STRUCTURING WITH A SEYCHELLES PRIVATE INTEREST FOUNDATION AND COMPANY SPECIAL LICENCE (CSL) SEYCHELLES INVESTMENT FORUM - JOHANNESBURG 20 JULY 2011

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1 STRUCTURING WITH A SEYCHELLES PRIVATE INTEREST FOUNDATION AND COMPANY SPECIAL LICENCE (CSL) SEYCHELLES INVESTMENT FORUM - JOHANNESBURG 20 JULY 2011

2 CONRAD BENOITON MANAGING DIRECTOR APPLEBY CORPORATE SERVICES (SEYCHELLES) LIMITED Website:

3 Disclaimer Complex subject matter Review with professional advisors Assume no responsibility

4 Overview What is a private interest foundation ( PIF and Foundation ) Legislation Advantages of PIFS General structure Creation of a PIF Requirements of a Seychelles PIF

5 Overview (Cont d) Assets PIFs vs Trusts Practical Uses Fees

6 What is a PIF? a PIF is a legal entity which may hold, protect and distribute assets or income in accordance with the wishes of the person who established it; multiple jurisdictions offer PIFs, including Switzerland, Austria, Panama, Jersey, and Seychelles; can be used for charitable purposes as well as for "private" purposes such as succession and estate planning.

7 Advantages of a Private Interest Foundation generally assets are sole and separate property and cannot be seized to satisfy any personal judgements or obligations of the founder or the PIF beneficiaries; cannot be attached in order to satisfy any claims against the founder, including judgements for divorce, lawsuit and other liabilities; can engage in any non-commercial activity which will increase the value of assets; founder does not own the PIF and as such gains important tax reporting and protection benefits.

8 Advantages of a Seychelles private interest foundation The Foundation Act 2009 specifically provides: that a Seychelles PIF is a separate legal entity in its own right ; that neither the founder nor the beneficiaries have any ownership interest in the PIF assets; that provision may be made to disentitle a beneficiary who challenges asset transfers to or distributions by a foundation; specifically protects the transfer of assets to the PIF from attack by creditors of the founder; that any claims by a creditor of the founder can only be brought within 2 years from the date of transfer of property to the PIF; for specific exclusion of foreign forced-heirship laws.

9 Advantages of a Seychelles private interest foundation (Cont d) Tax protection: Nil Seychelles taxation; no withholding tax is levied when distributions are made; no stamp duties are applicable.

10 Advantages of a Seychelles private interest foundation (cont d) Privacy Nominee founder permissible; No requirement to file regulations; Beneficiaries can be named in a separate document from the foundation charter (which is a public document); Councillors do not have to be named.

11 Advantages of a Seychelles private interest foundation (cont d) Fast registration and name approvals; Low minimum initial assets (US$1); Strong asset protection.

12 Advantages of a Seychelles Private interest Foundation (cont d) Ease of administration No annual audit required; Not required to file annual accounts or annual return in Seychelles; No annual meeting requirements; Permissible to have a foreign language name or certificate of registration; Must have a Registered Agent in Seychelles.

13 General Structure Founder: the person or entity that forms the PIF in the public registry. Our firm generally provides a nominee founder, and provides you with a pre-signed, updated letter of resignation from the founder immediately upon incorporation. At that point, the founder holds no control. Foundation Council: the council serves the same function to the PIF as directors do to a corporation. Protector: performs the function of the ultimate controller of the Foundation. Immediately upon incorporation of the foundation, the council appoints a Protector, through a notarized Private Protectorate Document. Since the document is a private, non-publicly registered document, the Protector remains 100% anonymous. From that point, the Protector has full control over the PIF and all of its assets. Not required to have a protector Beneficiaries: appointed by a Private Letter of Wishes, this is written by the Protector. This document is also private and non-publicly registered, so the beneficiaries remain 100% anonymous. The Letter of Wishes can be changed or modified at any time by the Protector only

14 Schematic Founder Protector (If desired) Patrimony Foundation Foundation Council Beneficiaries Purposes

15 Creation of a Seychelles PIF Created when a founder executes a written foundation charter ( Charter ), Charter is filed with Seychelles international Business Authority ( Registrar ) and the Registrar issues a certificate of registration. Founder undertakes to donate assets to be managed by a foundation council ( Council ) for the benefit of one or more beneficiaries, one of whom can be the founder. Council must consist of one or more persons. Council is similar to a board of directors of a corporation whose membership may be constituted by natural persons or corporations. Foundation management governed by foundation regulations ( Regulations ) Regulations are a private document between Founder and the Foundation Council. Name may be expressed in any language, but where not in English or French a translation of the name in English or French must be provided to the Registrar.

16 Assets a PIF may hold/acquire minimum of US$1 initial assets and, in addition, to non-seychelles assets, may include: any entitlement or interest as a beneficiary in another PIF under the Act or a trust under the Seychelles International Trusts Act. any shares, debentures or other interest in a company incorporated under the Seychelles International Business Companies Act, Companies (Special Licenses) Act, Protected Cell Companies Act and/or an interest in a partnership registered under the International Limited Partnership Act.

17 PIF Assets (cont d) any company, trust or other entity licensed as a mutual fund under the Seychelles Mutual Fund and Hedge Fund Act; or any funds in an account with a bank licensed under the Seychelles Financial Institutions Act; cannot include immovable properties or other properties in Seychelles, including shares, debentures or other interests in a legal person incorporated or registered, in Seychelles;

18 PIF Differences between a PIF and a Trust TRUST Separated legal entity recognised by law A relationship between settlor and trustee; therefore trust does not represent a legal entity different from the trustee Founder can retain control over asset Assets of a trust are irrevocably vested in the trustee Foundation has a founder who may have rights reserved to him over the management of the foundation A trust has a settlor who may have reserved powers (depending upon the legislation of the jurisdiction) Initial assets can be placed in the foundation after established and there is no time limit for vesting Assets must be settled upon trust at the outset in order to establish the trust Cannot be used for commercial purposes Can be used for multiple commercial purposes

19 Differences between a PIF and a Trust (cont d) PIF TRUST PIF has both legal and beneficial ownership of its assets Foundation, being a corporation, is governed by its incorporating documents and resolutions, which are not subject to variance by a court of law Foundation s administrators and the founder who comply with the requirements of the Charter and the Articles are not personally liable for the debts of the foundation The trustee has legal ownership of the Trust Assets which are held for the benefit of the beneficiaries or for a specific purpose or both Since a trust is a legal relationship, a court of law can vary that relationship in any manner it can justify Trustees have unlimited liability in respect of the activities of the trust The will and intentions of the founder may carry more weight to the extent that even the rights of the founder are assignable by him The property endowed or to be endowed becomes an estate separate and apart from that of the founder Interests of the beneficiaries are paramount, even though the settlor may provide a letter of wishes Property is held on trust beneficiaries who have a beneficial interest in the assets

20 Practical uses of private investment foundations Separation of voting and economic benefits Owning a private trust company To hold assets off balance sheet Protect assets against forced heirship

21 To separate voting and economic benefits Founder endows the foundation with non-voting shares of AAA Ltd., while holding the voting shares in his individual capacity. The Foundation will receive the economic benefits from the non-voting shares for the family while the founder maintains his control by retaining the voting shares in his individual capacity.

22 Owing a private trust company( PTC ) A foundation may be created to hold the shares of a PTC. The founder, family members and trusted advisors can be elected as directors and assume responsibility for the management of the PTC. Directors of the PTC can assume a more aggressive investment strategy than an institutional trustee would take. Remember, the foundation owns the shares of the PTC NOT the founder; in contrast to a trust, which may only operate and own property through a trustee.

23 Holding assets off balance sheet/securitisation of a mortgage Foundations provide a convenient way to package financial instruments into marketable securities. For example, AAA Ltd. has a mortgage portfolio that it wishes to sell to a number of investors. AAA Ltd. forms a foundation which then incorporates Invesco Ltd. AAA Ltd. endows its mortgage portfolio to Invesco Ltd. Invesco Ltd. then sell its shares to the investors.

24 Anti-Forced Heirship Founder wants all or some of his assets to fall outside of his personal estate. He can endow a foundation with those assets. Seychelles law contains specific exclusion of foreign forced-heirship laws and comprehensive provisions protecting dispositions to a foundation from challenge from creditors of the founder; and claims by creditors of the founder are statute-barred after 2 years from the date of the transfer of the relevant property to the foundation.

25 Fees Foundation registration fee (establishment and year 1) - US$200* Foundation annual renewal fee - US$200 Foundation continuation fee - US$200 Minimum Initial Capital US$1 * (contrast that with a jurisdiction such as Panama where one must invest a minimum of US$10,000 to set up a PIF)

26 Summary Private foundations are increasingly being used for wealth management purposes. Interest in foundations is definitely on the rise. Can be used for wealth protection, estate planning, charity, asset holding, intellectual properties ownership or forming tax effective structures and may own assets worldwide. A Seychelles foundation is exempt from Seychelles business tax on its income, Seychelles withholding tax and stamp duty.

27 Company Special Licence Companies (CSL) What is a CSL it is a local tax resident company specially licensed by the Seychelles International Business Authority (SIBA and taxed at a rate of 1.5% of its worldwide income. properly structured, the CSL may have access to the growing list of Double Taxation Agreements (DTA) signed by the Seychelles Government Current 13 including South Africa

28 CSL - Objects Investment management and advice Offshore banking Offshore insurance Reinsurance Business of An investment company A holding company A marketing company A company holding intellectual property A headquarters company A human resources company A franchising company

29 Incorporation of a CSL CSL incorporated under Companies Act 1972 Documents required Registration and certificate of incorporation Issuance of special license Incorporation and licensing process can be completed within 2-3 weeks

30 CSL Shares, Management and Accounts (I) Shares Minimum 2 shareholders No bearer shares Nominee shareholders allowed but names must be recorded Management Must be at least 2 natural persons, no corporate directors Directors need not be resident in the Seychelles (however advisable if they wish to access DTA) (CSP) Registered office Must be in the Seychelles

31 CSL Shares, management and accounts (II) Company secretary Must be resident in the Seychelles Must be a Seychelles registered Corporate Service Provider (such as Appleby) Accounts Must be prepared in accordance with IAS Subject to audit Annual returns filed within 90 days after end of financial year

32 CSL Taxation (Seychelles) World-wide profits subject to tax Tax rate 1.5% Withholding tax on dividends, interest and royalties: 0% CSL qualifies for treaty protection as it is a resident of the Seychelles Tax resident certificate available on request

33 CSL Taxation (Seychelles) (Cont d) Other tax benefits No stamp duties on transfers of property or shares Importation of furniture and equipment tax exempt for office use No exchange controls Tax benefits remain in force for at least 10 years

34 Confidentiality no public record of beneficial owners or shareholders very strict laws governing the protection and privacy of this information public disclosure of directors only

35 Seychelles DTAs Ratified and in force include China, UAE, Oman, Cyprus, Malaysia, Indonesia, South Africa, Mauritius, Vietnam, Thailand, Botswana and Barbados and Qatar Signed and awaiting ratification: Zimbabwe, Belgium, Bahrain, Kuwait, Zambia and Monaco Negotiations concluded with Russia, Egypt, Czech Republic, Tunisia,Namibia, Lesotho, Portugal, Sri Lanka, Pakistan, Malawi and Mozambique Negotiations in progress include Philippines, Malta, Burundi, Ivory Coast, Morocco, Uganda, Luxemburg, Tanzania and Kenya.

36 Case Study No. 1 Dividends Dividends Institutional / Portfolio Investors Equity Seychelles Investment Fund (CSL) Equity No Seychelles withholding tax 1.5% tax on dividends received (but credit for Chinese WHT) Chinese companies 1) 5% Chinese withholding tax 1) Plus equity investments in other East Asian countries (Singapore, Malaysia, Hong Kong, etc.)

37 Case Study No. 2 A South African company (SA Co) wishes to set up a subsidiary (mainly manufacturing) in China (in Guangdong SEZ) Profit perspectives are excellent SA Co s Chinese subsidiary will qualify as an FIE under Chinese law Question: How to structure the investment in a tax effective manner? 37

38 Case Study No. 2 - Foreign Direct Investment Applicable corporate tax rate in China: 15% After tax profits in China 85 Withholding tax in China 0% 0 Gross distribution received to SA Co 85 Tax payable in South Africa (28%): 28 Less: Credit for Chinese WHT: 0 Credit for Chinese CIT: 15 Total credits 15 Net tax payable in South Africa 13 Net after tax return 72

39 Case Study No. 2 Structuring thru a CSL Applicable corporate tax rate in China: 15% After tax profits in China 85 Withholding tax in China 0% 0 Gross distribution received to Seychelles Co 85 Tax payable in Seychelles: 1.5% 1.3 Net after tax profits in Seychelles 83.7

40 Case Study No. 2 Structuring thru a CSL Gross distribution to SA Co Withholding tax in Seychelles 0 Net receipt in South Africa 83.7 Tax payable in South Africa(28%): 28 Credits in South Africa: Credit for notional tax payable in Seychelles (art. 10 treaty South Africa Seychelles): 33½% Maximum credit 28 Net tax payable in South Africa 0 Net after tax return 83.7

41 Summary Legislated by hybrid common/civil law legal system Bearer shares not allowed Disclosure of beneficial owner to Registered Agent Local Secretary requirement Migration of domicile permitted (Incoming and Outgoing) Local Registered Agent requires Non-English language names allowed Register of Directors public Operational objects specific to intended business Register of Members not public Tax Resident Certificate No audited accounts made public 1.5% tax on worldwide profits Annual filing of returns not public Access to Double Taxation Avoidance Treaties No annual meeting required in Seychelles No corporate directors

42 Protected Cell Companies can be used as SPVs for Insurance (as well as Collective Investment Schemes) Seychelles Mr. A PCC Benefits of using this structure: CELL 1 CELL 2 CELL 3 Jurisdiction A Jurisdiction B Jurisdiction C PCC is a single entity but the cellular assets can be independently and separately held liable. Assets and liabilities can be segregated The administrative benefits of PCC are significant, once established repeat transactions can be carried out in much reduced timescale Single tax return is filed for the entire entity. Single regulatory consent can be issued and cells can be added/removed (regulatory consent can be amended) Can provide rights to the cells to invest in each other

43 Why Seychelles should be the preferred destination for the International Structuring A variety of products and well-balanced legislations Products for Lower Tax Benefits IBC International Business Company LLC - Limited Liability Company Products that utilize Double Tax Treaties and facilitate Gateways to other economies CSL Special License Companies Products that facilitate Estate Planning Trusts Foundations Products that facilitate Investments Mutual Funds Offshore Insurance Stock Exchange Products for Risk Mitigation and diversification PCC Protected Cell Company

44 CONFIDENTIALITY & TAX AVOIDANCE NOT SECRECY & TAX EVASION

45 THANK YOU