Seychelles Trust Formation
The Seychelles Trust Formation or International Trust has been with us since 1994 and is based largely on the BVI model.
The primary benefits of the Seychelles International Trust are in terms of the opportunities it offers by way of Tax minimisation, Financial Planning, Succession planning and Financial Privacy. The law also contains strong asset protection provisions.
Neither the name of the person establishing the Trust nor the persons who are to benefit from the Trust are disclosed to the Registry. Upon registration the Registrar simply issues a sealed letter confirming registration and specifying the name and registration number of the Trust.
The Seychelles Trust Formation or International Trust also has significant appeal as a holding vehicle wherein it is deployed to hold shares in an IBC as this can enable the would be beneficiaries to defer or avoid tax on the profits of the IBC for an indefinite period.
Features & Benefits of Seychelles International Trusts
Other features of Seychelles Trust Formation include:
- A Seychelles Trust pays no taxes in Seychelles on its foreign income
- A copy of the Trust Deed is not required to be filed with the Registry
- A Seychelles International Trust can own property anywhere (except for land in Seychelles; though it can own shares and/or maintain bank accounts here)
- The Settlors or Trustees can themselves be Beneficiaries of the Trust
- The Settlor can choose whatever country’s laws he prefers as the laws by which the Trust is to be governed
- Someone resident outside Seychelles may be appointed as a co-Trustee
- There is no requirement to mention the names of the Settlor or the final Beneficiaries in the Trust Deed
- The transfer of Property to a Seychelles Trust cannot be overturned by any foreign laws as to forced heirship
- A Seychelles International Trust cannot be voided by reason of a Settlor becoming bankrupt.
- The only way that a Settlor’s creditors can attack a Seychelles Trust is by commencing legal action against the Trustee in the Seychelles Supreme Court seeking to have the Trust declared a sham.
- Any legal action to claw back assets transferred to a trust, must be brought within two years of the date of transfer of the disputed asset to the Trust.
Whilst the Trustees administer the trust (Seychelles Trust Formation) at their discretion, a Letter or Expression of “Wishes” is commonly provided by the Settlor, setting out his or her wishes in relation to administration of the trust, including with respect to o distributions, timing of distributions, deletion or substitution of beneficiaries and etc. Though not bound by the Expression of wishes the Settlor’s wishes are commonly respected so as to ensure that the legal integrity of the Trust (in terms of its aim to assist the proposed beneficiaries) is maintained.
Asset Protection Provisions for a Seychelles Trust Formation
The Seychelles International Trusts Act 1994 (“the Act”) provides:
- “that notwithstanding any foreign laws, an international trust shall not be void by reason of the settlor’s bankruptcy or liquidation of the settlor’s property or in any legal action against the settlor by the settlor’s creditors (except where the Seychelles Supreme Court finds beyond reasonable doubt that the trust was made with the intent to defraud creditors of the settlor or the settlor was insolvent at the time when the property was vested in the trustee. The onus of proof as to intent to defraud rests on the creditor claimant)” &
- “that a legal claim by a creditor shall not be permitted against a trustee of an international trust after 2 years from the date of transfer of assets into the trust. “
- This affords a would be legal claimant a very narrow opportunity to “attack” a Seychelles trust. In addition to the 2 year legal claim limit period, a claimant creditor ALSO has to prove his or her case “beyond reasonable doubt” (Which is higher than the usual civil onus of “on the balance of probabilities”).
- Although a Seychelles International Trust is “registered” and a registration number allocated, the Trust Deed does not have to be filed with the Registry.
- There is no requirement to file with the Registry details of the Settlor or the beneficiaries (except for any beneficiaries who are Seychellois nationals)
- No information or document relating to an international trust can be made public, except by order of the Seychelles Supreme Court on application made by the Seychelles Attorney General and then only for the purpose of an inquiry into or trial relating to drug trafficking, arms trafficking or money laundering.
- Forced heirship
- Seychelles has strong anti-forced heirship provisions with regard to trusts. Neither an international trust nor any transfer or disposition of property to the trust can be invalidated by any foreign rule of forced heirship, nor because the trust concept is unknown to or not admitted by the laws of the foreign jurisdiction
Accumulation for the Seychelles Trust Formation
Under the Act, there are no restrictions on the accumulation of income:
- A trustee is allowed, (like under the terms of most typical discretionary Trust Deeds), a “power to accumulate”, ie to save the income as it arises rather than distributing it to the beneficiaries (which is very useful for tax avoidance/deferral purposes)
- The accumulations can be directed towards either “capital” beneficiaries or to towards “income” beneficiaries.
Establishment of a Seychelles Trust Formation
To establish a Seychelles International Trust Registration you need only:
- File a brief declaration by the Trustee with the Registry, declaring that the Settlor of the Trust is a non Seychelles resident; that the Trust property does not include any land in Seychelles; and advising of the name and date of the Trust.
- Make a one off payment to the Registry of US$ 100.
- A Seychelles Trust must be administered by a Seychelles Licensed Trustee.
- Non-resident co-trustee/s and/or protectors may also be appointed
- A Seychelles International Trust can own property anywhere in the world (except for land in Seychelles; although it can own shares and/or maintain bank accounts in Seychelles)
- The Settlor/s can also be a beneficiary of the International Trust (but not a sole beneficiary)
- The Settlor cannot at any time during the duration of the Trust be a resident of Seychelles
- There is a 100 year time limit on the length of the Trust at which time the law provides that the Trust will then terminate, unless terminated earlier either pursuant to the trust terms or for any other reason (charitable trusts or purpose trusts excepted).
- The Act requires a Beneficiary of an International Trust to be:
(a) identifiable by name; or
(b) ascertainable by reference to either:
(i) a class; or
(ii) a relationship to another person, whether or not living at the time of the creation of the trust or at the time by reference to which, under the terms of the trust, members of a class are to be determined. Some examples of “unnamed” beneficiaries - where the trust deed includes as a beneficiary the settlor’s children and remoter issue; and the spouses, widows and widowers of the settlor’s children.
The law governing an International Trust is the law chosen by the Settlor to be the proper law
- Seychelles international trusts can migrate and can be administered from Seychelles or elsewhere.
- The terms of an international trust may also provide for a change in the proper law of the trust, but a change is only valid if the new proper law venue recognizes the validity of the trust and the interest of the beneficiaries. (The Hague Convention has been ratified by Seychelles).