Economic Substance Requirements

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mickey

New member
In this thread we wanna list up the substance requirements of every each offshore jurisdiction (with source). This should give everyone an overview of what is where necessary.
I have also noticed that some information contradicts itself, this may have been caused by conflicts of interest by company mills etc.. I gonna start with Belize and Seychelles.

Belize - IBC (source)
The nature of business has a direct influence of its substance requirements.
The following business types needs to have sufficient substance:
  • banking business
  • insurance business
  • fund management business
  • financing and leasing business
  • headquarters business
  • distribution and service centre business
  • shipping business
  • as a holding company, engaged, or where one or more of its subsidiaries is engaged in one of the activities listed under s.5 (a) to (g).
  • all Regulated Entities under the IFSC Act
The substance requirements of the Act do not apply to any entity that does not conduct relevant activities in Belize.
The substance requirements of the Act do not apply to a commercial entity that is controlled
and managed outside of Belize and is tax resident in a jurisdiction other than Belize; however,
such an entity must provide the Authority with sufficient proof that is tax resident in the
jurisdiction that it asserts which is elaborated in section 5 of the Guidance Notes.

My Interpretation (it could be false)
Even if the activities of your business does not belong to the listed ones, if you cannot proof tax residence in another country your IBC becomes taxable in Belize for 25%.



Seychelles - IBC (source)
The turnover of business has a direct influence of its substance requirements.
A company who fulfil at least 2 of the following turnover/employee limits is required to build up and maintain sufficient substance in the Seychelles:
  • Balance sheet total in excess of the equivalent, in Seychelles Rupees or other currency, of 20,000,000 euros
  • Net turnover in excess of the equivalent, in Seychelles Rupees or other currency, of 40,000,000 euros
  • An average number of employees in excess of 250 during the financial year.
In contrast, covered companies that do not have adequate economic substance in Seychelles will be taxed differently. Such companies will pay tax on:
  • income from activities conducted in Seychelles
  • income from activities conducted outside Seychelles in the absence of a permanent establishment outside Seychelles
  • all passive income

My Interpretation (it could be false)
Even if the turnover/employee limits of your business does not belong to the listed ones, if you cannot proof tax residence in another country your IBC becomes taxable in the Seychelles:
  • for the first SCR 1 000 000 (USD 73 000) – 25%
  • for amounts exceeding SRC 1 000 000 – 33%
 

pesto

Offshore Agent
Even if the turnover/employee limits of your business does not belong to the listed ones, if you cannot proof tax residence in another country your IBC becomes taxable in the Seychelles:
that is how it works.

In addition you need to get organized with locals that you employ and get a office for.
 

mickey

New member
In addition you need to get organized with locals that you employ and get a office for.

Is that really the case? In my sources the substance requirements only belongs to a certain type of business (Belize) or a certain type of turnover (Seychelles), so it's not that mandatory.

Well the tax-rates are mandatory in any case and they have to be paid and the accounting has to be made, no question. Sure he has to take care for the CFC-Rules of his home country but as the tax-rates are comparable with his home country and the former offshore-locations are not blacklisted any more, many extra regulations would not be applicable. So an entrepreneur will not get any gains for it, but as long as his business does not require substance he could source out his entity to spread the risk to a political more stable country.

This becomes more and more important these days, due to the Covid-19 restrictions the social and political stability of couple western countries come more under pressure day by day.
 

ppa

New member
If a Seychelles IBC is acting as a member of an US LLC (being its holding company) does that mean that under the new tax regime all profits of the US LLC will be considered passive income for the Seychelles IBC and now be taxable?
 

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