Tax Haven Glossary

Bearer Shares - stock in a corporation certifying that "Bearer" is the holder rather than registering the stock in an individual or corporation name. Transfer of ownership is simply effected by handing the stock certificate to a new owner. If lost, they cannot be replaced unless you control the corporation, but there may be consequences if replacement shares are issued.

Beneficial Owners - regardless of whose name(s) appear as incorporators, directors, officers or shareholders, the beneficial owner is the party who reaps the benefits of the corporation's existence and is the ultimate and true owner.

British Crown Colony - a former possession of the British empire. Today, most are internally self-governed but externally protected by Great Britain.

Captive Insurance Company - an offshore insurance company controlled by another company or group for the purpose of providing coverage to a specific group of companies or individuals.

Confidentiality - does not imply that there are secrecy laws, but then again there might be. Confidentiality in banking and other transactions is usually a custom rather than a law. English common law found in half of all tax havens automatically calls for confidentiality in financial matters.

Currency Exchange Controls - restricts the free flow of money in and out of a country.

EC - European Community.

EEC - European Economic Community.

Entity or Vehicle - legal being created by law such as a corporation.

Holding Company - a company to hold assets as opposed to an operating company.

Host Country - the country of a chartered and/or licensed entity whose laws govern its creation and existence.

International Business Company (IBC) - a corporation chartered in a tax haven that has IBC legislation. These are corporations created by very modern corporation laws for offshore business. Usually they pay no taxes because their income is derived outside the tax haven.

Limited Liability - a corporation limited by shares. The amount paid for the stock is the maximum an investor can lose in a limited liability company.

Low Tax Haven - very low tax structure affecting offshore operations, usually a couple percent. If the tax haven has a double taxation agreement with the United States, the U.S. citizen will receive a tax credit or deductions offsetting the tax paid to the tax haven.

No Tax Haven or Zero Tax Haven - absolutely no taxes affecting offshore activities.

Nominees - nominees are other individuals or corporations who act as incorporators, directors, officers or shareholders in a corporation to provide autonomy to the beneficial owners.

Non-resident or Exempt Companies - both are created by the laws of a tax haven for the purpose of operating outside the country and usually they are not taxed on income derived elsewhere. These corporations are not as modern as IBCs.

Numbered Account - a bank account that is known only by a number and at least one bank employee knows the true identity of the account holder.

Off-the-Shelf Companies - corporations already incorporated, but never operated and ready for delivery to a purchaser. Particularly common in tax havens and countries where incorporation time is lengthy.

Offshore - operating outside your own country, but usually referring to a tax haven.

Offshore Bank or Class B Bank - a bank chartered and licensed to transact business strictly outside the host country.

Offshore Banking - banking outside your own country, however not necessarily with an offshore bank, commonly in a tax haven.

Offshore Financial Center - a tax haven and/or major offshore financial center such as Bahamas, Hong Kong, Panama, Singapore, Switzerland, etc.

Onshore Bank or Class A Bank - a bank chartered and licensed to transact business with residents of the host country or elsewhere.

Redomicile - reincorporate a company in another jurisdiction.

Secrecy Laws - guarantees secrecy to a person or corporation by the tax haven's laws. If breached, penalties are imposed.

State-of-the-Art Communications - excellent telephone, fax, telex, mail and courier services.

Tax Exchange of Information Agreements - often signed when a tax treaty is negotiated, this agreement allows for the IRS or another country's taxing body to obtain normally confidential information on a person or corporation in the tax haven who they are investigating.

Tax Haven - a country with no or low tax structure.

Tax Treaties - permits the corporate owner of a tax treaty country, such as a U.S. citizen, to take a tax credit or a deduction so that person is not taxed by both countries. This encourages reporting income and profits to the IRS. Obviously this has no effect on a tax haven with no taxes.

Tax-exempt or Tax-free - no taxes.

Trust Company - a company licensed to provide trust services.

Unlimited Liability Company - a corporation whose owners are all exposed to the possibilities of personal liability.