Seychelles: What Substantial Activity Means

"Substantial activity" refers to criteria that Seychelles-licensed entities must satisfy to enjoy preferential tax rates under the Securities Act, Mutual Fund and Hedge Fund Act, and related legislation. Failure to meet these requirements results in standard corporate tax rates applying.

Key Requirements

Core Income Generating Activities (CIGAs) in Seychelles

All essential business operations must be physically carried out at the licensee's premises or office in Seychelles. Outsourcing core activities outside Seychelles is not permitted, with some conditional exceptions for front-office tasks.

Adequate Full-Time Qualified Employees

The licensee must employ sufficient suitably qualified full-time employees who are residents of Seychelles. "Suitably qualified" means having relevant academic credentials or professional experience. The number required depends on business scale and complexity.

Adequate Operating Expenditures

The business must incur operating costs locally that correspond with its size and operational complexity. Proof is provided through financial statements, management accounts, and regular reporting to regulatory authorities.

Limited Third-Party Outsourcing

Outsourcing core functions is only allowed within Seychelles under strict conditions (adequate supervision, avoiding double-counting employees). Outsourcing core activities outside Seychelles disqualifies the entity from meeting the substantial activity test.

Conditional Exception for Front-Office

In certain cases, some front-office activities may occur abroad—provided middle and back-office operations remain based in Seychelles. This exception is evaluated on a case-by-case basis by the FSA.

Claiming the Preferential Tax Rate

Required Steps

Obtain written confirmation from the Seychelles FSA before submitting annual tax return

Make the request by January 31 of the year following the tax year

Submit covering letter, self-declaration form, organizational chart, and establishment list

Documentation Required

Covering letter requesting confirmation

Self-declaration form

Organizational chart showing structure

Establishment list detailing activities and personnel

Financial statements and management accounts

Consequences of Non-Compliance

If any of the substantial activity requirements are not fulfilled, the licensee cannot benefit from preferential tax rates and must pay under the standard tax regime for business entities in Seychelles.