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Tax Engineering

Financial offshore vocabulary

What is offshore?

Offshore is a country or a part of its area that offers favorable tax regime for foreign non-resident companies and investments. Usually offshore territories have more relaxed environment for business development than onshore zones due to the minimal list of obligations and requirements that the entrepreneur has to comply with in order to start its commercial activity. Additionally investors and foreign businessman can choose among hundreds of banks, insurance organizations, auditors, accountants, business centers and law firms that all together form what is called offshore system.

Besides that, a term “offshore” can be used to describe a company that was registered in one country but operates on the territory of

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What is onshore?

Onshore means all investments made by a company or individual in its high tax country of residence. The main difference between onshore and offshore is essentially a tax regime. Offshore are jurisdictions where non-resident companies or individuals pay 0% or less than 10% tax. The examples of this kind of jurisdictions are Cayman Islands, Belize or Saint Vincent and the Grenadines. Onshore are jurisdictions where all taxes are paid regardless of whether the company or an individual is a resident or not, carries out its business activities within these jurisdictions or outside its borders. Clear example of this kind of jurisdictions is Germany, Switzerland an

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What are the Articles of incorporation?

The articles of incorporation (sometimes called "Certificate of incorporation") is the essential part of the package of documents of a company and represents an identification of the country where it has been registered. The information included in the articles of incorporation can vary greatly depending on the country in which the company has been set up. However, there is a common information that most countries require:

  1. The name of the company: The name by which your company will be known must include one of the abbreviations: "Corp.", "Inc.", "S.L.", S.A. "etc. You may need to search and verify the availability of the name before submitting the articles of incorporation. In the event that you incorporate your partnership with a specialized company,
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What are the bylaws of a company?

The bylaws of a company are the regulations that the company creates for its shareholders, officers, directors and administrators. The Board of Directors as one of the first steps to incorporate the company adopts the bylaws. Unlike articles of incorporation, the bylaws of a company are mainly for internal use. Depending on the jurisdiction of the registry, the company may be obliged to make bylaws public in the mercantile registry or not. In addition, the articles of incorporation represent an official and training document with the general information of the company. The bylaws represent rules and orders that define the operation of the company and the conduct of its shareholders or directors.

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What are bearer shares?

Bearer shares are the anonymous shares held by a natural or legal person related to the company. The main characteristic of bearer shares is that the holder of such participations justifies before a notary the ownership of the shares and therefore declares to be a shareholder of the company. Bearer shares don’t hold the name of its owner and therefore facilitate the transfer of assets anonymously. As a general rule, we do not advise the use of bearer shares due to the negative awareness of some countries to recognize this type of stock because of its association with money laundering offenses of illicit origin.

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What are the registered shares?

The registered shares are the certificates of shares that point the property of it to natural person or a company and prove to be the owner of it. The name of the shareholder is recorded in the company's internal records and depending on the country of registration may be public or not in the commercial register. The main disadvantage of the registered shares is that they are not opaque, but when opening a bank account, banks and tax authorities of the majority of the countries value this form of shares holding more than one of bearer shares.

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What is a dormant company or shelf company?

Dormant companies or shelf companies are companies that are legally constituted but have not exercised any type of activity. These companies are constituted with a time of advance by the lawyers and ready to be sold, bought and used to protect the patrimony without having been used before by any other individual or company. Depending on the antiquity of shelf company it can be more or less expensive. These types of companies are widely used to give credibility to the businesses that need to attract new investors.

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What is a resident agent?

The Resident agent is the legal representative of your company in the country where it has been registered whether in an offshore or onshore jurisdiction. For the registration of an offshore company the participation of a resident agent is mandatory since the owner of the company or its directors can not directly incorporate an offshore company on their own.

The responsibilities of a resident agent are:

  • Register the offshore company in the jurisdiction chosen by the client.
  • Sign the incorporation documents.
  • Assign the first director of the company.
  • Represent the company and its directors legally before the authorities of the state.
  • Send and receive notifications
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What is a tax haven?

A tax haven is a country with a tax-free regime applied to companies and individuals that are not tax residents in this same country. Tax havens have favorable laws to encourage investments offering opacity and easiness to invest.

For a country to be considered a successful tax haven it must meet the following 5 conditions:

  • Null or close to 0 rate of taxation.
  • Banking secrecy.
  • Little bureaucracy.
  • Enviable geographic location.
  • Political stability.

If the country you are in meets any of the points listed above, Bingo!! You have just visited a tax haven.

Tax haven classificati

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What is money laundering?

Money laundering is a process of legalization of funds obtained by illegal activities, including criminal. In order to be able to use this money openly and publically they first have to be transferred from the black market to legitimate economy going through the process of money laundering. The funds can be legalized through payment gateways, lottery frauds or property acquisition.

Currently, money laundering is not a problem of just one particular country, but something that affects the economy of the whole world and that can be fought only by the collaborated efforts of the authorities of all states.

The scheme of money laundering

The process of money laundering can be separated into 3 stages:

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What is an offshore bank account?

Offshore banking and offshore bank accounts in particular are very useful financial tools when it comes to tax saving and anonymity. What is an offshore bank account? An offshore bank account is a personal or business bank account that is opened outside the country of residence of the bank account holder and has some tax benefits that are not available his country of residence. Depending on the country where the offshore bank account is opened, it may have greater bank secrecy or not. Currently the most opaque countries to open an offshore bank account are Saint Vincent and the Grenadines, Belize, Samoa, Uruguay.

Recently, with the approbation of automatic banking information exchange treaty the privacy of banking sector in ma

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What is a legal entity?

A legal entity is an institutional entity created by one or more individuals for certain collective purposes. Legal persons have the capacity to be holders of rights, own assets and also incur obligations. An example of a legal entity would be a company, association, corporation or foundation.

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What is an offshore foundation?

An offshore foundation is a commercial entity that occupies a place between a trust and a company. It is characterized by the allocation of a fund or patrimony for a specific purpose. The fund that is donated for the specific purpose becomes an autonomous entity and acquires the same rights as a legal entity.

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Who is a fiduciary?

A fiduciary is a physical person, for example, a trusted attorney appointed by a natural or legal person, such as company or a bank, who takes a responsibility to administer personal loans and assets. The fiduciaries can use their name or offshore companies owned by them to achieve opacity in the administration of their client's assets. One of the main obligations of fiduciaries is a high level of loyalty and ability to prioritize the interests of the owner of the assets taking good care of them in accordance with laws.

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What are Trusts and what are its advantages?

Tax havens do not offer many advantages without the personal or legal entity of Trusts. The basic definition of a Trust is: a mediation of a physical person or a public limited company (SA, SL, LTD, INC) generally owned by the trustworthy lawyer to hide and protect the assets of the final beneficiary. The Trust is widely used in the common law to hide the ownership of bank accounts and partnerships that a natural or legal person registers as a final beneficiary. The Trusts are also known as nominees where a trusted lawyer performs the functions of final beneficiary such as the company's billing and tax triangulation to save the maximum taxes to the final benef

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What does asset protection mean?

The term asset protection describes the legal concept of transferring your assets to a legal entity that protects it from frivolous litigation, government misappropriation and spousal attacks. The protection of assets protects them from any situation that may threaten their property. In any of these situations an offshore company will protect your assets, as it will act as a shield against these unexpected situations.

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What is an offshore company?

Law defines an offshore company as a legal entity with tax-exempt status whose liabilities are limited. Offshore companies can sell and buy shares, they have the right to sue and to be sued they also have a perpetual existence. Depending on the jurisdiction where it is registered, the offshore company may be based on "Roman law" such as, for example, Costa Rica and Panama or Anglo-Saxon law "common law" such as, for example, Cyprus, Belize, Cayman Islands, San Vicente and the Grenadines or Seychelles. Managers/directors and shareholders constitute offshore companies. Depending on the jurisdiction, it might be possible or not to use nominee services to hide the identity of the final beneficiary of the offshore company. The Articles of i

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What is the difference between tax haven and offshore?

The main difference between tax haven and offshore territory lies in tax rates and location. A tax haven is a country where non-residents are not subject to tax, for example, Belize, and an offshore territory can be any country, with or without fiscal obligations, that is outside of the taxpayer's tax residence. That is, a person who is a tax resident in Spain can register a company in an offshore territory with obligation to pay tax, for example, in the United States or can set up a company in a tax haven where tax rates for non-residents are 0%, for example in Belize. In both cases the fiscal location would be outside of client´s country of residence in Spain (

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What does it mean to launder money like "Japanese ants"?

Thefinancial term "Japanese ant" is defined as a sophisticated money laundering technique in which more than 1000 people can intervene. It works the following way: the ant receives a small amount of money, usually less than 10,000 British Pounds so that it can pass customs controls and deposit it in another country bank account. Another technique that can be applied is that once the ant lands in the country, he buys luxury products, leaves them in storage at a second-hand jewelry store so he can sell them in exchange for a commission. The detection of this type of money laundering is very complicated since small amounts of money are used and the intermediary businesses where they hide the product have a legal activity that is unnoticed by regulators. What

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