Secrecy Jurisdictions

The process whereby wealth holders deposit their funds and other assets offshore rather than in the banks of their country of residence. The result is that assets and income are not declared in the country in which a person resides.

A tax on the profits from the sale of capital assets such as stocks and shares, land and buildings, businesses and valuable assets such as works of art.

A protected cell company, or PCC, is like a standard limited company that has been separated into legally distinct portions or cells. The revenue streams, assets and liabilities of each cell are kept separate from all other cells. Each cell has its own separate portion of the PCC's overall share capital, allowing shareholders to maintain sole ownership of an entire cell while owning only a small proportion of the PCC as a whole. The undertakings of one cell have no bearing on the other cells. Each cell is identified by a unique name, and the assets, liabilities and activities of each cell are ring-fenced from the others. If one cell becomes insolvent, creditors only have recourse to the assets of that particular cell and not to any other. It is claimed that PCCs can provide a means of entry into captive insurance market to entities for which it was previously uneconomic. The overheads of a protected cell captive can be shared between the owners of each of the cells, making the captive cheaper to run from the point of view of the insured. This was the reason why PCCs started. There is now evidence that they are more generally available. As has been noted: The astute offshore practitioner can employ an offshore protected cell company as an effective asset protector and privacy enhancer. With an offshore insurance corporation, it is market practice that provides tangible benefits; with the protected cell company, it is the structure of the entity itself -- think of a house with a locked front door, and rooms inside, each with a separate lock and key. Protected Cell companies have -- in concert with other entities -- been used to construct what has been called "an impenetrable wall" against creditors and prying eyes. Whilst these claims can only be tested by time, this novel use of a PCC for asset protection and financial privacy is an interesting approach and a valuable piece of intellectual property. http://www.offshore-fox.com/offshore-corporations/offshore_corporations_030404.html Seen in this way they pose considerable problems for those investigating secrecy jurisdiction activity, not least because as yet effective information sharing agreements with regard to their activities have yet to be developed. PCCs were first developed in Guernsey in 1997 but are now widely available.

Controlled foreign corporation: A tax definition to describe a situation in which a company which charges tax on the profits of corporations has a subsidiary registered in a tax haven or other territory where little or no tax is charged on the profit the subsidiary makes. The subsidiary is then called a CFC and its profits can in some cases be subject to tax in the country of residence of the parent company.

A trust established for purposes accepted by law as charitable.

Tax is charged on the worldwide income of all citizens of the state irrespective of whether they are resident or not in the territory during the period for which the taxes are levied. The USA uses this basis of taxation but few other countries do.

A civil tax matter is one where the person committing a tax offence is not facing a prison sentence. What precisely constitutes a civil tax matter is largely defined in diverging national tax laws. Often, a civil tax matter defines a wrongful payment or non-payment of taxes that (in contrast to a criminal tax matter) remains below a certain threshold. This can be the case because the amount of tax evaded is considered rather low and/or the act was based on negligent rather than intentional behaviour. The distinction is important for international cooperation. Today, most cooperation between authorities takes place only if criminal tax matters are involved. The cooperation in civil tax matters takes place mostly through specific, bilateral treaties. (see: Information exchange). Compare with criminal tax matters.

An entity treated as a separate legal person from those who set it up, established under the rules of the country in which it is registered.

The company secretary usually acts as the chief administrative officer of the company, leaving the directors free to concentrate on running the business. In practice the role of company secretary has had diminishing significance over many years and some jurisdictions, for example the UK, no longer require that there be a company secretary in the case of private companies. A corporation may hold office as company secretary. The company secretary serves the Board of Directors of the company and does not therefore share their legal responsibilities.

A group of companies is made up of two or more member companies with one company owning, directly or indirectly, more than 50% of each of the other members. When this happens the shareholders of the ultimate parent company can only appraise the return on their investment if they can see the combined result of the parent company in which they have invested and that of all the subsidiary companies that it controls. This outcome is achieved by preparing consolidated accounts. In consolidated accounts all the trading between members of the group of companies is eliminated because this cannot generate profit for the ultimate parent company shareholders, which can only be earned by trading with independent third parties. It is only a third-party trading that is reflected in consolidated accounts. The balance sheet in a set of consolidated accounts only reflects liabilities owing to or from third parties, those between group companies being eliminated.

A constitution is a set of rules for the government of an organisation. Perhaps most commonly associated with states, they also manage the way in which companies, corporations, trusts, foundations and other organisations are managed.The constitution of a company is often called its articles and memorandum of association, or in the USA its articles and memorandum of incorporation. For a trust the constitution is the trust deed, for a partnership it is either the partnership deed or agreement. It is important that third parties have access to such constitutions, not least because they often include limitations on the activities of the entities in question and if they trade beyond those agreed limitations their actions can be deemed to be ultra vires i.e. beyond their powers, and in that case the person trading with the entity that has acted in this way may find themselves without legal recourse for recovery of their funds.

A liability which will only arise if a conditional event occurs: for example, a tax liability that will only be due if a tax return is challenged as inaccurate by a tax authority. The liability can be calculated as the total possible sum due, multiplied by the probability of the conditional event occurring. If the resulting figure is small it is customary for little or no liability to be included in the accounts of a company. If the probability is small but the potential liability is big, the risk of the liability arising may be separately disclosed in the accounts of a company, but this has not been the precedent to date. In the USA this was changed by the introduction of Financial Accounting Standards Board (FASB) Financial Interpretation Note 48 (FIN 48) ‘Accounting for uncertain tax positions’. This requires that all tax positions where there is uncertainty as to the outcome be disclosed and quantified. This for the first time gave indication of how much tax companies were trying to hold back through tax planning schemes. The effect can be material. For example in its December 2008 accounts Google Inc said:In addition, as a result of having adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) in January 2007, we increased long-term taxes payable by $400.4 million in the year ended December 31, 2007 as FIN 48 specifies that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities. We also recognized additional long-term taxes payable of $362.8 million in the year ended December 31, 2008.

A special form of company with taxation advantages, often used to attract corporate headquarters to a country. Most notably found in Belgium, the Netherlands and Ireland.

A tax on the profits made by limited liability companies and other similar entities in some countries, but otherwise usually being similar in application to income tax.

A proposed form of accounting in which a multinational corporation will be required to report in its accounts in which countries it operates, what the names of its subsidiaries are in each and every jurisdiction in which it operates, and to publish a profit and loss account of each such jurisdiction, without exception, showing its sales and purchases, both from third parties and intra-group, the number of employees it has and the cost of employing them, its financing costs both third party and intra-group, its profit before tax, its tax charge split between current and deferred tax, and a summary of its assets and liabilities in the location.