Glossary of offshore

Administrative Office - 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.

Annual Fees - A comparatively small fixed renewal fees a typical offshore company pays annually to the authorities of the jurisdiction of incorporation and to the Registered Agent.

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 – Basically annuity refers to an insurance contract and is defined as series of payments of set size and frequency, often to a retired person. The term annuity is used to refer to any terminating stream of fixed payments over a specified period of time for repayment of the received credit, the loan and percent on it.

Apostille - A special written authentication of a public document (e.g. Certificate of Good Standing) issued in accordance with the standards of the Hague Convention of 1961. Documents issued in a convention country, which have been certified by an Apostille, are recognised in other convention countries without any further authentication.

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.

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 Share Certificate (Bearer Shares) - A share certificate filled out in the name of “bearer” and not to a particular person or organization. The name of the owner is not registered in the books of the company. Bearer shares grant ownership rights to any individual who is in actual physical possession of the certificates. It may be transferred in complete privacy.

Beneficial owner (Beneficiary) - A natural person or a legal entity enjoying the right to receive benefits of a trust or IBC upon conditions established by the settlor in a trust deed.

Bye-Laws or By-Laws (also Articles of Association) - Articles of Association of a company (in certain jurisdictions).

Certificate of Incorporation - The evidence of incorporation and registration of the legal entity with the authorities of the jurisdiction. It includes basic information about the company including the name, date and place of registration, entry number in the register, etc.

Certificate of Good Standing - The official attestation by the authorities of a jurisdiction of incorporation, which states that the company actually exists and is in compliance with the requirements of the local laws (timely payment of annual fees and local taxes; filing the company’s annual statements and returns where applicable).

Certificate of Incumbency - The official attestation issued by its registered agent or the authorities of the jurisdiction of incorporation, which states that the persons listed are actually directors of the company.

Companies Act or Ordinance - Legislation enacted by a tax haven to provide for the incorporation, registration and operation of international business companies (IBCs). Commonly found in Caribbean tax havens.

Corporate Redomiciliation  - It is the process by which a company moves its domicile from one jurisdiction to another by changing the country under whose laws it is registered or incorporated, while maintaining the same legal identity. Some offshore jurisdictions allow corporations incorporated in other jurisdictions to reincorporate in their own at will.

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.

Dividend - The part of a company's post-tax profits distributed to shareholders, usually expressed as an amount per share.

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.

Domiciliary - A person who is domiciled in a particular jurisdiction (as a country).

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.

Draft - 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.

Due Diligence - Research and analysis of a company or organization done in preparation for a business transaction (including an analysis of the business’s structure, an examination of the business’s financial health, the credibility of the business’s owners, directors, the future potential, an assessment of the risk involved in a company’s business, a company’s business plan etc).

Exempt Company - A company exempted from tax or from compliance with specified regulations of the country in which it is established.

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.

GmbH - A Swiss, German and Austrian form of a limited liability corporation.

Hedge Funds - Speculative funds managing investments for private investors (in the US, such funds are unregulated if the number of investors does not exceed one hundred).

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).

International Business Corporation (IBC) - A company providing a maximum of privacy, combined with a comprehensive freedom from local taxation. A typical IBC’s can carry on business outside its jurisdiction, have meetings of its Directors and/or Members anywhere in the world, keep any number of bank accounts in various currencies, and issue bearer shares under certain conditions in the separate countries.

Joint Venture - A type of business partnership involving joint management and the sharing of risks and profits as between two or more enterprises based in different countries. Then the capital of the partnership is known as a joint venture.

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 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 favored and used for professional associations, such as accountants and attorneys.

Memorandum of Association (Charter) - The first constitutional document of a company, which must be submitted to the Registrar of Companies together with its Articles of Association, and which contains company name, address of its registered office, objects and powers, authorised share capital, and statement of limited liability.

Minutes - Brief summary of proceedings of a meeting/assembly/committee.
Money Laundering - Money-laundering occurs when criminals seek to make illegally obtained funds look legitimate by funneling them through a string of banks and businesses until the money's origin is obscured.

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

Nominee Company - A company formed for the express purpose of holding securities and other assets in its name or to provide nominee directors and/or officers on behalf of clients of its parent bank or trust company.

Nominee director - A person or entity acting as a formal director of the company. The nominee director may be used to sign (contracts, loans, etc.) for the company, but the real powers on administering and managing the company rest with the Beneficiary or its agent.

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.

Offshore - 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.

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 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 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.

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.  Each ordinary share gives its holder an identical volume of the rights. Holders have the right to vote at the meetings and receive dividends which vary in accordance with the profitability of the company.  The holders of the ordinary shares are the owners of the company.

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.

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.

Power of Attorney - A document which authorises a person to act on behalf of another.

Registered Agent - A person or entity designated in the articles of incorporation to represent a company in the jurisdiction of incorporation. A Registered Agent normally provides a Registered Office address, provides liaison with local authorities and receives all legal and tax papers and/or notices addressed to the company.

Registered Office - The official address of a company to which authorities, courts, and suitors send their notices, letters and reminders. It must always be an effective address for delivering documents to the company, and is usually provided by a Registered Agent.

Registered Share - Share which is transferred by an instrument of transfer. The name of the holder is registered in the books of the company and the shareholder's name is displayed on the actual share certificate.

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.

Royalty - All amounts received for the privilege of using intangibles such as patents, copyrights, secret processes and formulae, as well as amounts received for the privilege of exploiting mineral, oil and gas deposits.

Settlor (Creator or Grantor) - A person who actually creates a trust by donating property to be managed and administered by a trustee but from which all benefits and profits would go to a beneficiary.

Shelf Company (Ready-Made 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.

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.

Subsidiary Company - A subsidiary company is a company under the control of another company through stock ownership.

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).

Tax Haven - An international banking and financial centre providing privacy and tax benefits.

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 (Declaration of Trust) - The document that creates a trust and lays down the ways of how the trustees should conduct administration and management of the trust, and how they are to distribute trust assets among the beneficiaries.

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. Protector has the power to remove the trustee and appoint trustees. Consults with the settlor, but the final decisions must be the protector's. The extent of protector’s powers in each separate case is defined by the settlor.

Trustee - A person who administers and manages the property transferred in a Trust. Trustee becomes a legal owner of the property, and has a fiduciary responsibility to act in accordance with a trust deed and for the benefit of the beneficiary.

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.

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