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K

Key tested telex (KTT)
An older form of transferring funds between banks, using telex machines in addition to verification of messages through the use of key code numbers.


L

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 jurisdictions.

Laundering
Laundering is the process of cleaning illicitly gained money so that it appears to others to have come from, or to be going to, a legitimate source.

Letter of Intent (LOI)
A document by which the investor states that he intends to enter into a High-Yield transaction. 

Letter of Wishes/Memorandum of Wishes
A document prepared by the settlor or grantor of a trust providing guidance on how trustees should exercise their discretion's (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.

Leverage
Company debt expressed as a percentage of equity capital.  High leverage means that debts are high in relation to assets.  The equivalent UK term is gearing.

Leveraged (indirect) programs
Programs which use leased assets to increase the amount of instruments purchased and resold for a profit.   The benefit of leased assets is that such programs generate substantially larger profits.

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 low tax jurisdictions 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 low tax jurisdictions for this purpose.

Limit
In relation to dealing instructions, a restriction set on an order to buy or sell, specifying the minimum selling or maximum buying price.

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/corporation
A company established under common Law. This type of company can be found in the UK, the Channel Islands, the Isle of Man and many Caribbean jurisdictions. The important characteristic is that the liability of the shareholder is limited up to the amount of their capital contribution.

Limited Liability Company (LLC)
A hybrid between the partnership and the corporation (originates from the German GmbH created by law in 1892). 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 favourable 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.

Limited Liability Partnership (LLP)
A form of the LLC favoured and used for professional associations, such as accountants and attorneys. The benefits are that it protects the general partners usually the one funding the operation from liability.

Limited Power of Attorney
A legal document that empowers the trade manager to deal with the various parties of the transaction on behalf of the owner of the funds (the Principal).  Transactions will not happen without this instrument.

Listed Company
A company that has obtained permission for its shares to be admitted to the London Stock Exchange's Official List.

Living Trust
Revocable trust, for reduction of probate costs and to expedite sale of assets upon death of grantor. Provides no asset protection.

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.

Low tax jurisdiction
The term low tax jurisdiction is generally used to refer to a jurisdiction: 1) where there are no relevant taxes; 2) where taxes are levied only on internal taxable events, but not at all, or at low tax rates, on profits from foreign sources; or 3) where special tax privileges are granted to certain types of taxable persons or events. Such special tax privileges may be accorded by the domestic internal tax system or may derive from a combination of domestic and treaty provisions. (Where tax benefits are part of an economic development programme the term tax incentives is usually used). Simply stated, a low tax jurisdiction is any country whose laws, regulations, traditions, and, in some cases, treaty arrangements make it possible for one to reduce his over all burden. The low tax jurisdictions of the world broadly may be classified into six separate categories: 1) non-tax jurisdictions (e.g., Anguilla, Bahamas, Bermuda, Cayman Islands, Nevis, St. Vincent, Turks and Caicos, and Vanuatu); 2) countries taxing only local income (e.g., Costa Rica, Liberia, Panama, Gibraltar and Hong Kong); 3) low-low tax jurisdictions with treaty benefits (e.g., the Netherlands, the Netherlands Antilles, British Virgin Islands, Luxembourg and Singapore); 4) countries offering special privileges (e.g., Channel Islands and the Isle of Man); 5) low tax jurisdictions for individuals (e.g., Andorra), 6) low tax jurisdictions for International Business Companies (e.g., Antigua, Barbados, Grenada, Jamaica and Montserrat).


M

Man of Straw
Effectively a settlor or grantor who creates an offshore trust but often has no further connection with the trust once it is created.

Maildrop Company
A fully-legal commercial enterprise using a stable physical address as a delivery destination for letters or parcels on behalf of fee-paying clients who don’t live on the premises. Mail can be held or forwarded at the client’s request. Some maildrops provide similar services for faxes as well. Very useful for receiving confidential information which you don’t want delivered to your home address without prior notification.

Management and Control
In certain legal systems which follow the former United Kingdom law in this regard, a company is treated as being resident in the country in which its management and control is exercised, and not in the country of its place of registration or incorporation. The criterion of residence may be of relevance in international arrangements in involving low tax jurisdictions, and can be material from both the fiscal and the exchange control points of view.

Management Company
See Administrative Offices.

Managed Bank
An offshore bank also known as a Class "B" or Cubicle Bank.  The Managed Bank is not required to maintain a physical presence in the licensing jurisdiction.  Its presence in the licensing jurisdiction is passive with directors and officers provided by a managing trust company with a physical presence.  The Managed Bank is not permitted to transact business within the licensing jurisdiction but may maintain its books, records, etc., to assure secrecy of operations.

Mavera injunction
A court Injunction preventing the trustee for a trust from transferring trust assets pending the outcome of a lawsuit.

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 of Association
See Articles of Association.

Merchant Bank
A European form of an Investment Bank.

Minutes
Brief summary of proceedings of a meeting/assembly/committee.

Mini-Trust
A short (usually preprinted) form of a trust, often used as a confidentiality enhancer, to bridge the ownership and management of an International Business Company.  The Mini-Trust is intended only to pass assets on the death of the settlor, i.e. a will substitute.

Money Laundering
Money-laundering occurs when criminals seek to make illegally obtained funds look legitimate by funnelling them through a string of banks and businesses until the money's origin is obscured.

MTN
Medium Term Note.  A guarantee issued by a bank with a maturity between 1 and 10 years and paying interest (often 10 years with a 7 1/2% coupon).

Mutual Legal Assistance Treaty
A treaty which provides for mutual legal assistance, including the exchange of information, etc., in cases where criminal offences have been committed.

Mutual Assistance Agreement
A contract agreement between two or more nations in which the fiscal Governments are empowered to take preference over the civil rights of each others' citizens in ascertaining and collecting crime-related proceeds or tax liability.

Mutual Fund
Investment company usually formed in a low tax jurisdiction and issuing shares to the public.


N

Naamlose Vennootschap (NV)
Limited company in the Netherlands used as a Substantial Holding Company, required to publish its accounts.

Net Asset Value
The value of a company after all debts have been paid, expressed as an amount per share.

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.

Non-tariff barrier
A barrier to trade other than a tariff imposed directly on an import at its point of entry. Non-tariff barriers include things like safety regulations which only domestic firms satisfy; distribution systems that discriminate against imports; and government regulations that demand services (like finance) be supplied by known individuals.


O

O.E.C.D.
Organisation for Economic Co-operation and Development.

Off-balance sheet financing
The process whereby a contingent (dependent on certain events) liability is not recorded as a liability on the balance sheet but typically appears in the notes to the financial statement.  Off-balance sheet financing is therefore not reflected in the balance sheet total, although possible related reserves will.

Offshore
1. Any country other than your own.
2. Offshore means non-resident and applies for companies as well as individuals. Those countries which give non-residents special tax treatment or total exclusion from local tax liability on funds and assets they hold in that country or via an entity in that country provide "offshore services", that is services for private people or legal entities which are not resident in that country for tax purposes. For example the US, the UK, Austria etc. are commonly not known as offshore centres, however they do provide offshore services to non-residents.
3. 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 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 Booking Centers
An offshore financial center used by international banks as a location for "shell branches" to book certain deposits and loans.   Such offshore bookings are often utilized to avoid regulatory restrictions and taxes.

Offshore Company
See International Business Company.

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. 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 Dollars
Also known as euro dollars, offshore dollars consist of dollar deposits in any location outside the United States, including Europe.

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 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 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 Limited Partnership
A partnership, the general partner of which is an offshore company.  The limited partners may be onshore entities.

Offshore Profit Centers
Branches of major international banks and multinational corporations located in a low tax financial center which are established for the purpose of lowering taxes.

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 Trust
The quality that differentiates an offshore trust from an onshore trust is portability.  The offshore trust can be transferred to additional jurisdictions to maintain confidentiality and to advantage desirable facets of the new jurisdictions laws.

One-year zeros
An obligation of a bank due in one year and sold at a discount from face value in lieu of an interest coupon.

Onshore
Onshore is defined as the country in which a private person, a company or any other legal entity is resident for tax purposes.

Ordinary Shares
The most common form of shares.  Holders receive dividends which vary in accordance with the profitability of the company and the recommendations of the directors.  The holders of the ordinary shares are the owners of the company.

Ownership
Ownership constitutes the holding or possession of limited liability company legal claim or title to an offshore asset.


P

Par
The nominal or face value of a security.  A bond selling at par is worth the same dollar amount as when issued or when redeemed at maturity.

Parallel Account
A separate account established at the trading bank.

Partnerships
A partnership often offers useful features for the purposes of an overall tax plan. In certain jurisdictions, a partnership may have corporate attributes and resemble a company. However, even where a partnership does not have corporate attributes, requirements relating to formations and registration the nationality and/or residence of partners, limited liability, restrictions on activities, should be examined in the context of the general law governing local partnerships.

Pay Order
A document which instructs a bank to pay a certain sum to a third party.  Such orders are normally acknowledged by the bank which provides a guarantee that the payment will be made.

PBG
Guarantees issued by prime banks.  In this context the word prime is an adjective and not a noun, meaning that the bank issuing the bank guarantee is of prime status, one of the top international banks.

Permanent Establishment
Legal concept applied by a country in order to tax commercial activities realised in its territory by a company or person incorporated or resident outside the jurisdiction. The expression is commonly used in double taxation agreements and is defined in the O.E.C.D. model agreement, although in practice there is no consistent definition adopted either in double taxation agreements or in jurisdictions which recognise the concept under their general tax laws.

PLC
A UK public limited company.

Personen und Gesellschaftsrecht
Law applicable to individuals and corporate bodies in Liechtenstein.

Petrodollar
United States dollars obtained by oil exporting countries.

Portfolio
A collection of securities held by an investor.

Preferential Transfer
A disposition of an asset that is unfair to other creditors of the transferor.

Prime Bank
An older term for a well known (top 25, top 100) international bank.   The term should be avoided and replaced by "money center bank" or "international bank".

Principal
The party that controls the funds and seeks a secure high-yield investment.

Private Placement
An issue that is offered to a single or a few investors as opposed to being publicly offered.

Private Trustee Company
A company incorporated in certain offshore jurisdictions, such as Bermuda, to act as a trustee for a limited class or group of trusts.  Private trustee companies are not permitted to offer trustee services to the public generally.

Privatization
Conversion of a state run company into a public company, often accompanied by a sale of its shares to the general public.

Probate
The legal process for the distribution of the estate of a decedent.

Proof of Funds (POF)
A document by which the principal's bank states that the principal owns the funds required for the transaction.  Usually, proof of funds can also be delivered in the form of a recent bank-, security- or custody statement.  A generic document can be found in the "How to contact us" page of this site.

Proper Law
The body of law which governs the validity and interpretation of a contract or trust deed.

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. The protector usually 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. In some cases the protector has the power to remove a trustee and appoint another trustees

Provider
A wealthy private party buying guarantees from the issuing banks, reselling them through banks/brokers.  Other designation: commitment holder.

PT - The Perpetual Traveller
A PT by definition, is a non-conformist in a highly regulated, highly taxed, first world society. In a nutshell, a PT merely arranges his or her paperwork in such a way that all governments consider him a tourist. A person who is just "Passing Through". The advantage is that being thought of by government officials as a person who is merely "Parked Temporarily", a PT is not subjected to taxes, military service, lawsuits, or persecution for partaking in innocent but forbidden pursuits or pleasures. Unlike most citizens or subjects, the PT will not be persecuted for his beliefs or lack of them. PT stands for many things: a PT can be a "Prior Taxpayer", "Permanent Tourist", "Party Thrower", "Priority Thinker", "Practically Transparent", "Privacy Trained", or "Perpetual Traveller" if he or she wants to be. The individual who is a PT can stay in one place most of the time or all of the time. PT is a concept, a way of life, a way of perceiving the universe and your place in it. One can be a full-time PT or a part-time PT. Some may not want to break out all at once, or become a PT at all. They just want to be aware of the possibilities and be prepared to modify their lifestyle in the event of a crisis. Knowledge will make you sort of a PT. A "Possibility Thinker" who is "Prepared Thoroughly" for the future.

Purpose Trust
A trust created for an express purpose without any individually ascertained or ascertainable beneficiaries.  A purpose trust is typically used in circumstances where the trust is of philanthropic nature.

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.

Pyramid Selling
A method of selling products through layers and layers of agents who are structured like a pyramid. The top layer of agents sells to the next layer and so on. The last layer gets to sell to the general public. In practice, the last layer more frequently gets left with a load of unsellable stuff.


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FAQ
What is offshore?

The word "offshore" has no precise legal dictionary definition, it simply means "situated or operating in a foreign country or at some distance from the shore" and reflects the fact that most low tax jurisdictions are islands.

read more >>

Portfolio of Laws
- BVI - Trustee (Amendment) Act, 2003

- Cayman Islands - The Companies Law (CAP.22) - (2002 Revision)

- Cyprus - The Income Tax Law of 2002

more laws >>

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