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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).