Seychelles Mutual Funds

The Seychelles Mutual Fund and Hedge Fund Act (the “Act”) creates an attractive and tax-efficient environment for mutual fund and hedge fund business, enabling Seychelles mutual funds to be administered inside or outside of Seychelles.

The Act only regulates open-ended mutual funds (whose equity interests are redeemable or re-purchasable at the option of the investor). The Act does not apply to closed-end funds, such as private investment companies, whose shares are not redeemable at the investors’ option.

Fund administration flexibility

Seychelles mutual funds may be administered:

• In or from Seychelles by a Seychelles licensed fund administrator; or
• Outside of Seychelles by an approved foreign administrator (namely, an entity licensed as a fund administrator in a recognized jurisdiction).

“Recognized jurisdictions” presently include Austria, Australia, Belgium, Bahamas, Bahrain, Bermuda, British Virgin Islands, Canada, Cayman Islands, Cyprus, Denmark, France, Germany, Gibraltar, Guernsey, Holland, Hong Kong, Isle of Man, Ireland, Japan, Jersey, Luxembourg, Malaysia (including Labuan), Mauritius, New Zealand, Singapore, South Africa, Switzerland, United Arab Emirates, United Kingdom and United States of America.

Types of Seychelles mutual funds

The Act provides for four types of mutual funds:

• Professional Funds - enjoy a lighter regulatory touch, as they are only open to professional investors, in respect of which the initial minimum investment per investor is not less than US$100,000 (or its equivalent in any other convertible currency). A professional investor is defined as being any of the following:
  • a person whose ordinary business or profession is the buying and selling of mutual fund assets;
  • a person (individually or jointly with his spouse) who has a net-worth exceeding US$1,000,000 and signs a declaration to that effect;
  • a bank licensed in Seychelles or in a recognized jurisdiction;
  • a mutual fund licensed in Seychelles or in a recognized jurisdiction;
  • an insurance company licensed in Seychelles or in a recognized jurisdiction; or
  • a securities dealer or stock broker licensed in Seychelles or in a recognized jurisdiction.
• Private Funds – means a mutual fund: (a) the constitutional documents of which specify that it will have no more than 50 investors; or (b) the constitutional documents of which specify that an invitation to the public to subscribe for or purchase equity interests in the mutual fund is prohibited.
• Public Funds - means any mutual fund which is not a private mutual fund or a professional fund (such as retail funds offered to the general public).
• Exempt Foreign Funds - the Act allows for foreign funds to operate from Seychelles without a Seychelles Fund Licence if the fund is: (a) already licensed as a mutual fund in a recognized jurisdiction; and (b) administered by a Seychelles licensed fund administrator; and (c) is either listed on a stock exchange or the minimum investment amount is not less than US$100,000.

Fund Vehicle Options

The following range of entities may be used as fund vehicles:

• Seychelles tax-exempt IBCs
• CSLs - these are tax-resident companies which may access Seychelles Double Taxation Avoidance Agreements, such as the favourable Seychelles / China DTA
• Seychelles tax-exempt limited partnerships
• Seychelles international trusts (unit trusts), or
• Companies, unit trusts, or limited partnerships constituted in a recognized jurisdiction.

Other Advantages

• The accounts of Seychelles funds and fund administrators may be audited by approved overseas auditors (including auditors qualified in Hong Kong, Singapore and South Africa as well as UK, USA, Canada and Australia).
• Seychelles licensed funds and exempt foreign funds enjoy (among other fiscal concessions) full exemption from Seychelles business tax on the fund’s income (except for funds wishing to use a CSL structure so as to benefit from tax relief available under a Seychelles double taxation avoidance agreement (DTA), such as the favourable Seychelles / China DTA), as well as exemptions from Seychelles withholding tax and stamp duty.
• Reduced costs and value for money - Seychelles funds may be established and operated more cost-effectively than in many other jurisdictions.