The growing popularity of Seychelles as a reliable offshore financial center has further attracted a large number of Chinese entrepreneurs who use Seychelles companies in their international business structures. The percentage of Chinese clients who buy Seychelles companies (IBCs) has tripled over the last 2 years.
Following the signing of a DTA with China, Seychelles launched a sophisticated financial product - the ompany Special License (CSL) which ZEN OFFSHORE SERVICES highly recommends to our Chinese clients.
Unlike IBC , CSL is a domestic company liable to a 1.5% Seychelles corporate tax rate on worldwide income. However with the current Seychelles-China DTA, this tax can be avoided.
CSL is exempt from Seychelles withholding taxes on dividends, interest and royalties; and stamp duties on property transfers, share transfers and other business transactions; for a period of 10 years (expected to be extended by law to 20 years).
In addition, Seychelles CSL provides clients with an ability to reduce Chinese tax liabilities.,p> The Seychelles-China DTA limits Chinese withholding tax on dividends to 5%, and to 10% on interest and royalties. To achieve this, the CSL must be effectively managed and controlled from within Seychelles.
CSL can be structured as an investment holding company, international trade company, management or consultancy company; for purposes of holding intellectual property and collection of royalties, etc.
The Seychelles-China DTA has a notable advantage over the Hong Kong-China DTA:
- Seychelles-China DTA limits Chinese withholding tax to 5% provided that the Hong Kong company owns 25% or more of the shares in the Chinese company;
- If the Hong Kong company owns less than 25% of the shares in the Chinese company then withholding tax is levied at 10%.
A further advantage of the Seychelles-China DTA is the client ability to avoid Chinese capital gains tax on shares under a CSL when these shares are held by a Chinese company (provided that the CSL owns less than 25% of the Chinese company and that the assets of the Chinese company do not primarily consist of real estate). This feature will be of particular interest to China focused mutual funds and other foreign investors.
We expect that CGT relief using the CSL product will continue to grow in substantial appeal to Chinese entrepreneurs considering that China intends to pursue collection of capital gains tax on the sale of Chinese shares in the future.
Whatever your needs may be, ZEN OFFSHORE SERVICES is happy to provide the best suitable corporate and investment solutions to our Chinese clients.
