Secrecy Jurisdictions

A tax on the rental value of a site, assessed as if it were undeveloped and unimproved - in other words, as if it were bare land. It therefore charges tax on an immoveable and therefore unavoidable tax base which is always firmly located within a jurisdiction – the land itself.

A person providing advice on the law, who prepares legal agreements or who pursues disputes through the legal system of a jurisdiction. The use of the term and the entitlement to practice as a lawyer is regulated in many jurisdictions.

A legal person is a person that is not necessarily a human being but still has rights and obligations. Companies and many types of partnerships are legal persons, as are most foundations. The rights and obligations of a legal person are not equivalent to those of a natural person and are usually limited e.g. to the holding of ownership, entering into contractual relations etc.. Most, but not all legal persons will be owned by natural persons. Exceptions are legal persons owned by legal persons: these then create groups of companies, and foundations, which have no ownership but which are established for the benefit of designated groups, usually comprising natural persons. As such some argue that legal persons act as mere agents for their members or those on whose behalf they act, but this does not reflect their rights in law and the impact they consequently have on the arrangement of property rights within and between jurisdictions and as such they have to be considered as persons in their own right separate from those natural persons who own them or benefit from their existence.

There are basically two different types of legal system of significance in international tax legal. The first is civil or roman law, the second is common law. According to Wikipedia, civil law is the most widespread type of legal system. Common law is employed in the USA and the UK (and most of the latter’s former colonies). The main difference between the two systems is the relative importance of case law i.e. law made by judges when offering opinions on cases heard before them in common law systems. These play a crucial role in common law but civil law, in contrast, relies almost solely on statutes and the constitution for rule making. Sometimes, legal systems display a blend of both or apply one system in one particular legal domain and the other in the remaining legal system. When such a blend exists, that of significance here is the one used for taxation and commercial law.

A contract for the use or property, often intellectual property such as a patent, copyright or trademark. If ownership of the property is transferred to a holding company located in a tax haven, the licence fee income paid to the licensor may be exempt from tax, as well as reducing the taxable profits of the operating company (often a subsidiary) which is the licensee.

A limited company is a legal person with an existence separate from those natural persons that own it. Those natural persons interest in the limited company is delineated by the number of shares that they own within it. The management of a limited company is governed by its constitution. This is usually split into two parts, described as the articles and memorandum of association (or incorporation). The-day to-day management of the affairs of a company are delegated to a board of directors who are elected by the members. Those directors do not necessarily have an ownership interest in it. The directors are often served by a company secretary who manages the administration of the company. There are variants on this theme such as protected cell companies, incorporated cell companies, and various types of corporation. Some jurisdictions, such as the UK, designate companies differently if their shares may be traded but their structure is fundamentally similar. The limited company or corporation is by far the most company type of legal person in the world.

The right granted in law to the members of a company to be protected from claims made by that company’s third party creditors in the event of its insolvency. First found in 16th century England, its more general availability revolutionised the raising of capital in the 19th century and permitted the industrial revolution. Now available at very low cost in almost every jurisdiction in the world (California being one of the last to grant it, in the 1940s). Whilst of benefit when used properly it is also an opportunity for fraudulent abuse, requiring its proper regulation which can rarely happen in secrecy jurisdictions where too little information is available to regulators for this purpose.

Limited liability partnerships (LLP): A partnership that provides its non-corporate members with limited liability. LLPs are frequently based offshore for tax avoidance purposes.

A financial services provider supplying services to entities resident in the jurisdiction in which they themselves operate.

A transaction or entity that is solely regulated within the jurisdiction in which it is registered or takes place.

“Look through" when used as tax terminology refers to a legal person (and some other entities, such as unlimited partnerships) that undertake transactions but whose existence is then ignored when the resulting taxation liabilities are computed because the profits arising are attributed by the tax authority of the jurisdiction in which the liability arises to those persons, whether legal or natural, that have an ownership interest in the entity that is “looked through” and the tax liability is computed upon them in its place. Those members are then liable for the tax due. Partnerships, whether limited or unlimited are the most commonly “looked through” structures but such arrangements have been adopted for limited companies in some of the UK’s Crown Dependencies to avoid the ring fencing provisions of the EU Code of Conduct for Business Taxation.

A technicality that allows a person or business to avoid the scope of a law without directly violating that law. Much beloved by the tax avoidance industry.

A term that is hard to define since it is subjective. Low tax is often used to describe tax regimes where no tax is due; for example the Cayman Island where there is no direct taxation. More commonly it refers to a particular tax rate that is low in comparison to prevailing norms in other equivalent jurisdictions. So, Ireland has a low tax on corporate profits because its rate of 12.5% (in 2009) is low compared to those prevailing in most of the European Union. Because of this subjectivity the term has little practical use.

A web site promoting the use of tax havens / secrecy jurisdictions with web address http://www.lowtax.net/