Seychelles' preferential tax regimes have been deemed not harmful by the Organisation for Economic Cooperation and Development (OECD).
The ministry of Finance said: "The Progress Report shows that Seychelles meets the requirements of Action 5 of the BEPS standard, following the assessment of eight of our preferential tax regimes by the Forum on Harmful Tax Practices (FHTP)," the Seychelles News Agency reports.
The regimes reviewed in the Seychelles were: International Business Companies (IBC), Companies (Special Licenses) (CSL), export services under the International Trade Zone (ITZ), offshore banking (Segment 1 banking license), non-domestic insurance business, reinsurance business, securities business under the Securities Act, and fund administration.
In late January, the OECD announced that 44 jurisdictions had newly delivered on commitments to eradicate harmful elements in their tax regimes, either by abolishing them or making satisfactory amendments.
In 2016, Seychelles, a group of 115 islands in the western Indian Ocean, committed itself to the BEPS project - an international obligation - at the request of OECD. The island nation had to conform to international standards on tax matters in relation to the implementation of measures against tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations.
The secretary of State for Finance, Patrick Payet, said that "OECD believed that the preferential tax regimes of Seychelles were attracting investments from overseas, causing these investors to move their business from their country to Seychelles just to benefit from this preferential tax."
"In Seychelles, companies doing offshore banking were paying 3% business tax on their offshore sector compared to other commercial banks operation inshore, paying 33% business tax," he explained.
The offshore sector is the third top contributor to the Seychelles' economy. There are over 200,000 companies registered in the country.
Recommendations made by OECD are considered by the European Union when making the ‘EU list of non-cooperative jurisdictions for tax purposes'. EU will make its final recommendation on February 12 and announce countries that are blacklisted.
Seychelles is currently on the European Union's grey list which comprises of 47 countries committed to improving their transparency standards. The EU says that once fulfilled, these commitments should enhance the tax good governance environment, globally.