Tax Planning Vehicle

This type of company is used for tax planning and structuring, offering to minimize the overall effective taxation.

Main Features

The company pays a low rate of tax (1.5 to 3%) on its profits and situated in a jurisdiction where there are no withholding tax and no capital gains tax. By using the double tax avoidance treaties, it minimizes the overall taxation. Each solution needs to be structured according to the country where business is to be conducted, as well as the resident state of the beneficial owners.

Who is it for?

• Tax planning
• Tax Minimisation
• Repatriation of profits by reducing the tax liabilities

Benefits

• Low rate of tax (1.5 % or max of 3%)
• Tax minimisation and planning
• Avoidance of double taxation
• Confidential vehicle
• No capital gains tax
• No withholding tax on repatriation of profits (dividends)

Proposed Vehicle

• Mauritius GBC I
• Seychelles CSL

Taxation

• Mauritius GBC I - between 0 and 3% tax
• Seychelles CSL - flat 1.5% tax
• Only in resident state but at a reduced rate, as per the treaty between the two countries
• Mauritius Company pays tax at the rate of 15% with a deemed foreign tax credit of 80% which means effectively pays a maximum tax at the rate of 3%. However the recipient company can still claim a credit of 15% as tax suffered.

EXAMPLE OF USING A SEYCHELLES – INDONESIA DTA

(This is merely an example using illustrations and should not be construed as Tax Advice).

Mr Joe Bloke wants to invest some of his private wealth in an Indonesian Private Company. He has contacted OCRA to provide the most tax efficient way to achieve this. OCRA has undertaken to work out a feasible structure to invest into an Indonesian company, outlining the advantage of using a treaty company as opposed to a non-treaty or tax exempt company. OCRA will not get involved in the personal taxation of the promoter.

Existing Solutions

Investment directly in Indonesian Company

BVI or similar company holds 100% investment in Indonesia Company

BVI or any other non-treaty company Indonesian Company

Direct Investment in Indonesian Company USD Net profit before Tax 500,000 Less Corporate Tax 30% 150,000 Net profit after Tax 350,000 Withholding Tax 20% on dividend 70,000 Net dividend distribution 280,000 Total Tax suffered (150,000 + 70,000) 220,000

Proposed Solutions

Use a Seychelles CSL Company to invest in the Indonesian Company

and take advantage of the DTA signed between the two countries.

Seychelles CSL Company Indonesian Company	Seychelles CSL Company pays 1.5% of corporate tax on its worldwide profits
	Seychelles CSL Company holds 100% investment in Indonesia Company

Investment assuming 100% ownership in a Seychelles CSL USD Net profit before Tax 500,000 Less Corporate Tax 30% 150,000 Net profit after Tax 350,000 Withholding Tax 10% 35,000 Net dividend distribution 315,000 Tax Computation for Seychelles CSL Company Dividend from Income from Indonesia 315,000 Assume an annual maintenance fees Including licenses, directors etc 8,000 Net Profit before Tax 307,000 Tax (@1.5%) 4,605 Net Profit after Tax 302,395 Tax suffered (150,000 + 35,000 + 4605) 189,605

With the above example, assuming a turnover of USD 500,000 the difference in tax savings through a BVI company as opposed to a Seychelles company is USD 30,395. Accordingly, the more the turnover increases, the more the savings.

The above illustration has been calculated on the assumption that:

• Corporate tax in Indonesia is 30%
• Withholding tax on dividends to non-residents in Indonesia is 20%
• Withholding tax on dividends to non-residents being a Seychelles CSL company that has access to the DTA with Indonesia is 10%
• Corporate tax of a Seychelles CSL company is 1.5%
• Administrative charges for a Seychelles CSL company is USD 8,000

This type of company is used for tax planning and structuring, offering to minimize the overall effective taxation. Main Features The company pays

Mauritius and Seychelles

Mauritius and Seychelles have focused the development of their international financial centre on the use of their growing network of double taxation treaties for structuring investment abroad. So far Mauritius has ratified thirty three treaties and is party to a series of treaties under negotiation. The treaties currently in force are with Barbados, Belgium, Botswana, Croatia, Cyprus, France, Germany, India, Italy, Kuwait, Lesotho, Luxembourg, Madagascar, Malaysia, Mozambique, Namibia, Nepal, Oman, Pakistan, People’s Republic of China, Rwanda, Senegal, Seychelles, Singapore, South Africa, Sri Lanka, Swaziland, Sweden, Thailand, Uganda, United Arabs Emirates, United Kingdom and Zimbabwe. Treaties awaiting ratification include Bangladesh, Malawi, Nigeria, Russia, State of Qatar, Vietnam, Zambia and Tunisia. The Seychelles have ratified around 8 treaties including South Africa, China, Indonesia and Mauritius. Eligible Entities Tax treaty benefits are only available to resident entities or persons. Accordingly, a resident entity must be liable to tax in Mauritius or Seychelles under its laws by reason of its domicile, residence or criterion of a similar nature. Mauritius provides a wide range of resident entities and hybrid structures including the Global Business Company, the Trust and the Société. Seychelles provides for a CSL company and a domestic company. In Mauritius, a resident company including the Global Business Company may benefit from the tax treaty network. It is also possible for Mauritian branch of a foreign company to access the tax treaties by satisfying the conditions of residence. Entities wishing to avail benefits of a tax treaty must obtain a Tax Residence Certificate issued by the Mauritius Revenue Authority in Mauritius and same applies in the Seychelles. Scope of Double Taxation Avoidance Treaties All Mauritian double taxation avoidance treaties are based on the OECD Model Treaty of 1977. Under the post-independence treaties concluded so far, tax sparing is available. This implies that where Mauritian source dividends are exempt from tax under the tax incentive provisions, the foreign investor is entitled to credit a notional amount of Mauritian tax against the tax payable (if any) in his country, thus reducing his domestic tax liability.

All Seychelles double taxation avoidance treaties are based on either the OECD Model Treaty or the United Nations Model Treaty. However no credits are allowed in the Seychelles to reduce the domestic tax liability. Unilateral Relief If a resident of Mauritius derives income from a foreign country that has not concluded a tax treaty with Mauritius and foreign income tax is paid on the income, that tax may be credited against Mauritian income tax. The credit is limited on a source-by-source basis to the lesser of the foreign tax paid on the income concerned and the Mauritian income tax payable on the same income. In the case of foreign source dividends, no credit relief if granted for foreign corporate income tax borne on the profits out of which the dividends are paid (underlying tax). This does not apply for the Seychelles, because the credit method is not used.