Seychelles Economic Substance Requirements (2025–2026 Guide for International Companies)

Economic substance has become a more clearly defined compliance topic in Seychelles. The Seychelles Revenue Commission states that changes applying from 16 September 2021 adopted a revised approach for covered companies, including an economic substance test for passive income received from a non-resident.

Economic substance rules in Seychelles were clarified in 2021, introducing tests for certain foreign passive income.

For 2025–2026, companies using Seychelles structures should assess economic substance together with the tax framework, the International Business Companies regime, and current Financial Services Authority supervision. The Financial Services Authority lists the consolidated International Business Companies Act, 2016 (updated to 11 July 2025), as well as recent amendment acts and 2025 circular activity, showing that the framework remains current and active.

Why Seychelles Introduced Economic Substance Rules

Seychelles introduced economic substance rules as part of broader international efforts to strengthen corporate transparency and align with global tax governance standards.

Over the past decade, international organisations such as the Organisation for Economic Co-operation and Development (OECD) have developed frameworks encouraging jurisdictions to ensure that companies conducting certain cross-border activities demonstrate genuine economic presence. These initiatives aim to improve transparency and promote consistency in international tax practices.

Seychelles introduced economic substance rules to align with global standards and strengthen corporate transparency.

In addition, the European Union’s assessment of non-cooperative tax jurisdictions has encouraged several international financial centres to adopt or enhance substance-related legislation. Seychelles responded by updating its legal and tax framework, including amendments to the Business Tax Act and related regulations, to ensure that companies engaging in certain activities maintain appropriate economic presence where required.

These reforms support Seychelles’ objective of maintaining regulatory credibility while continuing to facilitate legitimate international business activity within a structured compliance environment.

Economic substance in Seychelles is tied to the tax framework

The Seychelles Revenue Commission explains that Seychelles historically operated under a territorial model, but that the law changes effective from 16 September 2021 introduced a revised approach for covered companies, including an economic substance test for passive income received from a non-resident.

This means economic substance is not simply a company registration issue. It is linked to the company’s income profile, tax treatment, and legal classification under the revised rules.

Economic substance in Seychelles is linked to tax rules, applying to certain companies based on their income and classification.

Key regulatory points

• The revised approach applies from 16 September 2021.
• The test is described by SRC in relation to covered companies and passive income received from a non-resident.
• The 2021 amendment regulations refer to concepts such as multinational group and pure equity holding company in the Eleventh Schedule.

Not every Seychelles company is automatically within scope

The official SRC wording does not say that every Seychelles company or every IBC automatically falls within the economic substance rules. SRC’s public explanation is narrower and refers to covered companies.

The Eleventh Schedule amendment regulations also show that part of the framework is linked to enterprises that are members of a multinational group, which means the analysis depends on the company’s structure and facts.

Companies that may need closer review

A company should review its position more carefully where it:

• receives passive income from a non-resident;
• is part of a multinational group;
• operates as or resembles a pure equity holding company under the amended Schedule language.

Economic substance rules apply only to certain Seychelles companies based on their structure.

Passive Income Is Central to the Current Economic Substance Test

The Seychelles Revenue Commission (SRC) expressly links the revised approach to passive income received from a non-resident. Its public tax-system guidance refers to passive income in the form of dividends, interest, royalties, rents, and other passive income. (Seychelles Revenue Commission – Seychelles Tax System)

The 2021 amendment regulations also clarify that, for the purposes of the relevant Schedule, passive income includes capital gains arising from a core income-generating activity of holding and managing shares or equitable interests. (Business Tax Act Amendment Regulations – Eleventh Schedule)

Passive income categories identified in official materials

• Dividends
• Interest
• Royalties
• Rents
• Certain capital gains connected to holding and managing shares or equitable interests

How the substance test works in practice

In practical terms, the economic substance analysis often depends on the type of income earned and the structure of the entity receiving that income. For example:

• A holding company receiving dividend income from overseas subsidiaries may need to assess whether the entity qualifies as a covered company and whether substance considerations apply.
• A company earning interest income from loans provided to related entities within a multinational group may need to review whether the activity falls within the relevant framework described by SRC guidance.
• An entity receiving royalty income from licensing intellectual property to foreign affiliates may also need to evaluate whether its operational structure supports the income-generating activity.
• A company holding overseas property and receiving rental income from tenants located outside Seychelles may need to assess whether the income type falls within the passive income categories referenced in the legislation.

In these situations, the analysis typically focuses on whether the entity falls within the category of a covered company and whether the relevant income is passive income received from a non-resident, as described in the SRC guidance. (Seychelles Revenue Commission – Seychelles Tax System)

Regulatory Oversight Is Becoming More Structured

Oversight in Seychelles is becoming more structured through updated tax rules, clearer supervision criteria, and increased SRC–FSA coordination.

The statement “enforcement is increasing” is best framed carefully. Official sources clearly support that oversight is becoming more structured and more visible, even if they do not always use that exact phrase.

SRC’s 2021 tax-system update introduced the revised approach and economic substance test for covered companies.

FSA’s 2024 circular listings include Circular No. 5 of 2024 – Proof of Physical place of Business and Office Criteria, showing that physical presence criteria became an explicit supervisory topic.

FSA’s 2025 circular listings include Circular No. 6 of 2025 – Upcoming Policy Changes to the International Business Companies Act, 2016, which shows continued regulatory development into 2025.

FSA and SRC also announced a memorandum of understanding to increase collaboration and coordination in their regulatory and supervisory functions.

Accounting records remain an important part of substance-related oversight

The Financial Services Authority has stated that a random sample of International Business Companies would be requested to make available their accounting records at the registered office within a prescribed timeframe to ascertain compliance with section 174 of the IBC Act.

That communiqué is about accounting-record compliance, not a standalone economic substance rule. Still, it shows that the IBC environment is subject to active supervisory checking, which is relevant when companies need to evidence real activity, structure, and record availability.

The 2025 legal framework is still evolving

The Financial Services Authority’s legislation pages list the International Business Companies (Amendment) Act, 2025 and show a consolidated IBC Act updated to 11 July 2025. This confirms that the legal framework is current and should not be described using only older 2021 language.

For tax administration, SRC also published 2025 materials on business tax filing, including a 2025 announcement on updated business tax return forms and the requirement to lodge a Nil Business Tax Return for businesses not in operation or trading during the tax year.

What international companies should review

Companies using a Seychelles structure should review whether they fall within the category of a covered company, whether they receive the type of passive income identified by SRC, and whether their structure is connected to a multinational group under the amended Schedule.

They should also ensure that accounting records are maintained and can be produced in line with section 174 expectations, because the FSA has publicly signalled active checks in that area.

Practical compliance checkpoints

• Review whether the company is a covered company under the post-2021 tax approach.
• Review whether the company receives passive income from a non-resident.
• Review whether the structure is part of a multinational group.
• Ensure accounting records are maintained and available in line with section 174 compliance expectations.
• Monitor 2024–2025 FSA circulars and legislative updates.

Conclusion

For 2025–2026, the most accurate description is not that Seychelles imposes a blanket economic substance rule on all international companies. The more accurate position is that Seychelles applies a revised tax approach for covered companies, including an economic substance test for passive income received from a non-resident, within a broader regulatory environment that shows continuing supervision and policy development.