Friday, July 16, 2010

The Flat Tax Spreads to The Seychelles

With the assistance of the International Monetary Fund and other tax experts, the Republic of Seychelles (a small island nation 832 miles east of mainland Africa, northeast of Madagascar, with a population of about 84,000) completed a major tax reform that includes a broad-based flat tax. In the 2010 budget, Minister of Finance Danny Faure spelled out the details.

January 1, 2010: A 15% withholding rate will be applied to dividends and interest income.

July 1, 2010: A personal income tax (PIT) will replace former Social Security fund contributions amounting to 22.5% of wages with a flat-rate tax of 18.75%. Expatriates will be subject to the PIT at an initial rate of 10%. Rebates will be given to those with the lowest incomes in the country below a PIT threshold.

January 1, 2011: The PIT rate will be reduced to 15%.

January 1, 2012: The expatriate PIT rate will rise to 15% to be harmonized with that of residents.

On January 1, 2010, the tax reform also lowered the top rate of tax on corporations, partnerships, and sole traders from 40% to 33% on income exceeding Seychelles Rupees 1,000,000 (US$1 = SCR 12.5), with a lower rate of 18.75% applied to income beyond a tax-free threshold over SCR 250,000 up to SCR 1,000,000.

3 comments:

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