Glossary Of Offshore Terms
Adverse trustee. One who has a substantial, beneficial
interest in the trust assets as well as the income or benefits derived from
the trust. A trustee that is related to the creator by birth, marriage or in
an employer/employee relationship.
Annuitant. The beneficiary or beneficiaries (in a
last-to-die arrangement) of an annuity who receives a stream of payments
pursuant to the terms of the annuity contract.
Annuity. A tax sheltering vehicle. An unsecured contract
between the company and the annuitant(s) that grows deferred-free and is
used to provide for one's later years. All income taxes are deferred until
maturing of the annuity. Capital gains and income accumulate tax deferred.
Results in a stream of payments made to the annuitant during his or her
lifetime under the annuity agreement. Taxes are paid on the income, interest
earned and the capital gains but only to the extent as and when they are
received. Currently, there is no annual limit on purchases, but there is no
tax credit for purchases. An annuity is not an insurance policy.
Apostille. An apostille is a special seal applied by an authority to
certify that a document is a true copies of an original. Apostilles are
available in countries, which signed the Hague Convention Abolishing the
Requirement of Legalization of Foreign Public Documents, popularly known as
The Hague Convention. This convention, created in 1961, replaces the time
consuming chain certification process used so far, where you had to go to
four different authorities to get a document certified.
Asset manager. A person appointed by a written contract
between the IBC (or the exempt company) or the APT and that person to direct
the investment program. It can be a fully discretionary account or
limitations can be imposed by the contract under the terms of the APT or by
the officers of the IBC. Fees to the asset manager can be based on
performance achieved, trading commissions or a percentage of the valuation
of the estate under his or her management.
Asset Protection Trust (APT). A special form of irrevocable
trust, usually created (settled) offshore for the principal purposes of
preserving and protecting part of one's wealth offshore against creditors.
Title to the asset is transferred to a person named the trustee. Generally
used for asset protection and usually tax neutral. Its ultimate function is
to provide for the beneficiaries of the APT.
Badges of Fraud. Conduct that raises a strong presumption
that it was undertaken with the intent to delay, hinder or defraud a
creditor.
Bank of International Settlements (BIS). Structured like
America's Federal Reserve Bank, controlled by the Basel Committee of the
G-10 nations' Central Banks, it sets standards for capital adequacy among
the member central banks.
Bank Secrecy. In most countries one of the terms of the relationship
between banker and customer is that the banker will keep the customer’s
affairs secret. Staff members are normally required to sign a declaration of
secrecy as regards the business of the banks. Where numbered accounts are
used their purpose is to limit the number of persons who know the identity
of the client. In certain countries (e.g. Switzerland and the Cayman
Islands) specific legislation makes breaches of bank secrecy subject to
criminal law sanctions. However, in all legal systems (including
Switzerland) there are specific cases where the duty of secrecy of a banker
is discharged, e.g. where fraud, money laundering and narcotics are
involved. The exchange of information clause contained in most tax treaties
may enable the tax administration of one treaty country to obtain
information concerning bank accounts which its residents have in the other
country.
Bearer Bond. A bond issued in bearer form rather than being
registered in a specific owner's name. Ownership is determined by
possession.
Bearer Shares. Shares in the capital of a company which are
transferable by delivery of the certificate. They do not display a
shareholder's name but instead grant ownership rigths to any individual who
is in actual physical possession of the certificate(s) Unlike registered
shares, which are transferred by an instrument of transfer and display the
shareholder's name on the actual share certificate, the name of the holder
is not registered in the books of the company.
Beneficiary. The person(s), company, trust or estate named
by the grantor, settlor or creator to receive the benefits of a trust in due
course upon conditions which the grantor established by way of a trust deed.
An exception would be the fully discretionary trust. The beneficiary could
be a charity, foundation and/or person(s) which or who are characterized by
classes in terms of their order of entitlement or their hierarchy.
Board of Trustees. A board acting as a trustee of a trust
or as advisors to the trustee depending upon the language of the trust
indenture. Also see Committee of Advisors.
Business trust. A trust created for the primary purpose of
operating or engaging in a business. It is a person under the Internal
Revenue Code (IRC). It must have a business purpose and actually function as
a business.
Captive Bank. Bank intended to provide services to the promoter and
associates of the promoter, usually an international group of companies.
Captive Insurance Company. Insurance company established by a company
or international group to provide insurance (or reinsurance) for the
promoter and associates of the promoter.
Committee of Advisors. Provides nonbinding advice to the
trustee and trust protector. Friendly towards settlor but must still
maintain independence.
Committee of Trust Protectors. An alternative to utilizing
merely one trust protector. Friendly towards settlor, but must remain
independent.
Companies Act or Ordinance. Legislation enacted by a tax
haven to provide for the incorporation, registration and operation of
international business companies (IBCs). More commonly found in the
Caribbean tax havens. For a typical example, read the Bahamas' International
Business Company Act of 1989.
Controlled Foreign Corporation (CFC). An offshore company
which, because of ownership or voting control of U.S. persons, is treated by
the IRS as a U.S. tax reporting entity. IRC 951 and 957 collectively define
the CFC as one in which a U.S. person owns 10 percent or more of a foreign
corporation or in which 50 percent or more of the total voting stock is
owned by U.S. shareholders collectively or 10 percent or more of the voting
control is owned by U.S. persons.
Corporate Officers Another "cabinetlike" institution, sometime part
of the Board of Directors: president, secretary and treasurer etc. These
individuals have the right to represent the company to third parties, to
negotiate and make commitments in its name.
Creator. A person who creates a trust. Also see settlor and
grantor.
Current Account. An offshore, personal savings or checking
account.
Custodian. A bank, financial institution or other entity
that has the responsibility to manage or administer the custody or other
safekeeping of assets for other persons or institutions.
Custodian Trustee. A trustee that holds the trust assets in
his or her name.
Declaration of Trust. A document creating a trust; a trust
deed.
Discretionary Trust. A grantor trust in which the trustee
has complete discretion as to who among the class of beneficiaries receives
income and/or principal distributions. There are no limits upon the trustee
or it would cease to be a discretionary trust. The letter of wishes could
provide some guidance to the trustee without having any legal and binding
effects. Provides flexibility to the trustee and the utmost privacy.
Domicile. The place where an individual has his permanent home, or to
which he intends to return, or in some cases the country of origin. In other
jurisdictions the place where an individual has a long established residence
or in relation to a company, where it is incorporated.
Donor. A transferor. One who transfers title to an asset by
gifting.
Dormant Company. A company that is not currently trading. It has a
registered name, directors, articles of association, and so on. But it has
no turnover.
Double Taxation Agreement (or Double Tax Treaty). Agreement between
two countries intended to relieve persons who would otherwise be subject to
tax in both countries from being taxed twice in respect of the same
transactions or events.
Estate. Interests in real and/or personal property.
Exempt Company. A company exempted from tax or from compliance with
specified regulations of the country in which it is established.
Exempt Trust. A trust established in a country where the Government
issues a guarantee that the trust income and property will not be taxed for
a specified number of years no matter what laws are subsequently passed
relating to income, inheritance, estate duty, or capital gains taxes.
Exequatur. Recognition of a country's consul by a foreign government.
Expatriation The removal of one’s legal residence or citizenship from
one country to another. Expatriates from Third World countries enter OECD
countries to search for better income opportunities than they can pursue at
home. Expatriates from OECD countries search for better capital preservation
opportunities than they can pursue at home.
Family Holding Trust. A trust that is created specifically
to hold the family's assets consisting of real and/or personal property.
Family Limited Partnership (FLP). A limited partnership
created for family estate planning and some asset protection. It is family
controlled by the general partners. A highly appreciated asset is
transferred into the FLP to achieve a capital gains tax reduction. Usually,
the parents are the general partners holding a 1 to 2 percent interest. The
other family members are the limited partners holding the balance of the
interest in the partnership.
Flight Capital. Money that flows offshore and likely never
returns. Flight is exacerbated by a lack of confidence as government grows
without bounds.
Foreign. May be utilized in a geographic, legal or tax
sense. When used geographically, it is that which is situated outside of the
U.S. or is characteristic of a country other than the U.S.
Foreign Bank Accounts (U.S.). Every United States resident,
partnership, corporation, estate or trust must advise the United States
Treasury of any financial interest in or signature authority over a foreign
bank, securities or other financial account in a foreign country and must
report that relationship each calendar year by filing Form 90-22.1 with the
Treasury Department on or before June 30 of the succeeding year. This report
must be at the following address: United States Treasury Department, P.O.
Box 28309, Central Station, Washington, DC 20005. A "foreign country"
includes all geographical areas located outside the United States, Guam,
Puerto Rico, and the U.S. Virgin Islands.
Foreign Corporation. A corporation organized under the laws of a
foreign country and whose parent company in the home country may participate
in any percentage of shares of the affiliate corporation.
Foreign Investor in Real Property Tax Act of 1980 (FIRPTA).
Under FIRPTA and the Economic Recovery Act of 1981, unless an exemption is
granted by the IRS, upon the sale of real property owned by offshore
(foreign) persons, the agency, attorney or escrow officer handling the
transaction is required to withhold capital gains taxes at the closing of
the sale transaction. Unless withheld and submitted to the IRS, the party
handling the sale transaction is personally liable for the taxes.
Foreign Person. Any person, including a U.S. citizen, who
resides outside the U.S. or is subject to the jurisdiction and laws of a
country other than the U.S.
Foreign Personal Holding Company (FPHC). Different than a
controlled foreign corporation. Discuss with your CPA.
Free Zones. Free zones are designated areas which receive special
treatment through their exclusion from the area to which the country's
normal customs rules apply. A free port is one at which imports may be
landed without paying customs duties. The system of free zones or free ports
favors export processing, transshipment and the entrepot trade since there
is no need to pay and then reclaim customs duties. Though free zones are
often part of a tax incentive package in what would otherwise be a high tax
jurisdiction, they may also be found in tax havens, e.g. Freeport in the
Bahamas.
Fraudulent Conveyance. A transfer of an asset that violates
the fraudulent conveyance statutes of the affected jurisdictions.
GmbH. A German form of a limited liability corporation.
Grantor. A person who creates a trust or transfers real
property to another entity. In a U.S. grantor trust, the person responsible
for U.S. income taxes on the trust. May have a reversionary interest in a
trust.
Grantor Trust. A trust created by a grantor and taxed to
that grantor (settlor).
Headquarters Company. A company organized in a foreign country,
usually a tax haven, which exclusively services its affiliate companies
through managing or administering activities. It does not buy or sell
products and does not involve itself in financing activities as may be
practiced by offshore holding companies. A headquarters company is a fixed
installation belonging to a foreign enterprise or an international company
having its registered office in a specific foreign country selected because
its laws permit it to act for the sole benefit of one or more companies in a
group for the purpose of performing management control, servicing or
coordination functions, usually in a specified geographical area. The
headquarters company generally is allowed a tax deduction by granting
permission to base its taxation on a national profit amounting to
approximately 5% to 8% of the total operating expenses incurred in the
particular country where it is organized to operate as a headquarters
company. In some countries, i.e., the Philippines, there is no taxation on
income and expenses are not used as any base of computation. In other
countries, i.e., France, the headquarters company may be either an
incorporated company of the host country or a branch of an international
company.
High Net Worth (HNW) Person. An individual with more than
$1,000,000 in liquid assets to manage.
Holding Company. A company whose activity is limited to holding and
managing investments or property but not having ordinary commercial or
trading activities. The requirements to achieve holding company status vary
in different countries (in particular Liechtenstein, Luxembourg, Nauru and
the Netherlands).
Homestead Exemption. State or federal bankruptcy laws that
protect one's residence from confiscation by a judgment creditor or loss in
a personal bankruptcy.
IBC. A corporation. See international business company or
exempt company.
Inbound. Coming into the U.S.; onshore; such as funds being
paid to a U.S. person from an offshore entity.
Incomplete Gift. Where the settlor has reserved the right
to add or delete beneficiaries to the trust, it is construed as an
incomplete gift.
Independent Trustee. A trustee who is independent of the
settlor. Independence is generally defined as not being related to the
settlor by blood, through marriage, by adoption or in an employer/employee
relationship.
INTERFIPOL. International Fiscal Police. The tax crime
counterpart to INTERPOL.
International Business Company (IBC). A corporation formed
(incorporated) under a Company Act of a tax haven, but not authorized to do
business within that country of incorporation; intended to be used for
global operations. Owned by member(s)/shareholder(s). Has the usual
corporate attributes.
International Financial and Banking Centre (IFC). A country
identified as being a tax haven.
International Trust. A Cook Islands term for a special type
of an Asset Protection Trust (APT). Governed by the laws of the Cook
Islands.
INTERPOL. International Criminal Police Organization. The
net-work of multinational law enforcement authorities established to
exchange information regarding money laundering and other criminal
activities. More than 125 member nations.
Layered Trusts. Trusts placed in series where the
beneficiary of the first trust is the second trust; used for privacy.
Layering. May be achieved with numerous combinations of
entities. For example, 100 percent of the shares of an IBC being owned by
the first trust, which has as its sole beneficiary a second trust.
Letter Box Company. A corporation set up in a tax haven with nothing
more than a mailing address to take advantage of tax provisions. Severely
criticized in many quarters as an evasive measure, the company whose
existence is little more than a name-plate has been outlawed in Monaco but
is allowed to function in many other havens.
Letter of Wishes. Guidance and a request to the trustee
having no binding powers over the trustee. There may be multiple letters.
They must be carefully drafted to avoid creating problems with the settlor
or true settlor in the case of a grantor trust becoming a co-trustee. The
trustee cannot be a pawn of the settlor or there is basis for the argument
that there never was a complete renouncement of the assets. Sometimes
referred to as a side letter.
Licensing. Technology which can be the subject-matter of licensing
covers all forms of industrial enterprise. It embraces industrial property
which may be protected by patents, trade marks, etc. As well as technology
which cannot be patented. Industrial enterprises frequently exploit their
technology by transferring it to licensing companies in tax havens so that
royalties and other sums may be received by the licensing company from
related companies or third parties thus reducing the total tax burden. The
anti-avoidance provisions of most developed countries have limited the use
of tax havens for this purpose.
Limited Company. Not an international business company. May
be a resident of the tax haven and is set up under a special company act
with a simpler body of administrative laws.
Limited Liability Company (LLC). Consists of member owners
and a manager, at a minimum. Similar to a corporation that is taxed as a
partnership or as an S-corporation. More specifically, it combines the more
favorable characteristics of a corporation and a partnership. The LLC
structure permits the complete pass-through of tax advantages and
operational flexibility found in a partnership, operating in a
corporate-style structure, with limited liability as provided by the state's
laws.
Living Trust. Revocable trust, for reduction of probate
costs and to expedite sale of assets upon death of grantor. Provides no
asset protection.
LLP. Limited liability partnership. A form of the LLC
favored and used for professional associations, such as accountants and
attorneys.
LLLP. Limited liability limited partnership. Intended to
protect the general partners from liability. Previously, the general partner
was a corporation to protect the principals from personal liability. Under
the LLLP, an individual could be a general partner and have limited personal
liability.
Mavera Injunction. A court injunction preventing the
trustee for a trust from transferring trust assets pending the outcome of a
law suit.
Member. An equity owner of a limited liability company
((LLC), limited liability partnership (LLP), limited liability limited
partnership (LLLP) or a shareholder in an IBC.
Memorandum. The Memorandum of Association of an IBC,
equivalent to articles of incorporation.
Mutual Legal Assistance Treaty (MLAT). An agreement among
the U.S. and many Caribbean countries for the exchange of information for
the enforcement of criminal laws. U.S. tax evasion is excluded as not being
a crime to the offshore countries. The British Virgin Islands have not
executed the Treaty.
Nominee Director. Someone who acts on your behalf as a ‘front’
director of the company. In some jurisdictions the nominee director can also
be another offshore company.
Non-grantor Trust. Usually an APT created by a NRA person
on behalf of the U.S. beneficiaries.
Non-Resident Company. A company treated by the jurisdiction in which
it is incorporated as non-resident for tax purposes or exchange control
purposes or both.
NRA. Nonresident (of the U.S.) alien. Not a U.S. person as
defined under the Internal Revenue Code (IRC).
Offshore (OS). Offshore is an international term meaning
not only out of your country (jurisdiction) but out of the tax reach of your
country of residence or citizenship; synonymous with foreign, transnational,
global, international, transworld and multi-national, though foreign is used
more in reference to the IRS.
Offshore Banking. By popular usage, the establishment and operation
of US or foreign banks in such offshore tax havens as the Bahamas and the
Cayman Islands.
Offshore Banking Unit (OBU). A bank in an offshore financial center,
not allowed to conduct business in the domestic market but only with other
OBU’s or with foreign persons.
Offshore Center. A financial center used as a foreign base for
overseas operations where the investor may move in and out of his investment
freely and which fits the needs of the user.
Offshore Centers. Countries and jurisdictions, most commonly small
islands with little to no resources for revenue, specializing in the
provision of financial services. These centers specialize and focus on
offering to non-residents more favorable tax environments than that enjoyed
in their home territory on international trading activities and/or
investments via that country. Other beneficial features of offshore centres
may include banking secrecy, privacy, various types of discretionary
services and other favorable aspects of the legal environment.
Offshore Finance Company. A company organized in a foreign country,
almost always in a tax haven country, which handles such financing services
as arranging foreign loans in Eurocurrency markets and floating bonds or
other forms of indebtedness abroad in United States dollars or other hard
currencies. Generally the offshore finance company is created to handle the
financing requirements of its parent or related companies but is used
occasionally to handle the financing needs of the parent company's
distributors or agents overseas.
Offshore Fund. A mutual fund offering its shares to persons resident
outside the country in which it is incorporated.
Offshore Group of banking Supervisors (OGBS). Established in October
1980 at the instigation of the Basle Committee on Banking Supervision with
which the Group maintains close contact. The primary objective of OGBS is to
promote the effective supervision of banks in their jurisdictions and to
further international cooperation in the supervision between the Offshore
Banking Supervisors and between them and basle Committee member nations and
other banking supervisors. Current OGBS members are: Aruba, Bahamas,
Bahrain, Barbados, Bermuda, Cayman Islands, Cyprus, Gibraltar, Guernsey,
Hong Kong, Isle of Man, Jersey, Lebanon, Malta, Mauritius, Netherlands
antilles, Panama, Singapore and Vanuatu.
Offshore Holding Company. A company organized in a foreign country
which controls one or more affiliate companies and which manages,
administers or services its affiliate companies usually located outside the
country in which the parent company is incorporated.
Offshore Investment Center (Or Jurisdiction). A financial center used
as a foreign base for overseas operations where the investor may move in and
out of his investment freely and which fits the needs of the user. Large
amounts of financial assets or foreign currencies may be sold without delay
at low cost as compared with other types of financial centers. An offshore
investment center is also used as a base for such international activities
as export-import trading, commodity transactions, mutual and other
investment funds, exchange and securities hedging, futures trading for
options, calls and puts, and patent and trademark licensing. Once referred
to exclusively as the traditional "tax haven," the title given to this type
of offshore operation (offshore investment center or jurisdiction) is now
also universally accepted in order to strengthen its image in the worldwide
business community.
Offshore Investor. An investor who is a user of a foreign base
company in an offshore center and who may move in and out of his investment
freely.
Offshore Profit Centers. Branches of major international banks and
multinational corporations, which are established in low tax financial
jurisdictions to lower taxes for the business entity as a whole. The
resulting high- and low- (or non-) taxed profits are blended to enhance the
overall return to the shareholders.
Offshore Trading Company. A company organized in a foreign country to
buy goods from an exporter in one or more other foreign countries and to
sell these same goods to importers in other foreign countries. The documents
are processed by the offshore trading company and all managerial,
administrative and day-to-day financial transactions are handled by it. The
goods are shipped from the seller in one country to the buyer in the other
country without ever being shipped or landed in the country where the
offshore trading company is located.
Offshore Web Hosting. Hosting a web site in a different jurisdiction
than your home country jurisdiction. The web site does not need to be in the
same country the IBC is incorporated.
Ownership. Ownership constitutes the holding or possession
of limited liability company legal claim or title to an offshore asset.
PLC. A UK public limited company.
Preferential Transfer. A disposition of an asset that is
unfair to other creditors of the transferor.
Pre-filing Notice. Mailed by the IRS to parties (tax
payers) who are believed to be participating in fraudulent trust programs.
The notice requests that the receiver seek professional counsel before
filing their next tax return.
Probate. The legal process for the distribution of the
estate of a decedent.
Pure Equity Trust. A special type of irrevocable trust
marketed by promoters. The trust assets are obtained by an exchange of a
certificate of beneficial interest in return for the assets, as opposed to
traditional means, such as by gifting.
Pure Trust. A contractual trust as opposed to a statutory
trust, created under the Common Law. A pure trust is one in which there must
be a minimum of three parties(the creator or settlor (never grantor), the
trustee and the beneficiary(and each is a separate entity. A pure trust is
claimed to be a lawful, irrevocable, separate legal entity.
Ready-Made Company. See Shelf Company.
Real Estate. Withholding and other taxes are frequently imposed on
rental income deriving from the holding of real estate in a foreign country;
similarly, capital gains taxes may be imposed on the profits flowing from
the sale of property. However, in exceptional cases, the provisions of a tax
treaty may be of considerable value in minimizing the total tax burden, e.g.
the treaty between the Netherlands Antilles and the United States. Ownership
of real estate by individuals may also result in liability to death duties
and similar taxes in the country in which the real estate is situated,
irrespective of the residence or domicile of the individual owner. For this
reason it is common to hold foreign real estate through a tax haven or other
company.
Register. The register of international business companies
(IBCs) and exempt companies maintained by the Registrar of a tax haven.
Registered Agent. A registered agent is the person or entity
designated in the articles of incorporation to receive service of process
and other important notices from the state. A corporation must maintain a
registered agent at all times or risk forfeiture of the corporate charter.
Registered Company. A company that is registered with the authorities
of the country in which it is established. In most countries it is illegal
to operate as a company without being registered.
Registered Office. The registered office is the place where the
registered agent can be found. It may be the corporate office, or it may be
the office of the corporation's attorney.
Registrar. The Registrar of Companies, a governmental body
controlling the formation and renewal of companies created under their
company act.
Resident Company. A company treated by the jurisdiction in which it
is incorporated or in which it conducts commercial activities as resident
for tax purposes or exchange control purposes or both.
Revenue Reconciliation Act of 1995. Proposed changes to the
Internal Revenue Code affecting foreign trust reporting, among other
changes.
Securities. Shares and debt obligations of every kind,
including options, warrants, and rights to acquire shares and debt
obligations.
Settle. To create or establish an offshore trust. Done by
the settlor (offshore term) or the grantor (U.S. and IRS term).
Settlor. One (the entity) who (which) creates or settles an
offshore trust.
Shelf Company. A company that previously has been organized with
designated capital and registration cost paid and is placed on an inactive
basis, with annual registration, capital and stamp duty fees currently paid
but shares held in bearer form and the directors and officers substituted at
the time the company is taken off the shelf and becomes active.
SIPC. The Securities Industry Protection Corporation.
Provides up to $500,000 insurance protection for your U.S. stock brokerage
account.
Situs or Site. The situs is the domicile or dominating or
controlling jurisdiction of the trust. It may be changed to another
jurisdiction, to be sited in another country or U.S. state.
Societe Anonyme (SA). A limited liability corporation
established under French Law. Requires a minimum of seven shareholders. In
Spanish speaking countries, it is known as the Sociedad Anonima. Important
characteristic of both is that the liability of the shareholder is limited
up to the amount of their capital contribution.
Sparbuch. An Austrian numbered savings account.
Special Custodian. An appointee of the trustee in an APT.
Special Investment Advisor. An appointee of the trustee in
an APT.
Statute of Limitations. The deadline after which a party
claiming to be injured by the settlor may (should) no longer file an action
to recover his or her damages.
Statutory. That which is fixed by statutes, as opposed to
Common Law.
Stiftung. A Liechtenstein form of private foundation.
Suffix. The name/abbreviation of letters after the company name to
denote limited liability, for example: Limited, Corporation, Incorporated,
Société Anonyme (France), Société par actions (France), Sociedad Anonima,
Sociedade Anonima, Stiftung (Liechtenstein), Limitada, Aktiengesellschaft
(Germany), Naamloze Vennootschap (The Netherlands), Aktieselskab (Denmark),
Sociedad Berhad Anonima (Western Samoa), Berhad (Labuan), Sociedad Anónima
de Inversión (Uruguay), AG (Germany), ApS, A/S (Denmark), BV (The
Netherlands), Corp., Est. (Liechtenstein), GmbH (Germany), Inc., KFT
(Hungary), LDA, LLC, Ltd., PLC (United Kingdom), RT (Hungary), S.A.,
S.A.R.L. (France), S.A.F.I. (Uruguay).
S.W.I.F.T.. Society for Worldwide Interbank Financial
Telecommunications. Tax Avoidance. Lawful agreement, or
re-arrangement, of the affairs of an individual or company intended to avoid
liability to tax.
Tax Clearance Certificates. A certificate issued by an Income Tax
Department confirming that an individual departing from a country has
fulfilled all his income tax obligations and has no arrears. The certificate
must be shown to customs and emigration authorities upon departure from the
specific country.
Tax Evasion. Fraudulent or illegal arrangements made with the
intention of evading tax, e.g. by failure to make full disclosure to the
revenue authorities.
Tax Exempt Company. This is a company designed for companies and
individuals who are foreign to the jurisdiction in which it is registered,
providing a maximum of privacy, combined with comprehensive freedoms from
local taxation. Tax Exempt companies (often referred to simply as Exempt
Companies) pay a tax-exempt fee each year. This fee is a fixed annual fee
exempting the company from further tax liabilities in the jurisdiction in
which it is registered. It also has to pay annual filing fees (governmental
fees) and domicillary fees (service provider's fees) in order to remain
registered. The relevant tax-exempt fee for the relevant jurisdiction is
denoted in the e-offshore list for every jurisdiction.
Tax Haven. An international banking and financial centre
providing privacy and tax benefits.
Tax Treaties. Tax treaties are international agreements or
conventions concluded with the object of eliminating double taxation by the
contracting states. International double taxation may be loosely defined as
the imposition of comparable taxes in two (or more) states on the same
taxpayer in respect of the same subject matter and for identical or
overlapping periods. The most harmful effects of double taxation are on the
exchange of goods and services and on the movement of capital and persons.
Tax Regimen. The local tax treatment of income tax, foreign
source income, nonresident treatment and special tax concessions which, when
combined, form complex issues.
TCI. Turks and Caicos Islands.
Tranch. A bond series issued for sale in a foreign country.
Transmogrifying. Conversion of nonexempt assets to exempt
assets.
True Settlor. The true grantor is not the true settlor, and
his or her identity is kept quite private by the trustee. See grantor trust.
Trust. An entity created for the purpose of protecting and
conserving assets for the benefit of a third party, the beneficiary. A
contract affecting three parties, the settlor, the trustee and the
beneficiary. A trust protector is optional but recommended, as well. In the
trust, the settlor transfers asset ownership to the trustee on behalf of the
beneficiaries.
Trust Deed. An asset protection trust document or
instrument.
Trust Indenture. A trust instrument such as a trust deed
creating an offshore trust.
Trust Protector. A person appointed by the settlor to
oversee the trust on behalf of the beneficiaries. In many jurisdictions,
local trust laws define the concept of the trust protector. Has veto power
over the trustee with respect to discretionary matters but no say with
respect to issues unequivocally covered in the trust deed. Trust decisions
are the trustee's alone. Has the power to remove the trustee and appoint
trustees. Consults with the settlor, but the final decisions must be the
protector's.
Trustee. A person totally independent of the settlor who
has the fiduciary responsibility to the beneficiaries to manage the assets
of the trust as a reasonable prudent business person would do in the same
circumstances. Shall defer to the trust protector when required in the best
interest of the trust. The trustee reporting requirements shall be defined
at the onset and should include how often, to whom, how to respond to
instructions or inquiries, global investment strategies, fees (flat and/or
percentage of the valuation of the trust estate), anticipated future
increases in fees, hourly rates for consulting services, seminars and client
educational materials, etc. The trustee may have full discretionary powers
of distributions to beneficiaries.
Uniform Partnership Act (UPA). One of the uniform type of
laws adopted by some states or used as a baseline for other states.
Vintage Company. See Shelf Company.
Withholding Tax. Tax required to be deducted at source by companies
paying interest, dividends or royalties, but which may in certain
circumstances be reclaimed by the recipient or be reduced under a double
taxation agreement/tax treaties.
