DG for taxes, sectorial policy details amendments to Immovable Property Tax, Business Tax laws |05 January 2022

Ms Verghese (Photo: Dionne Renaud)

On December 17, the cabinet of ministers approved several policies among them proposals to amend the Immovable Property Tax Act to bring more clarity to the categories of immoveable properties that should be subject to the Immoveable Property Tax.

Cabinet also approved the rate that will be used to calculate the property tax for properties purchased in foreign currency.

There were also proposals to amend the Schedules of the Business Tax Act to allow for the implementation of a comprehensive set of business tax reforms.

Giving more details on the amendments, Seylina Verghese, the director general for taxes and sectorial policy in the department of Finance, said Immovable Property Tax is applicable only for foreigners who own property here, noting that the tax was first introduced in 2020 with a rate of 0.25% on the value of the property.

The deadline to pay the tax for last year was December 31, 2021.

In 2020, as a result of inconveniences caused by the Covid-19 pandemic, the deadline for payment of the tax was extended to March 31, 2021.

She stated that revenue collected for 2020 amounted to approximately R32.2 million.

Ms Verghese went on to explain that the Immovable Property Tax has three aspects; registration whereby all foreigners with property here have to register regardless if its residential, commercial or industrial properties; evaluation has to be carried out to assess the value of the property and this has to be submitted before a chief valuation officer. To note an evaluation is carried out every five years and the last aspect is the payment of the tax itself.

Ms Verghese noted that the recent decision taken by cabinet is to amend the Immovable Property Tax Act toinclude some new categories in the exemption schedule.

“With regard to the exemption schedule, at present Section 11 of the Act states that there are three categories that are exempted namely commercial and industrial properties as well as residential properties belonging to foreigners who are married to Seychellois. Therefore properties that do not fall in any of the three categories will be liable to be taxed,” Ms Verghese explained.

The new categories that are being added to the exemption list for Immovable Property Tax are as follows:

- Immovable properties or parts thereof that are used for the purpose of housing employees

- Immovable properties or parts thereof that are used exclusively for the purpose of conservation and protection of wildlife and/or habitat

- Immovable properties that are owned or leased by foreign states/ governments, and which are used as the official premises for their diplomatic mission and/ or residences for their diplomatic officers

- Immovable properties that are adjudicated to Financial Institutions by order of the court and/ or seized by FIs, when a borrower defaults on or fails to satisfy the terms of a mortgage

- Immovable properties owned by a minor (non-Seychellois) who has been adopted by a Seychellois.

Cabinet also approved the rate that will be used to calculate the property tax for properties purchased in foreign currency.

In relation to that, Ms Verghese explained that in cases where properties have been bought and paid for in foreign currencies, they have to decide on the currency rate to be applied when calculating the tax deduction.

She said the decision is to apply the currency rate on the date that a submission for evaluation of the property is submitted before the chief valuation officer.

Ms Verghese went on to explain that the amendments will bring more clarity and fairness.

Meanwhile with regard to cabinet’s decision to approve proposals to amend the Schedules of the Business Tax Act to allow for the implementation of a comprehensive set of business tax reforms, Ms Verghese explained that the aim of the reforms which will be implemented effective January 1, 2022 is to harmonise the different existing tax rates and introduce one tax regime to encourage more growth and development of the private sector.

“In the past we have seen that the different tax rates have been confusing at times for people starting a business and also we have observed that our tax rates are much higher than other countries. The reforms are expected to bring more fairness where everybody will contribute equally towards the tax revenue. Other than the tax rates, the reforms are also reviewing all allowable deductions which are also considered as too high,” Ms Verghese remarked.

She noted that the reforms started in 2019 with the assistance of the OECD and consultations with different business stakeholders both on Mahé as well as on Praslin and La Digue.

The accompanying table shows the proposed amendments in the tax rate.

Ms Verghese explained that with the reforms all sectors will benefit from the 15 and 25% rate and furthermore the tourism, fisheries and agriculture sectors which were being charged under another rate will also fall under the 15 and 25 % rate.

Individual fishermen will continue to benefit from an exemption while the agricultural sector is benefitting from a grace period of three years.

Marie-Anne Lepathy