformed from a tax-free entity into an ordinary resident with a territorial base, although the practical result for external business changed little.

Economic Substance

The territorial principle alone was not enough for the European Union: exemption of passive foreign income without real activity was classified as harmful tax practice. The response was the Business Tax (Amendment) Act, 2020 (Act 2 of 2021), brought into operation from 15 September 2021 by a commencement notice (S.I. 78 of 2021) gazetted on 16 September; the Seychelles Revenue Commission applies the revised rules from 16 September 2021. They target covered companies: a company that, alone or as part of a group on a consolidated basis, exceeds two of three thresholds—a balance sheet above €20 million, net turnover above €40 million, more than 250 employees on average. For such a company, foreign passive income—interest, rents, royalties, dividends and other income not arising from its own business activities—counts as Seychelles-source income unless the company has adequate economic substance in the tax year; income from activities abroad stays outside the tax only if it is attributable to a permanent establishment abroad, and income from intellectual property held in Seychelles is taxed except the nexus-qualifying share of patent and patent-equivalent income. A pure equity holding company or a real estate holding company passes the test by meeting its filing obligations and having adequate staff and premises in Seychelles to hold and manage its investments; any other company must also take its strategic decisions, manage and bear its principal risks and incur adequate expenditure in Seychelles. These functions may be outsourced to providers in Seychelles under adequate supervision. An IBC below the thresholds stays under the general territorial rule.

Beneficial Owners and Automatic Exchange

Parallel to taxes, Seychelles closed the opacity issue. Since August 28, 2020, the Beneficial Ownership Act 2020 has been in effect: each company maintains a beneficial owner register at its agent's location, and the information flows into a centralized encrypted database maintained by the Seychelles Financial Intelligence Unit (FIU). The database is closed but accessible to regulators and law enforcement; the agent must submit beneficial owner data within 14 days. In addition, Seychelles participates in automatic exchange of financial information—CRS under the OECD Global Forum and FATCA with the US. The owner anonymity for which offshores were chosen in the 2000s ceased to work in Seychelles: the data is available both to the state and to the tax authorities of the country of residence.

The diagram below shows both the ownership and the route the data takes: the beneficial owner holds assets through the IBC, the agent keeps the register and files with the FIU database, and CRS and FATCA carry the information to the tax authority of residence.

Regulation: EU and OECD Lists

Seychelles' relationship with the European Union involves two entries on the EU blacklist. The first happened because of taxes: in 2020, the islands were placed in Annex I as a jurisdiction with a harmful foreign income exemption regime that had not completed promised reforms by the deadline. The 2021 reform with the substance requirement removed the complaint, and on October 5, 2021, Seychelles was removed from the blacklist.

The second entry was about transparency. In October 2023, Seychelles was again placed in Annex I—this time because the OECD Global Forum downgraded the country's rating on exchange of information on request to "partially compliant." In February 2024, they were moved from the blacklist to the "grey" list (Annex II), and on February 17, 2026, they were removed from there as well. Seychelles is now off the EU lists, but the history itself shows: the jurisdiction's status is now reviewed regularly, and it depends on how the country passes periodic reviews.

Reputation and Banking

The most difficult thing about a Seychelles structure is opening and maintaining a bank account. After the wave of de-risking, international banks massively curtailed work with clients from classic offshore jurisdictions: a Seychelles IBC account in a decent bank opens slowly, expensively, and sometimes not at all. Correspondent relationships are narrowing, compliance is increasingly insistent about real activity and beneficial owners. In practice, companies move to specialized second-tier banks and neobanks, which adds costs and operational risks. The reputational trail of an offshore works against the owner even with a completely legal structure.

Application

A Seychelles IBC is chosen where price and speed matter: holding assets and shares, owning intellectual property, simple trading operations, an intermediate company in a group. It works neatly as a top or intermediate holding and as a holder of a separate asset in combination with a trust or foundation. When easy access to banks and reputation with counterparties and investors are critical, BVI is more often chosen, and for trade within the EU—European companies with real substance. The nine-register comparison puts the trade-off in one place: the Seychelles is now on neither EU list, which the BVI (Annex II) cannot say, and keeps its beneficial-ownership database closed and, until 1 January 2027, its directors off the public register, but it has only a handful of rarely usable treaties and, unlike Jersey, Guernsey or Gibraltar, no regulated local administrator or prepared accounts in the file that a European bank's compliance officer expects to see. For a Russian owner the Seychelles stays on the Russian Ministry of Finance list of offshore zones (Order No. 86n): dividends that an IBC pays to a Russian parent company do not qualify for the 0% rate under Article 284 of the Russian Tax Code, and the territorial zero does not take the company out of the controlled foreign company rules. Seychelles remains a budget solution for tasks where banking limitations are tolerable.

Evolution and Conclusion

The Seychelles IBC has traveled from a "zero tax and anonymity" instrument to a company with territorial zero on foreign income, a requirement for real presence for the passive income of large-group companies, and mandatory disclosure of beneficial owners to the state. Each step was a forced response to pressure from the OECD and EU, but together they changed the meaning of the product. Today, an IBC is a legitimate low-cost vehicle for holding and trading; it has lost its role as an instrument of tax invisibility.

Complete removal from EU lists in 2026 restored reputational normalcy to the jurisdiction, but the era of "register and forget" is over. A Seychelles company requires maintaining substance where applicable, careful reporting on beneficial owners, and sober expectations regarding banks. With this approach, it remains one of the cheapest entries into an international corporate structure; with carelessness—it turns into a source of problems with banks and tax authorities.