Legal and Ethical Issues in Offshore Tax Planning
Expert-defined terms from the Professional Certificate in Offshore Tax Planning Techniques course at London School of International Business. Free to read, free to share, paired with a globally recognised certification pathway.
Legal and Ethical Issues in Offshore Tax Planning Glossary #
Legal and Ethical Issues in Offshore Tax Planning Glossary
Advance Pricing Agreement (APA) #
Advance Pricing Agreement (APA)
An Advance Pricing Agreement (APA) is a mutual agreement between a taxpayer and… #
It provides certainty on the pricing of transactions between related entities.
Base Erosion and Profit Shifting (BEPS) #
Base Erosion and Profit Shifting (BEPS)
Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies used b… #
Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies used by multinational companies to exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax jurisdictions.
Beneficial Ownership #
Beneficial Ownership
Beneficial ownership refers to the ultimate owner of an asset or income, even if… #
Understanding beneficial ownership is crucial in tax planning to determine who is entitled to the income or assets.
Captive Insurance Company #
Captive Insurance Company
A Captive Insurance Company is a subsidiary established by a parent company to p… #
Captive insurance can be used for risk management and tax planning purposes.
Controlled Foreign Corporation (CFC) #
Controlled Foreign Corporation (CFC)
A Controlled Foreign Corporation (CFC) is a foreign corporation in which more th… #
S. shareholders. CFC rules aim to prevent U.S. taxpayers from deferring tax on passive income earned through foreign subsidiaries.
Double Taxation Agreement (DTA) #
Double Taxation Agreement (DTA)
A Double Taxation Agreement (DTA) is a bilateral agreement between two countries… #
DTAs help resolve issues related to cross-border taxation and promote international trade.
Effective Tax Rate #
Effective Tax Rate
The Effective Tax Rate is the average rate at which an entity is taxed on its in… #
It is calculated by dividing the total tax paid by the entity by its taxable income. Understanding the effective tax rate is essential in tax planning to assess the overall tax burden.
Foreign Account Tax Compliance Act (FATCA) #
Foreign Account Tax Compliance Act (FATCA)
The Foreign Account Tax Compliance Act (FATCA) is a U #
S. tax law requiring foreign financial institutions to report information about accounts held by U.S. taxpayers or face withholding taxes. FATCA aims to prevent tax evasion by U.S. taxpayers using offshore accounts.
General Anti #
Avoidance Rule (GAAR)
The General Anti #
Avoidance Rule (GAAR) is a rule implemented by tax authorities to prevent taxpayers from engaging in artificial or abusive tax avoidance schemes. GAAR allows tax authorities to disregard transactions that are deemed to be tax avoidance.
Hybrid Mismatches #
Hybrid Mismatches
Hybrid Mismatches refer to differences in the tax treatment of financial instrum… #
Hybrid mismatches can be exploited for tax planning purposes but may lead to double non-taxation.
Interest Deductibility #
Interest Deductibility
Interest Deductibility refers to the ability of a taxpayer to deduct interest ex… #
Tax rules on interest deductibility vary between jurisdictions and can impact tax planning strategies, especially for multinational companies with cross-border financing arrangements.
Judicial Anti #
Avoidance Doctrine
The Judicial Anti #
Avoidance Doctrine is a legal principle developed by courts to counteract tax avoidance schemes that exploit loopholes in tax laws. Courts use a substance-over-form approach to determine the true intent of transactions and disregard artificial arrangements.
Known Unknowns #
Known Unknowns
Known Unknowns refer to uncertainties in tax planning that are recognized by tax… #
Taxpayers must acknowledge known unknowns and consider potential risks in their tax planning strategies.
Legal Privilege #
Legal Privilege
Legal Privilege refers to the protection of confidential communications between… #
Legal privilege is essential in tax planning to ensure that sensitive information remains confidential.
Master File and Local File #
Master File and Local File
The Master File and Local File are documentation requirements under the OECD's t… #
The Master File provides an overview of the group's global operations, while the Local File contains detailed information on specific transactions.
Nexus Approach #
Nexus Approach
The Nexus Approach is a principle used in determining the taxable presence of a… #
The Nexus Approach considers factors such as physical presence, economic activities, and legal relationships to determine if a foreign entity is subject to tax in a jurisdiction.
Organized Tax Evasion #
Organized Tax Evasion
Organized Tax Evasion refers to deliberate and systematic efforts to evade taxes… #
Organized tax evasion is a criminal offense and can lead to severe penalties, including fines and imprisonment.
Permanent Establishment (PE) #
Permanent Establishment (PE)
A Permanent Establishment (PE) is a fixed place of business through which a fore… #
The presence of a PE can create tax obligations for the foreign entity in the host jurisdiction, such as corporate income tax.
Qualifying Non #
UK Pension Scheme (QNUPS)
A Qualifying Non #
UK Pension Scheme (QNUPS) is a pension arrangement established outside the UK that meets certain criteria set by HM Revenue & Customs. QNUPS can provide tax-efficient retirement planning for UK residents and expatriates.
State Aid #
State Aid
State Aid refers to government support or subsidies provided to businesses that… #
State aid rules aim to prevent unfair advantages for certain companies and ensure a level playing field in the EU single market.
Thin Capitalization Rules #
Thin Capitalization Rules
Thin Capitalization Rules limit the deductibility of interest expenses on loans… #
Thin capitalization rules prevent multinational companies from shifting profits through excessive interest deductions.
Ultimate Beneficial Owner (UBO) #
Ultimate Beneficial Owner (UBO)
The Ultimate Beneficial Owner (UBO) is the natural person who ultimately owns or… #
Identifying the UBO is crucial in anti-money laundering regulations and tax planning to prevent abuse of corporate structures.
Value Chain Analysis #
Value Chain Analysis
Value Chain Analysis is a strategic tool used to analyze a company's activities… #
Understanding the value chain helps in optimizing operations, improving efficiency, and identifying tax planning opportunities.
Withholding Tax #
Withholding Tax
Withholding Tax is a tax deducted at the source on payments made to non #
residents, such as interest, dividends, or royalties. Withholding tax obligations vary between jurisdictions and can impact cross-border transactions and tax planning strategies.