Paradise Papers: Your jargon-busting guide to the key terms

| Author: Tony Imossi (Secretariat) | Filed under: General News
Paradise Papers: Your jargon-busting guide to the key terms

Don't know your "double Irish" from a "drawdown"? Find out more about the words and phrases found in the Paradise Papers.

A
Asset holding: Assets stored in an offshore company, reducing taxes.
Asset protection: Places assets offshore to keep them safe from potential creditors. Often legal but deliberate concealment of assets is illegal.
B
Bearer shares/bonds: Shares or bonds, that can be held anonymously, and redeemed only be presenting a physical document, much like a banknote. Made illegal in the UK in 2015.
Beneficial owner: Enjoys the benefits of company ownership, such as profits, but not necessarily named as company owner.
C
Captive insurance: A firm creates an insurance company to provide cover for itself, often reducing costs and improving flexibility.
Company registry: A place within a jurisdiction where a register or list of companies is kept.
Controlled foreign company (CFC): A subsidiary of a multinational, set up in an offshore jurisdiction to finance overseas business. There are rules preventing a CFC from artificially shifting profits between territories, although they can be difficult to enforce.
Country-by-country reporting: A system under which multinationals are required to report annually on each jurisdiction in which they do business.
Creditor: An individual or institution that lends money, or credit, to another party with the intent that the amount will be repaid, usually with interest.
Crown dependencies: Territories under the sovereignty of the British Crown but not part of the UK. They are Jersey, Guernsey and the Isle of Man. The UK has ultimate legislative control, but their own legislatures can pass laws with UK assent.
D
Director: A member of an elected or appointed board that determines company policy.
Dividend: A proportion of a company's earnings, determined by its board, that is passed on to shareholders.
'Double Irish': A tax system under which multinationals registered firms in Ireland, but the companies remained resident for tax purposes elsewhere. Now being phased out.
Double taxation: The payment of taxes twice on the same source of income, i.e. an international company that trades in two countries may find it is taxed by both. Treaties try to prevent this.
Drawdown: Two very different meanings. The first (in banking) refers to the gradual acquisition of credit. The second (in trading) refers to how much a specific share price has fallen, from its peak to its lowest level.
Due diligence: An audit or test undertaken to determine the facts behind a transaction or investment before it is effected. A defence against criminal or corrupt behaviour.
E
European Union Savings Directive (EUSD): An agreement between EU states, and some other countries, to stop people earning interest in a savings account without declaring it. Was wrapped into other legislation in 2015.
F
Fiduciary company: A company that has an ethical and legal responsibility to act in the best interests of another party.
H
High Net Worth Individual (HNWI): A wealthy individual or family with easy access to a large amount of cash, usually at least $1m.
N
Nominee: A company or person who holds assets in name only. The true, hidden owner, is known as the beneficial owner
Non-dom: In this case, a UK resident whose permanent home, or domicile, is outside of the UK. Such an individual must pay UK tax on UK earnings, but is often exempt from UK tax on foreign income or gains, unless they bring that income back to the UK.
O
Offshore Financial Centre (OFC): A financial jurisdiction outside of your own nation's regulations often used by companies and individuals to lower tax on their profits. Often referred to as tax havens, but many OFCs dislike the term.
P
PEP - Politically Exposed Person: People who either are, are related to, are friends with, or have business connections to, politicians. Business with them is considered a greater risk of corruption, so offshore providers are expected to monitor them closely.
Prepackaged bankruptcy: A deal agreed between a company and its creditors for a failing firm to be reorganised. It must be backed by the firm's shareholders and takes effect after the firm declares bankruptcy, which usually means it can't repay its debts.
S
Share: A unit of ownership, usually in a company, the price of which can go up or down, depending on the company's fortunes. Owners of shares are often paid annual "dividends", or a small portion of profits, if the company performs well.
Shareholder: An individual or entity that holds at least one share in a company. Has certain voting rights, and also benefits - or loses out - financially according to company performance. Not liable for company debt.
Shelf company: A company or corporation that was created, but not used, and left to age. It can then be sold on, and used to bypass the often lengthy registration or incorporation procedures that come with setting up a new business.
Shell company: A company in name but effectively empty, functioning only to manage the money in it, it can be used to hide the beneficial owners.
Subsidiary: A company more than 50% controlled by another, known as the parent, or holding, company. Often not in the same country as its holding company.
T
Tax haven: A secretive, stable jurisdiction, often a small island, through which money or other assets can be routed, to take advantage of low, or non-existent, local taxes.
Tax inversion: : A company buys another in a low-tax jurisdiction then moves its corporate headquarters there, often in name only.
Tax treaty: When two nations enter into an agreement to avoid the problem of double taxation (see separate entry).
Transfer pricing: A system by which a multinational company moves profits within its component parts to reduce tax, often using an offshore financial centre.
Treaty shopping: Where a company or individual in country A is earning income in country B, but the nations have no common tax treaty, so the company or individual takes advantage of a treaty that does exist between country B and another country, country C, to lower tax payments. A new OECD convention was set up in 2017 to stop companies using the system.
Trust fund or Trust: Where one individual or organisation legally entrusts a second entity to look after assets for a third entity, so that they are no longer liable for tax on the assets. A sham trust is where the first party still retains control of the assets.
U
UK overseas territories: 14 territories under UK sovereignty, but not part of the UK and mostly self-governing except for defence and foreign affairs. Includes Bermuda, Cayman Islands and British Virgin Islands.
Ultimate beneficial owner: An entity or person similar to the beneficial owner (see separate entry), but with the final say in transactions, etc.

PARADISE PAPERS

The papers are a huge batch of leaked documents mostly from offshore law firm Appleby, along with corporate registries in 19 tax jurisdictions, which reveal the financial dealings of politicians, celebrities, corporate giants and business leaders.

The 13.4 million records were passed to German newspaper Süddeutsche Zeitung and then shared with the International Consortium of Investigative Journalists (ICIJ). Panorama has led research for the BBC as part of a global investigation involving nearly 100 other media organisations, including the Guardian, in 67 countries. The BBC does not know the identity of the source.

Paradise Papers: Full coverage; follow reaction on Twitter using #ParadisePapers; in the BBC News app, follow the tag "Paradise Papers"

Source:  BBC

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