A tax on property owned by foreigners is expected to take effect in July next year, a top official of the Ministry of Finance said on Thursday at a consultative meeting.
The principal secretary for finance, Patrick Payet, said that the ministry has taken this decision after discussions with the government.
"What we have seen with the real estate market is that it is driven by foreigners. We see prices go up and while foreigners can purchase properties, Seychellois lose because they cannot afford to buy land or houses."
"With this, we are ensuring that there is enough supply of land for Seychellois as well as additional land for the business sector to invest in and develop for rent," said Payet after a consultative meeting with businesses, companies owning properties and real estate agents.
The property tax will apply to foreigners, be it individual or companies, who already own residential and tourist establishments as well as businesses in Seychelles, a group of 115 islands in the west of the Indian Ocean. It will also apply to any future purchase of property by foreigners.
The idea for a new property tax was made in the 2017 budget address by Peter Larose, the minister of finance, after concerns from members of the National Assembly.
Payet said that the policy framework for the implementation was approved by the Cabinet of Ministers two weeks ago. The framework will form the basis for implementation in 2018.
Property tax is a tax assessed on real estate and it is usually based on the value of the property. The property can be classified as land, buildings or other immovable improvements to the land which increase the value of the real estate.
The tax rate will be 0.25 percent of the value of the property.
"We feel that the rate is ideal based on different assessments we have made using other countries which we feel may give us some competition in those markets," said Payet.
He added that: "We have used a very conservative rate of 0.25 percent to ensure that people pay the tax instead of finding ways not to pay. It is also favourable compared to other countries where the tax is in existence."
The revenue collected will be invested in different infrastructures and the principal secretary said that while the ministry responsible for housing is ensuring that there is enough land for Seychellois, the additional resources will go towards the building of houses.
The government expects to build 25 houses in 25 districts every year.
"There are other infrastructures in education, health, as well as for transport. At the end of the day, the money will go towards different infrastructures."
The new law is expected to come into force in January and the Registration Division will be tasked with informing foreign owners of their tax obligations. By next October, the Seychelles Revenue Commission is expected to collect the tax.
The Ministry of Finance, Trade and Economic Planning has started a series of consultations for the implementation of the property tax. The meetings will continue on the second and third most populated islands- Praslin and La Digue - during the weekend. A separate one will be done with the tourism sector and the Seychelles Chamber of Commerce and Industry.