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A number of tax reforms appear in the 2019 budget to help the country’s economy to grow and generate funds given the economy is running nearly full tilt. Finance, Trade, Investment and Economic Planning Minister Maurice Loustau-Lalanne explained the reform in the Business Tax Act will propose that the income sourced in Seychelles by a business should be taxed in Seychelles.

He said in his first budget address on Monday in the National Assembly: “Currently the taxable business income generated from the offshore banking is being taxed at 3%. This provision under the business tax act will continue to apply until December 31, 2018. From January 1, 2019, the normal business tax rate applicable to the banks will apply”.
Various amendments to the Business Tax Act have already been gazetted and are expected to appear before the National Assembly. They will be followed by other legislations – Companies (Special Licences) Act, Securities Act, Mutual Fund and Hedge Fund Act, International Business Companies Act, Insurance Act and International Trade Zone Act.
On the other hand, certain amendments that had been announced previously are expected to be delayed for 2020 so as for the government to further engage and discuss with the business sector.

Immovable property tax

During the budget address, Minister Loustau-Lalanne explained that the government has decided that the immovable property tax will only apply on foreign-owned residential properties instead on both foreign-owned residential and company owned properties as was previously announced.
The rate will remain at 0.25% as announced last year and its implementation is expected to start on April 1, 2019.
Businesses in the tourism industry that are benefitting from fuel concessions under the Tourism Incentives Act (TIA) will lose these concessions gradually and by 2020 they should be fully liable to pay full taxes on fuel purchased.
As for Tourism Incentives Act licensed hirecrafts, dive centres, tour operators, cruise ships, yachts/live aboard operators, they will see their fuel concessions reduced from 50% to 25% in January 2019 and from 25% to complete removal in January 2020.
In January 2019, helicopter operators will see a gradual reduction from 25% to 12.5% and 12.5% to complete removal in January 2020.
In a bid to increase local production and give local producers a competitive edge, government will increase duty on imported pork and poultry as from January 1, 2019.
These new rates will be 15% tax with an additional R3 per kilo for pork and 15% tax with an additional R5.92 per kilo for poultry.
These duties however are temporary and Minister Loustau-Lalanne said: “This would be a short term measure to re-energise the industry and provide some further leeway against the more competitive imports.”
The agricultural and fisheries industries are already exempted from taxes when importing products and equipment that are approved by the Ministry of Fisheries and Agriculture and they will also benefit from Value Added Tax (VAT) refunds on certain products and equipment purchased locally through a bill that will be brought to the National Assembly.

Excise taxes on tobacco and certain beverages

Excise taxes will be on imposed on certain beverages and tobacco products as the country steps up its fight against diseases linked to excessive sugar and tobacco consumption.
The sugar tax will apply to all beverages including alcoholic beverages of which the sugar content exceeds 5g per 100ml, at a rate of R4 per litre. Freshly squeezed fruit juices shall be exempted from payment of the tax.
Importers must declare the sugar content in imported beverages.
To deal with the scourge of excessive tobacco consumption, the effects that these have on society, and the significant costs to the budget for treatment of tobacco-related diseases the government will, as from January, 2019, increase the rate of excise tax on these products. It will implement a 10% increase on all tobacco products.
The excise tax will be applicable on both imported and local tobacco products.
“Approximately 11% of the adult population are suffering from diabetes and 30% with hypertension. It is estimated that only about 50% of these patients seek treatment and abide to it. According to the Ministry of Health, medications for diabetes and hypertension amount to an approximate R18.25 million per year, whilst the costs involved for medical consultations and haemodialysis is estimated to amount to R65 million per year,” pointed out Minister Loustau-Lalanne.