A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
An administrative office is frequently located in a country other than that of the headquarters office, the parent company or a country of operation. The role of such an administrative office may be to co-ordinate international or regional activities, to provide particular services (such as management analysis, financial or other related services) or to perform a given function (such as marketing). A number of otherwise high tax jurisdictions (such as the United Kingdom, France, Belgium and Denmark) grant special tax treatment in order to attract the administrative offices of multinationals.
One who has a substantial, beneficial interest in the trust assets as well 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.
German company limited by shares.
A person appointed to represent and vote on behalf of a director of a company when he is absent from a meeting of directors.
Establishment, a legal entity without shares established in Liechtenstein, with some features of a trust but with corporate personality. It does not have shares.
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
A tax sheltering vehicle, an unsecured contract between the company and the annuitants. Funds that may grow deferred-free and are 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 resulting 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.
The object of anti-avoidance measures, insofar as they relate to low tax jurisdictions, is to prevent the avoidance or reduction of tax through the displacement of one or more connecting factors (i.e. the basis of tax liability) from the taxing jurisdiction concerned to a low tax jurisdiction.
Anti-avoidance measures may be of general application or may refer to specific low tax jurisdictions. Any measures usually appear in domestic tax systems; they may however be imposed by tax treaties.
Certificate of Good Standing in connection with corporations according to the Convention of The Hague of 5th October, 1961.
An apostille is a special seal applied by an authority to certify that a document is a true copy 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.
Buying securities in one country, currency or market and selling in another to take advantage of price differentials.
Articles of Association
Regulations for governing the rights and duties of the members of a company among themselves. Articles deal with internal matters such as general meetings, appointment of directors, issue and transfer of shares, dividends, accounts and audits.
1) the Corporation’s name; 2) its registered address; 3) its objects and aims; 4) its capitalization; 5) a statement that the company is a limited liability organization.
A person appointed by a written contract between the IBC (International Business Company) or the exempt company or the APT (Asset Protection Trust) and that person to direct the Investment program. It can be a fully discretionary amount 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 funds under management.
Asset Protection Trust (APT)
A special form of irrevocable trust, usually settled offshore for the principal purposes of preserving and protecting all or part of the beneficiary wealth offshore against creditors or other claimants. Title to the asset is transferred to a person or corporate named the trustee or trust company respectively. Generally used for asset protection it usually will be tax neutral. Its ultimate function is to provide for the beneficiaries of the APT.
The last body needed in connection with a corporation; required to inspect the company’s bookkeeping and verify the correctness of annual accounts. Usually not employees or directors of the corporation but an outside firm.
Anti-avoidance German law whereby German citizens remain subject to the principal German taxes for a period of ten years if they emigrate to a country designated in the legislation (as from time to time amended) as a low tax country.
Back-to-Back loans are matching deposit arrangements. They may be used in order to solve a financing or exchange control problem. However, in the case of certain tax havens, the function of back-to-back loans is to reduce the taxable base subject to withholding taxes on interest payments, by interposing an intermediary subsidiary company between the source of the income and the recipient. For example, an intermediary company located in the Netherlands or the Netherlands Antilles may be interposed so as to take advantage of a favourable tax treaty. In such cases the authorities usually require a certain spread or "turn" on the rates so as to create a small profit which is subject to tax locally.
Badges of Fraud
Conduct that raises a strong presumption that it was undertaken with the intent to delay, hinder or defraud a creditor.
A considerable volume of international banking takes place offshore and many of the world’s major banks have banking and trust company operations in one or more low tax jurisdictions. Most low tax jurisdictions have enacted legislative provisions and set up administrative authorities whose function it is to control banking and trust company activities.
Bank of International Settlements (BIS)
A consortium of Banks, controlled by the Basel Committee of the G-10 nations' Central Banks, it sets standards for capital adequacy among the member central banks. Basle, Switzerland. The bank’s bank.
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 drugs 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.
A banking passport is simply that you create a "new person" with another nationality and a full set of ID, a separate "legal entity" through a second passport (or third) in a name of your choice.
Also known as dry, formal, naked, passive or simple trusts. These are trusts where the trustees have no duties to perform other than to convey the trust property to the beneficiary(s) when called upon to do so.
A committee of central banks setting standards for conducting their business resulting in minimum standards, preventative money laundering measures etc.
An investor who has sold a security in the hope of buying it back at a lower price.
A bond issued in bearer form rather than being registered in a specific owner’s name. Ownership is determined by possession.
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 rights 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.
Securities for which no register of ownership is kept by the company. Dividends are not received automatically from the company and must be claimed.
Bearer Share Certificate
A negotiable share certificate made out in the name of the bearer and not in the name of a particular person or organization.
Person who is the ultimate beneficiary of a company or trust as distinct to the registered or nominal owner.
The person(s), company, trust or estate named by the grantor, settlor or creator to receive the benefit's 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 characterised by "classes" in terms of their order of entitlement or their hierarchy.
Besloten Vennootschap met Beperkte aansprakelijkheid (BV)
Dutch limited company for small commercial enterprise, not required to publish accounts; used as a Substantial Holding Company.
A designation that a certain financial result is not guaranteed but that a good faith effort will be made to provide the result that is represented.
A trust in which the trustees are not allowed to provide any information to the beneficiaries about the administration of the assets of the trust.
Term for "reserving" funds by one bank for the benefit of another bank. Blocking of funds is an often used banking procedure to ensure that the same funds are not used twice. Often more beneficial to an investor than a bank guarantee.
Term for the most prestigious industrial shares. Originally an American term derived from the colour of the highest value poker chip.
Board of Directors
The company’s "cabinet" - as specified in the Articles of Association - is supposed to make decisions on the issues that are too specific for the general meeting to discuss but which are beyond the day-to-day responsibility of the company management.
Board of Trustees
A board acting as trustees to a trust or as advisors to the trustee depending upon the language of the trust indenture. This board is in full control of the trust affairs. The board of trustees will manage the trust affairs based on the rights and responsibilities granted to them by the settlor's trust deed.
Any interest-bearing government or corporate security that requires that the issuer will pay the holder of the bond a specified sum of money, usually at fixed intervals, and will repay the principal amount of the loan at maturity. A secured bond is backed by collateral, whereas as an unsecured bond or debenture is backed by the full faith and credit of the issuer, not by any specified collateral. Only corporations can issue stocks, but bonds can be issued by corporations or governments.
An individual or organization in-between the person/organization that controls the funds and the provider/trader. A broker often knows someone who knows somebody else who may provide program trading. This chain of brokers is known in the business as a "daisy chain".
Bye-Laws or By-Laws (also Articles of Association)
Articles of Association of a company (in certain jurisdictions).
An investor who has bought a security in the hope to make a profit from rising prices.
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.
An option like contract for which the buyer pays a fee or premium, to obtain protection against a rise in a particular interest rate above a certain level. For example, an interest rate cap may cover a specified principal amount of a loan over a designated time period such as a calendar quarter. If the covered interest rate rises above the rate ceiling, the seller of the rate cap pays the purchaser an amount of money equal to the average rate differential times the principal amount times one quarter.
The process whereby money from a company's reserves is converted into capital and then distributed to shareholders as new shares, in proportion to their original holdings, also known as bonus or scrip issue.
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.
Certificate of Incorporation
Certificate issued to companies who have complied with all the statutory requirements for registration.
see Memorandum of Association.
A mechanism for calculation of mutual positions within a group of participants with a view to facilitating the settlement of their mutual obligations on a net basis.
The simultaneous purchase of a cap and the sale of a floor with the aim of maintaining interest rates within a defined range. The premium income from the sale of the floor reduces or offsets the cost of buying the cap.
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.
The fee that a broker charges clients for dealing on their behalf.
A wealthy private party buying guarantees from the issuing banks, reselling them to other banks/brokers. Commitment holders are not allowed to trade or to do business on their own behalf. Other designation: provider.
Common Trust Fund
A trust that operates by the process of pooling funds from a number of participants in the trust, who as beneficiaries under the trust, share in the income or other gains derived from the acquisition, holding, management or disposal of assets acquired for the trust.
Companies Act or Ordinance
Legislation enacted to facilitate and regulate for the incorporation, registration and operation of international business companies (IBC's). More commonly found in The Caribbean countries i.e. the Bahamas or the BVI.
The total return on investment, consisting of the distribution (dividend, interest) and the capital gain or loss, in % of the investment amount.
A funds transfer method which uses Society for Worldwide Interbank Financial Telecommunications protocols to transfer funds conditionally between banks, subject to the performance of a specified party.
The money value of a transaction (number of shares multiplied by the price), before adding commission, stamp duty, etc.
Contract exit for non-performance
A condition in a financial agreement that enables the investor to take back his funds if the result represented is not achieved.
The day that a transaction takes place, the broker sends the client a document detailing the transaction, including full title of the stock, price, consideration and stamp duty (if applicable).
Controlled Foreign Corporation (CFC)
A legislative concept used for anti tax avoidance legislation in high tax jurisdictions. An offshore company, which, because of ownership or control lies within the high tax jurisdiction, will be deemed to be resident in the high tax jurisdiction.
Another "cabinet like" 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.
The basic existence of a corporation usually derives from two documents: the Articles of Association and the Certificate of Incorporation.
Corporation Tax Company
A company incorporated in Controlled Foreign jurisdiction, but not trading in that jurisdiction and thereby designated as non-resident for tax purposes; liable only to low fixed annual rate of tax.
The total net profit a company has available for distribution as dividend, divided by the amount paid, gives the number of times that the dividend is covered.
Similar to barter, countertrade is a form of exchange in which an exporter in one country accepts raw materials, equipment and technology from an importer in another country as payment for finished products. This type of trading is practiced especially by Communist countries but is gaining in use by China and in developing countries of South America and Africa. Countertrade also is a way to avoid reliance on tax haven operations for trading companies established in no-tax or low-tax countries so as to reduce burdensome taxes on profits. Countertrade arrangements may consist of counter purchase, reverse countertrade, buyback arrangements, switch transactions or swap deals.
A duty that is imposed by a country on imported goods to counting a subsidy that has been granted to the goods by the exporting country.
Country of Origin
The country from which goods originate. Where quotas are in operation it is important that goods are marked clearly with their country of origin to keep imports within their quota.
A detachable part of a bearer bond. The coupon gives its holder the right to the interest payments that are due on the bond.
The so-called "Cuba Clause" allows the situs and proper law of a trust to be transferred from one jurisdiction to another.
Tax charged on distributions of certain Liechtenstein legal entities (AG and Anstalt with share capital).
Creator, Settlor or Grantor
A person who creates/settles a trust
Value amount representing the credit risk exposure in off-balance sheet transactions. In the case of derivatives, credit equivalent value represents the potential cost at current market prices of replacing the contract's cash flows in the case of default by the counter-party.
The risk that a counter party to a transaction will fail to perform according to the terms and conditions of the contract, thus causing the holder of the claim to suffer a loss.
The denomination of the notes and coins in circulation in an economy.
A transaction involving the exchange of cash flows and principal in one currency for those in another with an agreement to reverse the principal swap at a future date.
Current Exposure Method
Term used in the Basle Capital Accord to denote a method of assessing credit risk in off-balance sheet transactions, consisting of adding the market to market replacement cost of all contracts and an amount for potential credit exposure arising from future price- or volatility changes.
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.
A trustee that holds the trusts assets in his or her name. I.e. under common law it is the norm for a trustee to hold the trust assets in his or her name. In the civil law countries i.e. Liechtenstein the trust holds the underlying assets in it’s own right
A tax imposed on imported goods.
An alliance of a number of countries that agree to remove customs and excise controls on goods and services that pass among them.
An unsecured bond backed only by the general credit of the issuing corporation. A certificate of indebtedness, an instrument in which a corporation or a company acknowledges indebtedness for a specified sum on which interest is due until the principal is paid back.
Debit, Credit Card
A debit card is directly tied to a bank account. Whatever charges the user runs up are debited to the bank account, and monthly statements do not carry a remittance slip. The same account may have a cheque book tied to it as well. Credit as such, however, is not extended since you are not allowed to use the card if the balance on the bank account wanders into the red.
Declaration of trust
A document creating a trust. For ultimate anonymity, a trust may be created in certain jurisdictions by a trustee or a trust company without the settlor either being identified or being a signatory to the declaration. In contrast settlor and trustees sign a trust deed.
The right of individuals to have access to information about themselves that is held by other parties, such as financial institutions, credit-rating agencies or government offices. Individuals usually have to submit a formal request to gain access to the information. Such rights are established in many countries by so-called data protection legislation.
Substantial Holding Company (in the Netherlands).
An offset against an income tax payable to the country of the parent corporation for income taxes paid by the foreign subsidiary in the foreign country on the earnings and profits out of which the dividend is distributed. The deemed-paid credit is also known as an indirect credit and is computed according to a specific formula as designated by the income tax laws of the country in which the offset is taken.
General term for payment undertakings arising on the presentation of a written demand (plus possible other documents specified in the guarantee), not conditional on proof of default by the principal in the underlying transaction. They ensure often that the lender will be paid the principal on maturity and possibly, depending on the instrument, interest when due.
Depository Trust Company (DTC)
A custodial clearing facility owned by the major banks and securities firms and monitored by various banking regulatory agencies and the Securities and Exchange Commission.
Financial contracts whose values are based on, or derived from, the price of an underlying financial asset or price - for example, a stock or an interest rate.
When the market price of a newly issued security is lower than the issue price. If it is higher, the difference is called a premium.
1. A highly flexible arrangement in which the beneficiary has no fixed interest in any part of the income of the trust or its assets except perhaps at the termination of the trust. The Trustees usually hold the property and income for a broad class of beneficiaries to whom they distribute the assets at their discretion. However, the Trustees may be guided by an informal memorandum written by the settler which outlines his wishes but has no legal status. One advantage of this arrangement is that benefits can be varied according to changes in circumstances with little difficulty. Another is that the beneficiary has a somewhat nebulous hope of receiving anything and therefore it is difficult for any creditors to find an interest to which to attach a liability.
2. 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.
3. The form of trust usually established offshore. The discretion's are vested in the trustee who can usually decide which of the beneficiaries is to benefit, when and to what extent. Discretion's are exercised under advice of, or suggestions from the settlor or protector.
The part of a company's post-tax profits distributed to shareholders, usually expressed as an amount per share. Discretionary payment by a corporation to its shareholders, usually in the form of cash, stock, or other property.
The place where an individual has his permanent home and the means by which the person is connected with a certain system of law related to issues such as marriage, divorce, succession of estate and taxation, 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.
A company that is not currently trading. It has a registered name, directors, articles of association, and so on. But it has no turnover.
A transferor. One who transfers title to an asset by gift.
Use of two passports for the purpose of confusion or convenience.
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.
A signed, written order by which one party (the drawer) instructs another party (the drawee) to pay a specified sum to a third party (the payee), at sight or at a specific date.
Almost all phone calls in the world are routinely scanned for "suspicious words" by various governmental agencies' computers.
You have probably heard of Echelon, the international surveillance system setup by U.S.A.'s NSA (Nation Security Agency) in close collaboration with their counterparts in Canada, Great Britain, Australia and New Zealand that listens in on all telephone conversations in the world and scans your faxes, e-mails for "suspicious words", such as 'drugs', 'terrorist' 'bombs', 'money laundering', 'offshore', 'tax havens', etc. and even private ATM transactions.
The European Union is planning its own EU Phone, Fax & Internet Surveillance System. In Germany, all international calls are already automatically scanned by the Bundes-Nachrichten-Dienst. Austria is following suit.
Emigration to a low tax jurisdiction or to a country offering special retirement incentives may serve to break totally or in part the link between a taxpayer and the high tax jurisdiction from which he is emigrating. Normally, it is the change in the place of residence which is material; however, in other cases a change in domicile or even citizenship may be necessary. Anti-avoidance provisions or exchange controls may delay or render extremely difficult the coming into effect of the fiscal advantages of the act of emigration.
When a contract or an asset such as money is placed with a third party until certain conditions are met, it is said to be held in escrow. Parties that are in dispute over the ownership of an asset may agree to place the asset in escrow until an arbitrator has had time to decide who the rightful owner is.
Interests in real and/or personal property.
A bond issued in a currency other than that of the country or market in which it is issued. Interest is paid without the deduction of tax.
Eurobonds are long-term loans issued in terms of the USD or other currencies or in terms of composite units of account. They may take the form of loans, debentures or convertible debentures and are issued at a fixed rate of interest. Eurobonds are normally issued in countries where interest payments are not subject to withholding tax. Major issues are frequently handled by international underwriting syndicates.
Eurocurrencies are currencies held outside the country of origin by non-residents of that country and made available to the Eurocurrency market for lending. The market originally developed in Eurodollars, but other currencies, e.g. Deutschemarks, Swiss francs and Yen, now form a major part of the market. The market is not subject to exchange controls or other restrictions, although investors and borrowers may be so subject in their own countries.
European Union (EU)
The community of powerful European countries set up in 1957 by the Treaty of Rome and fired by the desire of its founders to avoid yet another pan-European war. It consists of 25 Member States (2005).
The risk-sharing part of a company's capital, usually referred to as ordinary shares.
A class of options giving the purchaser the right but not the obligation to buy or sell an individual share, a basket of shares or an equity index at a predetermined price, on or before a fixed date.
A transaction that allows an investor to exchange the rate of return (or a component thereof) on an equity investment (an individual share, a basket or index) for the rate of return on another non-equity or equity investment.
Latin for 'without', the opposite of Cum. Used to indicate that the buyer is not entitled to participate in whatever forthcoming event is specified, for example, ex cap, ex dividend, ex rights.
Regulations whereby a country controls transactions in foreign currencies or securities. In some jurisdictions (e.g. Australia, Japan and the United Kingdom) the regulations may render a contract void unless prior consent is obtained.
A company exempted from tax or from compliance with specified regulations of the country in which it is established.
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.
Recognition of a country's consul by a foreign government.
The fixed price at which an option holder has the right to buy, in the case of a call option, or to sell, in the case of a put option, the financial instrument covered by the option.
The buyer of a security arriving on the secondary (retail) market.
The removal of one’s legal residence or citizenship from one country to another in anticipation of future restrictions on capital movements or to avoid estate taxes. Expatriates from Third World countries enter OECD countries to search for better income opportunities than they can pursue at home.