SEYCHELLES Law and Practice Contributed by: Tamara Christen, Christen Chambers
8. Tax 8.1 VAT and Sales Tax
are permitted to agree on liquidated damages (LDs) as monetary compensation for unmet milestones or completion dates, with specific rates (eg, a percent - age of unperformed services per day) and maximum caps outlined in contracts. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance It is not common for additional forms of security to be sought, however, contracts may rely on bank-backed performance securities as the primary safeguard against contractor default. 7.6 Liens or Encumbrances in the Event of Non-Payment The laws do not provide for liens, although these can be stipulated in a contract. Court protection orders may be placed over property to prevent its sale. If there is already an encumbrance on the property, the beneficiary of the encumbrance must follow judicial seizure procedures outlined in the Immovable Prop - erty (Judicial Sales) Act. Removal of the encumbrance can be either by agreement of both parties or court intervention. 7.7 Requirements Before Use or Inhabitation The law mandates that before any building – whether newly constructed or modified – can be occupied or used, a written permit must be issued by the rele - vant authority, authorising such occupancy or use. In practice, this process is formalised through the issu - ance of a certificate of occupancy, which confirms that the premises have met all planning and building requirements as stipulated under the Physical Plan - ning (Building) Regulations.
The sale or purchase of corporate real estate is VAT exempt as per the First Schedule Part II clause 5 of
the Value Added Tax Act 2010. 8.2 Mitigation of Tax Liability
For large-scale transactions with multiple changes of shareholders it is preferable to structure the transac - tion where the change in shareholding occurs through a foreign entity, leaving the domestic shareholding unaffected while the foreign entity incurs the share - holder activity. This will mitigate some (but not all) of the liabilities applicable in Seychelles. 8.3 Municipal Taxes Within the Seychelles context, there are no municipal taxes. 8.4 Income Tax Withholding for Foreign Investors Real estate taxation is distinguished between com - mercial rental and residential rental. While commer - cial rental pays the same business tax as all other businesses at 25% of corporate profit the residential income is limited to 3% of the gross rental income. Foreign investors have a 15% withholding tax on divi - dends paid. 8.5 Tax Benefits A real estate investment may qualify for accelerated capital allowances (depreciation) on qualifying capital expenditures. By reinvesting lease income into prop - erty enhancements, the real estate investment can not only maintain and increase the long-term value of the asset but also optimise its tax position.
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