Glossary Terms of Reference

Apostille, Certificate of Good Standing, available in the countries which have signed the Hague Convention of October 5, 1961

Bank Secrecy In most countries it is one of the main aspects of the relationship between banker and customer. Normally, staff members are required to sign a declaration of secrecy as regards the business of the bank and affairs of the customer.
In some countries with strict banking traditions, a specific legislation makes breaches of bank secrecy subject to criminal law sanctions. However, even in the legislation of these countries there are special cases where the duty of banking secrecy may be discharged, for example, in the cases of money laundering and drug traffic.
Most tax treaties contain the clause of exchange of information which enables the tax administration of one country to obtain information regarding bank accounts which its residents have in the other country.
Numbered accounts are often used with purpose to limit the number of persons knowing the identity of the customer.

Barter 20% of the World Trade is Barter, this figure allow Countries without hard currency to interchange especially local primary products for manufactured ones.

Bearer Bond This is the bond issued in bearer form, and not registered in a specific owner’s name. The ownership is determined by actual physical possession.

Beneficiary A person receiving the proceeds of a trust.

Bonded Warehouse Is an area under Customs Control, with incentives and a trade facilitator

Board of Trustees Acts as a trustee of a trust or as advisors of the trustee, depending on the language of the trust indenture.

Bond A long-term debt certificate issued by a governmental agency or private company. It represents an obligation on the part of the issuer to pay interest and repay principal of a loan.

Broker A person acting as a qualified intermediary in the purchase of securities. The function of broker is to buy securities.

Business Door opener For many Economies, Free Zones has been a Business door opener to new and important foreign investments.

Business Trust A trust which primary purpose is operating and engaging in a business. This type of trust is a person under the Internal Revenue Code (IRC).

Captive Bank Bank intended to provide services to the promoter and his/her associates (usually an international group of companies).

Captive Insurance Company Insurance company intended to provide (re)insurance service to the promoter and his/her associates (a company or an international group).

Certificate of Good Standing Issued by the authorities of the jurisdiction of incorporation to a legal entity such as an International Business Company, Private Foundation, Corporation or Limited Liability Company. The document proves that the given legal entity actually exists and is in good standing owing to compliance with all requirements of the local laws.
Certificate of Good Standing is normally requested by local authorities when a foreign legal entity is forming a subsidiary as well as by banks when opening an account.

Certificate of Incorporation Certificate issued to companies which comply with all the statutory requirements for registration.

Charter Memorandum of Association.

Common Law Legislative system widely used in Great Britain, USA and most countries of the British Commonwealth. Unlike in the system of civil law, which is based on statutes and codes, common law court decisions are derived from precedents (previous court decisions). In most Offshore Financial Centres IBC and trust legislation is based on the common law.

Customs Duties Where very important for Countries economy to protect local Industries, but today because the Regional and Bi-lateral agreements, disappeared among many Countries or their percentage drop down.

Daughter Company A company with some of its shares being owned by a parent company.

Discretionary Trust Flexible form of trust in which the beneficiary has no fixed interest, except in case of trust termination. The trustees usually hold the property and income for a broad class of beneficiaries to whom they distribute the assets at their discretion. Sometimes the trustees may be guided by an informal memorandum written by the settlor which although has no legal status.
The advantages of this type of the trust are as follows: benefits can be easily varied according to the change of circumstances, and it is more difficult for creditors to find an interest to which a liability may be attached (as nowhere it is strictly said that the beneficiary would receive anything).

Dormant Company A company having registered name, directors, articles of association, etc., but not trading at the current moment and having no turnover.

Double Taxation Agreement (DTA) Also Double Tax Treaty. An agreement between two countries which relieves the persons who would otherwise be liable to taxation in both countries from being taxed twice in respect of the same transactions or events.

Duty Free Duty Free is the opportunity to get Tax advantages during a transit time between two Customs and Tax Legislations, as transit in Airports, Ports, Ships, Airplanes and Diplomatic Special Shops.

Export Processing Zones Export Processing Zones were created in the 70’, in order to develop industries in Countries without domestic market capacity, but with labour force to produce for export markets.

Exchange Control The number of regulations by which a country conducts control the transactions in foreign currencies or securities.

Exempt Company A company exempted from tax or from compliance with specified regulations of the country of its establishment.

Exempt Trust May be established in the jurisdiction where the government guarantees that the trust income and property will not be liable to taxation for a certain number of years, no matter what laws are passed, in relation to income or capital gains taxes, inheritance or estate duty.

Family Limited Partnership Created for family estate planning and asset protection, allowing to achieve a capital gains tax reduction. Normally the FLP is controlled by the general partners holding a 1%-2% interest. There are also limited partners also holding some interest in the partnership.

Fiduciary The same as Trustee.

Foreign Corporation Organized under the laws of a foreign country. The parent company of the corporation may hold some part of shares of the affiliate corporation.

Forwarding Agents Every day more and more specialized services are offered to import and export Companies in order to facilitate transit regulations between the factory and final customer, as Packing, Transport, Insurance, Customs control, paper work, reception   and delivery, these services are offered by Forwarding Agents, which sub contract to third parties each one of the service.

Free Ports Some Ports, are Free Port as Hamburg (since 1.888) probably the most important Worldwide, they offer facilities for transit shipments, avoiding customs control, while cargo is in the port.
Many other Ports with latest technologies, with computerized Customs control, give similar advantages to users.

Free Trade Any deal inside a Free or Special Economic Zone, is Free Trade, because is not involved with Customs or Income Taxes.
For that reason to establish your Company inside a Free Zone, even without a large investment, give you a lot of business opportunities.

Free Zones Free Zone, have been the tool for Centuries, to increase the economies and reach Welfare for many Countries,  with more than  20 different denominations, Free Zone is and Special Regime, applied to authorized activities in a defined Area.

Global Economy Political, Economic, Industrial, Trade and Customs, Regional or Bilateral agreements, drop down Customs and a new economic order has been born the Global Economy

Goodwill The long-term clientele, solid reputation and connections, altogether forming the asset of immaterial value.

Headquarters Company A company which exclusively services its affiliate companies through managing or administering activities. Unlike offshore holding companies, it does not buy or sell products and does not involve itself in financial activities. In some countries the headquarters company may be either an incorporated company of the host country or a branch of an international company.

Holding Company The activity of holding company is limited to holding and managing investments or property but not having ordinary commercial or trading activities. The requirements for a company for attaining the status of holding vary in different countries.

I. B. C. International Business Corporation “ a company exempt from taxes or from compliance with regulations of the jurisdiction of incorporation, but not allowed to conduct trade actvities or own real estate there.
The term has some kind of additional meaning in the legislation o Antigua, Grenada, St. Vincent and some other jurisdictions, and refers to companies registered in a foreign country, which can make business anywhere in the world, except for the country where they are registered.
There is no multiple director requirement for an IBC, minimal number of directors is one, which may also serve as the Shareholder.

I. B. I. T. International Business and Investment Trust.

I. F. C. International Finance Companies.

Intellectual Property Ownership implying the right to possess, use or dispose patents, trademarks and copyrights.

International Monetary Fund (IMF) Main objective is to promote international monetary co-operation and currency stabilization in order to expand international trade.

International Tax Planning Aims in determining whether or not to initiate the project, from the tax point of view, and if initiated – how to minimize or defer the imposition of the tax burden. The analysis is made while taking into consideration all relevant tax factors (double taxation, the relationship between two or more tax systems, etc.).

Investment Bank The bank that issues bonds and stocks, and then offers companies to purchase or divest them.

Investment Fund The money contributed by a number (small or large) of subscribers, unit-holders or shareholders, which is invested and administered on their behalf. The proceeds (or losses) are shared in proportion to their subscriptions after deduction of costs.

Investment Fund Custodian The person or company holding the investment assets on behalf of the subscribers. In some jurisdictions, the functions of Promoter, Manager and Custodian have to be separated between different persons or entities, but in many other jurisdictions they can be combined. All the three functions are rewarded with fees, usually based on the value of the fund, but sometimes based on fund’s success.

Investment Holding Company A company organized in a tax haven jurisdiction by an investor which purchases and subsequently handles for him his personal investment portfolio through nominee company.

Investment Incentive Incentives that are granted with the aim to attract local or foreign investment capital to certain activities or areas (for example, exports and technological development, also some backward regions as part of decentralization policy). Incentives often go in one package together with tax incentives and may take the form of grants, factory sites, interest-free loans, exemption from exchange restrictions.

Jobs creator New projects and foreign investments need labour force, in Mexico the Maquila Process created more than 1.000.000 Jobs, Kaohsiung Export Processing Zone in Taiwan have more than 65.000 Jobs and Worldwide about 40.000.000 Jobs have been achive because Free & Special Economic Zones, a real Job Creator for economies

Joint Venture Business partnership involving joint management and the sharing of risks and profits between two or more enterprises based in two or more different countries.

Licensing The technology covering all forms of industrial enterprise. It covers the protection of industrial property by patents, trademarks, etc. Tax havens are used frequently for this purpose, as the royalties and other sums of money may be received by the licensing company incorporated in such jurisdiction, thus reducing the total tax burden. Most developed countries have included in the legislation the tax avoidance provisions which limit the use of tax havens for this purpose.

Limited Liability The liability of members of shareholders in a company limited by shares or by guarantee.

Limited Liability Company (LLC) Combines features of the corporation and the partnership.

Logistic Platform Areas If Logistic Services grows faster than other sectors, is because the concentration in Hubs, generate Logistic Areas Platforms, which provide an important economy of scale with a sensible reduction of distribution cost.

Logistics Services Distribution every day represent a higher percentage of the product cost, that is because the market, needs more efficiency to avoid the Inventory cost, so the Logistic Services have to be prepared and specialized to  JIT Distribution.

Memorandum of Association The Articles of Association.

Minutes Short summary of proceedings of a meeting or assembly.

Natural person A physical person being a subject of legal and/or business relations.

Non-Resident Company A company treated as non-resident by the jurisdiction of incorporation, for the purpose of tax exemption or exchange control.

Offshore Any country other than your own.

Offshore Banking The establishment and operation of the banks in the offshore jurisdictions.

Offshore Banking Unit A bank in an offshore financial centre, which is not allowed to conduct business in the local market but only with other offshore banks or with foreign individuals.

Off Shore business When we talk about Off Shore business, for many people means to defraud taxes, big mistake, today many Countries, including United States, have tax programs where companies, persons, procedures and capitals, can avoid legally income taxes.

Offshore Centre A financial centre used as a foreign base for overseas operations where the investor may freely move in and out his assets.

Offshore Finance Company Company organized in a foreign country, most frequently in tax haven, and handling wide range of financial services. Usually the offshore finance company is created to handle financing requirements of its parent or related companies, but is used occasionally to provide the financial needs of the parent company’s distributors or foreign agents.

Offshore Funds Types There are even more varieties of offshore funds than of onshore funds in high-tax countries, which are often limited by local regulation to more stable types of investment. There are offshore bond funds, equity funds, sectoral funds, emerging-market funds, money-market funds, hedge funds, property funds, income funds, capital funds, etc.

Offshore Holding Company A company organized in a foreign country, having control over one or more affiliate companies, managing, administering or servicing the companies usually located outside the country of incorporation.

Offshore Investment Fund General term for an investment fund based in an offshore jurisdiction, offering its shares to persons that are not residents of the country in which it is incorporated. Sometimes the funds based outside a particular high-tax jurisdiction are incorrectly named offshore. An offshore investment fund often has the problem that it cannot market into some important high-tax countries, unless its local supervisory and regulatory regime is ‘recognised’ by high-tax countries as being up to their standards.

Offshore Investor An investor using a foreign base company in an offshore centre and having the possibility to freely move his investments.

Offshore Trading Company Company organized in a foreign country to buy goods from an exporter in one or more other foreign countries and to sell these goods to importers in another foreign countries. Usually, offshore trading company processes all managerial, administrative and daily financial transactions, and ships the goods from the seller in one country to the buyer in the other country.

Offshore Web Hosting Web hosting in a different jurisdiction than your home jurisdiction. The web site does not need to be in the same country where the IBC is incorporated.

Outsourcing Services Outsourcing Services, becomes a fast growing activity in Free Zones, give the opportunity to do business inside a Free Zone, including all incentives and advantages, without investment, sub-contracting professional services a third part Companies established inside de Free Zone.

Parent Company A company in relation to its branch, subsidiary or daughter company.

Partnership Often offers useful features for the purposes of an overall tax plan. In some jurisdictions, a partnership may have the features of a corporation and a company. Requirements relating to formations and registration of the company should be examined in the context of the general law governing local partnerships.

Permanent Establishment The term is commonly used in DTA’s and applies to business activities realized on the territory of a country, by a company or person incorporated or resident outside this jurisdiction.

Private Foundation An effective offshore asset protection tool combining the features of a trust and an International Business company. The purpose of a Private Foundation is similar to a trust and is mainly preserving the assets, donated by the Founder and some third persons, for the benefit of and for distribution among the beneficiaries. Similarly to an IBC, a Private Foundation has a distinctive legal personality and tax-exempt status.

Ready-Made Company The same as Shelf Company.

Real Estate Withholding tax and, capital gains tax and some other taxes are often imposed on rental income deriving from the holding of real estate in a foreign country, or from the sale of property. Also, the ownership of real estate by individuals may result in death duty liabilities and some other similar taxes in the country where this real estate is situated, irrespective of the residence or domicile of the individual owner. For these reasons, it is common to hold foreign real estate through a tax haven or another company situated in a tax haven jurisdiction.

Register The register of IBCs and exempt companies maintained by the Registrar of the given offshore jurisdiction.

Registered Agent A registered agent is the person or entity representing an IBC, LLC, a Private Foundation or Corporation in the given jurisdiction. Registered agent usually provides a Registered Office address, communicates with local authorities, receives all the legal and tax documentation and important state notices. Maintaining registered agent is obligatory for all the corporations.

Registered Company Company registered with the authorities of the country where it is established. In most jurisdictions the company that is not registered has no right to operate.

Registered Office Registered office is the official address of the registered agent and the place to which authorities, courts, and other institutions send notices, letters and reminders. That is why it must be always the real address for delivering company documents, and it can be situated anywhere in the jurisdiction. It may be the corporate office, or the office of the corporation’s attorney.

Resident Company A company treated as resident by the jurisdiction of incorporation, for the purpose of tax exemption or exchange control.

Securities Shares, bonds and debt obligations of any kind, which give evidence to and assure the fulfilment of an obligation. Securities are bought and sold in the financial markets and via the Internet, through an Offshore Brokerage Account.

Seminars The Free Zone Promoter has to include in their objectives, permanent Seminars as a training program.
Organized by themselves or in a joint venture with a local High School or University.
Offered to the Free Zone staff and Companies installed in the Zone.
Accessible to all Professional levels

Settlor The person who creates a trust.

Share of Stock There are several different classes of shares representing ownership in a corporation, with different privileges and rights, such as registered shares, par value and non-par value shares, preference shares, redeemable and non-redeemable shares, shares with or without voting rights, bearer shares, etc.

Shelf Company A company that has been organized previously, with designated capital and registration cost paid, and after that has been made inactive, with annual registration, capital and stamp duty fees currently paid but shares held in bearer form. The directors and officers are substituted when activating the company.

Special Economic or Development Zones Special Economic Zones is the modern an another denomination where the Free Zone Regime may be applied.
Sometimes the Area is biger than a fenced Zone and its extension include a full City or several Villages.

Society Anonym (SA) An LLC under French Law; in Spanish-speaking jurisdictions – Sociedad Anonima. Requires minimum 7 shareholders, whose liability is limited up to the amount of their capital contribution.

Subsidiary Company A company under the control of another company, through the ownership of stocks and shares.

Substantial Holding Company In the Netherlands a special type of holding company, which is exempt from tax on income from investments.

S. W. I. F. T. Society for Worldwide Interbank Financial Telecommunications.

Tax Clearance Certificates Confirm that an individual departing from the country has fulfilled all his income tax obligations. The certificates are issued by an Income Tax Department and are shown to customs and emigration authorities upon departure from the given country.

Tax Exempt Company A company designed for individuals or corporate entities who are foreign to the jurisdiction in which it is registered, providing maximum of privacy and anonymity as well as comprehensive freedom from local taxation. It should only pay a fixed annual fee (tax-exempt fee), which makes the company free from further tax liabilities in the jurisdiction of incorporation. The company must also pay annual filing fees and domiciliary fees, for maintaining the status of registered company.

Tax Incentives Many Countries, expect to attract foreign investment, offering Taxes Incentives.
Do  you know that when a Company decides where to invest, only 35% is because Free Taxes, other reasons as : Location, Labour Force, Industrial culture….  are sometimes more important for Decision Makers

Tax Haven Usually refers to the jurisdiction with following features:
No relevant taxes
Taxation levied only on internal taxable events, or lower tax rates on profits from foreign sources
Special tax privileges to some types of taxable persons or events (these privileges may derive from the domestic internal tax system, or from a combination of domestic and treaty provisions.

Tax Holiday Exemption from taxation for a designated period of time.

Tax Regimen Local treatment of income taxes, incomes derived from foreign sources, non-resident treatment and special tax concessions.

Tax Treaties International agreements or conventions having the aim to eliminate double taxation by the contracting states. International double taxation is the imposition of comparable taxes in two (or more) states on the same taxpayer, in respect of the same subject matter and for the same period. Most often double taxation is levied on the exchange of goods and services and on the movement of capital and persons.

Three way Business or Triangulation The first Free Zones Regime known, 2.000 years ago in Cartage and Tyre, were established to develop trade among Mediterranean Countries, today with the Global Economy. To use Three Way Business and/or Triangulation, Companies avoid or reduce Taxes legally .

Training programs We talked about Labour Force as a reason to decision makers to invest, that’s truth, but not enough, Training Programs, increase the skill and career of the people and make it easy to nationalize the team of workers and managers.
This option can consolidate the project in the Country

Trust The concept dates back to the middle of the 11th century, to the period of Norman conquest of England. Now, the developed form of the trust has become one of the most effective tax and estate planning techniques.
The modern concept of the trust refers to the duty or aggregate accumulation of obligations that a Settlor gives to a trustee, by transferring his assets to the third party. The trustee administers the trust property in a way lawfully prescribed by the trust instrument (Trust Deed or Settlement Deed, Declaration of Trust).
There are three basic types of trust:
1.  A Interest in Possession’ trust allows for a particular beneficiary, often the Settlor, to have a distinct right to income from part of the trust’s capital assets;
2. A  Accumulation and Maintenance’ trust allows for income to accumulate until a class of beneficiaries reach a certain age;
3. A Discretionary’ trust vests discretion with the trustees to decide how both income and capital are distributed.
Trusts do not have shares.

Trustees The persons whose duty is to act in accordance with a Trust Instrument for the benefit of the beneficiary (ies).

Trust Deed Trust Instrument (also Settlement Deed or Declaration of Trust), laying down the ways how the trustees should conduct administration and management of the trust, and how they are to distribute trust assets and income derived from the trust activities among the beneficiaries.

Uniform Partnership ActUPA – the uniform type of laws adopted by some states or used as a basic law for other states.

VAT Value Added Tax.

Vintage Company The same as Shelf Company.