Africa-Press – Seychelles. The National Assembly yesterday approved the Business Tax (Amendment) Bill 2022 which seeks to effect certain changes to the Business Tax Act 2009, and makes provisions to replace Section 54, relating to transfer pricing.
The Bill establishes the provisions to ensure that businesses and permanent establishments engaged in financial and trade arrangements do not fix or control these trade conditions and financial prices, as a means of benefitting from transfer pricing.
Provisions of the Bill will apply to all businesses and permanent establishments.
Transfer pricing benefits occur when businesses and permanent establishments fix trade conditions and financial prices in their arrangements, towards ensuring that their revenues for the year are lower than it is supposed to be, while losses for the year are higher than what they are supposed to be. As a result, the tax concession is higher than what they are due, or withholding tax is less than what they should be paying.
When there is a transfer pricing benefit, the prices and financial and trading conditions in their arrangements are not at ‘arms length’. Providing an example, Vice-President Ahmed Afif said that if a hotel operating in Seychelles also has another branch internationally, the local branch if paying for a service with the overseas branch should in principle be paying for the service at the same price as anyone or entity who does not have any linkages with the hotel. If however the hotel benefits from a price or favourable condition due to the linkage between the two, the arrangement is considered to not be at arm’s length.
Section 54 delineates when a transfer pricing benefit is deemed to have been obtained, taking into account domestic and foreign residents and makes clear how exactly the Commissioner General of the Seychelles Revenue Commission (SRC) is to determine the transfer pricing benefit when conducting a transfer pricing audit.
The amendment also makes inoperable those conditions which are not at arm’s length and bestows upon the Commissioner General power to make a determination pursuant to subsection (25) in relation to those persons who become disadvantaged as a result of the Commissioner General making a transfer pricing adjustment.
In a bid to ensure adherence to the law, government has made budgetary provisions to allow SRC to employ an expert on transfer pricing, to train staff and to work with them on audits once the law comes into effect as from January 2023.
As highlighted by Linyon Demokratik Seselwa (LDS) member for Beau Vallon John Hoareau, transfer pricing is practiced mainly by large tourism establishments whose parent companies are outside of Seychelles, and this causes government to lose much in terms of taxes.
“Not declaring this revenue means they are also not declaring their profits, thereby meaning that they skip out on another tax based on profits, business tax. Therefore, this Bill is an important one for Seychelles,” MNA Hoareau stated.
Similarly, United Seychelles (US) member Johan Loze expressed his support for the Bill, which has been in drafting for a number of years.
In concluding, VP Afif added that the Bill will not in any way affect the value of taxes owed by businesses, but will rather ensure that they pay what they should be paying, in its entirety.
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