Seychelles has become a leading jurisdiction for investment firms seeking a Securities Dealer Licence due to its efficient regulatory framework, reasonable operational costs, and evolving tax environment. However, recent regulatory developments and international standards have shifted the focus from simple licensing structures to properly substantiated, operationally sound entities.
One of the key advantages available to Seychelles Securities Dealers is access to a preferential tax regime under the Seventh Schedule of the Business Tax Act. This may include a preferential tax rate (commonly referenced as 1.5% on gross revenue), depending on the structure and activity of the licensee. However, this benefit is not automatic and is strictly conditional upon meeting the substantial activity requirements and obtaining confirmation from the Financial Services Authority (FSA).
Where the substantial activity requirements are not met, the licensee will not be eligible for the preferential tax regime and will instead be subject to the standard Seychelles corporate tax rates, currently applied on a progressive basis as follows:
- 15% on taxable income up to SCR 1,000,000; and
- 25% on taxable income above SCR 1,000,000.
Economic Substance Requirements in Seychelles
Economic substance is no longer a procedural or administrative requirement. It is a central regulatory and tax condition applicable to licensees under the Securities Act, 2007, as amended, and the Securities (Substantial Activity Requirements) Regulations, 2018.
In line with the FSA Substantial Activity Requirements Guidelines, a licensee will only be eligible to benefit from the preferential tax regime where it can demonstrate that:
- Core income generating activities (CIGA), as defined under Regulation 4 of the Securities (Substantial Activity Requirements) Regulations, are conducted in Seychelles;
- The licensee employs a reasonably adequate number of suitably qualified persons in Seychelles; and
- The licensee incurs an adequate level of operating expenditure within Seychelles, proportionate to the nature, scale, and complexity of its business.
Importantly, the assessment of adequacy is conducted on a case-by-case basis by the Financial Services Authority (FSA), taking into consideration the size, revenue, and operational complexity of the licensee.
Critical Requirement: FSA Confirmation
A key legal requirement often overlooked is that the preferential tax treatment is only available where the licensee obtains annual written confirmation from the Financial Services Authority (FSA) that the substantial activity requirements have been met for the relevant financial year.
In practice:
- The licensee must submit a formal request to the FSA (typically by 31 January of the following year);
- This includes a self-declaration form, organisational structure, and employee establishment list; and
- The FSA will assess and issue its determination, which must be submitted to the Seychelles Revenue Commission (SRC) together with the Annual Tax Return.
Without this confirmation, the preferential tax regime does not apply, and the licensee will be subject to the standard Seychelles business tax rates.
Outsourcing and Operational Structure
The Regulations provide flexibility in structuring operations, but with clear limitations.
Core income generating activities may be outsourced to third-party service providers only where:
- The activities remain physically performed in Seychelles; and
- The licensee demonstrates adequate supervision and control over such outsourced functions.
Where core income generating activities are outsourced outside Seychelles, the substantial activity requirements will generally be considered not to have been met.
Front-Office vs Back-Office Activities
The regulatory framework recognises that certain front-office activities may be conducted outside Seychelles. However, this is subject to strict conditions.
Specifically:
- Front-office activities may be performed outside Seychelles;
- Provided that the corresponding middle-office and back-office functions relating to the same activities are undertaken in Seychelles.
This distinction is critical when structuring international brokerage operations and must be carefully assessed to ensure compliance.
Operational Presence in Seychelles
In practical terms, demonstrating substantial activity typically involves establishing a meaningful operational footprint in Seychelles.
This may include:
- Maintaining an appropriate operational presence in Seychelles (which includes office facilities);
- Ensuring active involvement of locally based personnel in core business functions;
- Demonstrating real decision-making and operational execution within the jurisdiction; and
- Maintaining adequate local expenditure aligned with the scale of operations.
It is important to note that the law does not prescribe a “one-size-fits-all” model but rather requires proportionality between the business activity and the level of substance maintained.
Not Meeting the Substantial Activity Requirements
Failure to meet the substantial activity requirements has direct tax implications.
Where a licensee does not satisfy the substance requirements and/or does not obtain FSA confirmation:
- The preferential tax regime will not apply; and
- The entity will be subject to the standard Seychelles business tax rates.
Additionally, inaccurate or misleading information provided to the FSA in relation to substance may result in enforcement action under the Financial Services Authority Act.
Conclusion
Seychelles continues to position itself as a competitive and credible jurisdiction for Securities Dealers. However, the regulatory landscape has clearly evolved from a registration-based approach to a substance-driven framework aligned with international standards (including OECD BEPS Action 5 principles).
For Securities Dealers, economic substance should not be viewed as a regulatory burden, but rather as a fundamental component of building a compliant, credible, and tax-efficient international structure.
Licensees that properly implement and evidence their substantial activity in Seychelles are able to access the available preferential tax regime, while strengthening their overall regulatory standing and operational resilience.
How FiveComply Can Assist
Navigating the substantial activity requirements and aligning operational structures with both regulatory and tax expectations, requires a careful and practical approach.
At FiveComply, we support Securities Dealers in establishing and maintaining compliant, substance-driven structures in Seychelles. Our services include:
- Advising on substance requirements and operational structuring in line with the Securities (Substantial Activity Requirements) Regulations;
- Assisting with the preparation and submission of the annual FSA substance confirmation request;
- Providing resident Compliance Officer and corporate governance support;
- Supporting the establishment of local operational presence, including coordination of office setup and staffing; and
- Ongoing regulatory and post-licensing advisory to ensure continued compliance.
Our approach is practical and tailored to each client’s business model, ensuring that regulatory requirements are met without overcomplicating operations.
For further information or to discuss your structure, feel free to reach out to our team.
Disclaimer
This article is provided for general informational purposes only and does not constitute legal or tax advice.