The American Expat Financial News Journal’s “Essential Financial Acronyms for Americans Living Abroad” is designed to help our fellow Yanks in Expatland to navigate the international seas of the financial services industry.
In addition to financial acronyms, we’ve also included a few generic “Expatland” acronyms, as these can be useful to know, and aren’t always obvious to newbie expats.
If you can’t find an acronym you’re looking for, have an idea for one that isn’t here, or would like to suggest changes to our definition of a particular acronym, just let us know.
AARO: Association of Americans Resident Overseas
The Association of Americans Resident Overseas is based in Paris, and was founded in 1973 by Phyllis Michaux and a group of other Americans who were concerned about the way they thought that U.S. government was treating its citizens abroad.
More than 45 years on, AARO is an international, non-profit, non-partisan, volunteer-run association with members in 46 countries. It researches issues that significantly affect the lives of overseas Americans and keeps its members informed of those issues, while also lobbying on behalf of expatriate causes, such as taxation, citizenship issues, Social Security and Medicare.
In Paris, its offices are housed in Reid Hall, also known as Columbia Global Centers, in the Montparnasse area, a part of Paris in which many Americans of the "Lost Generation" made their homes, and their names, during the 1920s and 1930s.
Its website is here.
ACA: Affordable Care Act
This commonly-used acronym in the U.S. is actually short for the “Patient Protection and Affordable Care Act”, which is often referred to as simply the Affordable Care Act, thus ACA (or sometimes “Obamacare”, as it was introduced during the Barack Obama presidency). It was designed to ensure that all Americans had access to healthcare, even if they couldn’t afford health insurance. Obama’s successor, Donald Trump, has been working to dismantle the ACA ever since taking office, as he promised he would if elected.
ACA: American Citizens Abroad
Founded in 1978, the American Citizens Abroad is a non-profit, non-partisan organization based in Washington, D.C., which works on behalf of Americans outside of the U.S.
It has become more prominent and visible over the past decade, in the wake of new U.S. legislation aimed at making it more difficult for Americans to avoid their U.S. tax obligations, which has seen American expatriates unable to obtain bank accounts, mortgages, or otherwise go about their lives normally in terms of financial services. It has actively been lobbying U.S. lawmakers for years to urge a move to a residence-based rather than citizenship-based tax regime.
Its website is www.americansabroad.org.
AEOI: Automatic Exchange of Information
“Automatic exchange of information” refers to agreements typically drawn up between countries that provide for the exchange of non-resident financial account information with the tax authorities in the other country – typically, the account holders’ country of residence.
The idea of countries agreeing to automatically exchange tax-relevant financial information has been something that the Brussels-based organization for Economic Cooperation & Development (OECD) has been promoting for years, in an effort to tackle cross-border tax evasion.
It has managed to get around 100 countries around the world to agree to an AEOI regime, known as the Common Reporting Standard (CRS), although the U.S. has not signed up to this, citing the fact that it already has its own regime, known as FATCA
Under AEOI regimes, participating jurisdictions automatically send and receive pre-agreed information each year, without having to send a specific request for it.
See also Common Reporting Standard (CRS)
ATCK: Adult third culture kid
An ATCK, or adult third culture kid, is what a “third culture kid” grows up to become.
And a third culture kid is what people have begun to call those children who were raised in a culture other than that of their parents for a significant portion of their childhood.
See also “TCK.”
BATs: Baidu, Alibaba, Tencent
BATs is an acronym that is typically described as China’s answer to the US internet/tech giants acronym “FAANG.” (Facebook, Amazon, Apple, Netflix and Alphabet (the parent of Google). It began to come into mainstream use in 2017.
The three BATs companies are: Baidu, often described as China’s version of Google; Alibaba, the country’s answer to Amazon; and Tencent, a Shenzhen, China-based provider of Chinese internet products, including a social app known as WeChat, often compared to Facebook.
Alibaba is listed in the US, while Baidu and Tencent are listed in Hong Kong.
BICE: Best interest contract exemption
Also known as the “BIC exemption”, this is a newish-term for many, as it has to do with the well-intentioned-but-now-defunct U.S. Fiduciary Rule, which had been drawn up by the Obama administration to ensure that those companies selling retirement products to American consumers ensured that they placed their client’s “best interests” first when doing so.
The Trump administration opposed the Fiduciary Rule, and it is now history, although some lawmakers and the SEC continue to push for legislation aimed at addressing some of the concerns that it had been conceived to deal with.
The exemption referred to here would have enabled these investment advisers to receive commissions and other types of compensation when selling retirement products if certain specific requirements were met, thus permitting them an exemption from the “best interests” rule.
BRICs: Brazil, Russia India and China
This much-used acronym was coined in 2001 by then-Goldman Sachs executive Jim O’Neill in a research paper, which established the idea of these four large developing countries as representing an unofficial single unit of global economic power, owing to their perceived similarities.
O’Neill had been the US investment bank’s chief economist, and the paper containing the initial reference to BRICs was entitled The World Needs Better Economic BRICs.
O’Neill subsequently (2013, 2014) coined another term, MINT, to refer to another group of developing countries he thought also shared certain characteristics: Mexico, Indonesia, Nigeria, and Turkey.
BRVM: Bourse Régionale des Valeurs Mobilières
Located in Abidjan, Cote d’Ivoire, the Bourse Régionale des Valeurs Mobilières is a West African stock exchange that lists companies based in Benin, Burkina Faso, Guinea Bissau, Côte d’Ivoire, Mali, Niger, Senegal and Togo.
CAGR: Compound Annual Growth Rate
The compound annual growth rate is a much-used point of reference number used by business executives and investors to measure a company’s development over time. It’s not an accounting term, but it is often used to describe some element of a business, for example its revenue or income; and because of its compounding nature, it dampens the effects of volatility on results.
Basically the CAGR consists of an entity’s annual growth rate as measured over a period of years, on the basis that each year’s growth is “compounded” – that is, the amount of growth registered each year is included in the following’s year’s number.
CCRC: Continuing care retirement community
A continuing care retirement community is a type of elder care facility which caters for elderly residents from the stage where they are still living largely independently but are interested in having a little help, “all the way to end of life”, as they say, with hospice-type facilities.
CDOs: Collateralised debt obligations
Collateralised debt obligations are asset-backed securities, which involves combining a number of debt assets, such as mortgages, bonds and other types of loans, and repackaging them in tranches that may be sold to investors.
An important type of CDOs are MBSs, or mortgage-backed securities. Some high-risk CDOs were blamed for contributing to the 2008 financial crisis, but they continue to have their supporters.
CEE: Central and Eastern Europe
The CE acronym, for “Central and Eastern Europe”, typically refers to a group of former Communist states. It came into use after the collapse of the Iron Curtain in 1989, 1990. CEE countries can, depending on the usage, include: Estonia; Latvia; Lithuania; the former East Germany; the Czech Republic; Slovakia; Hungary; Poland; Romania; Bulgaria; Slovenia; Croatia; Albania; Bosnia-Herzegovina; Kosovo; Macedonia; Montenegro and Serbia.
Certain other former Communist countries that, depending on the situation and the entity which is defining “CEE”, are sometimes also included in the acronym. These include Belarus, Moldova, Ukraine and Russia; some definitions also include Austria.
CFA: Chartered Financial Analyst
A certification awarded by the CFA Institute, a global association of investment professionals which is based in Charlottesville, Virginia, and also maintains outposts in New York, London, Hong Kong and Mumbai. The CFA Institute also provides the Certificate in Investment Performance Measurement (CIPM) designation, and the Investment Foundations Certificate, and oversees a raft of programmes, conferences, seminars and publications that are designed to keep members current on developments in their professions.
CFC: Controlled Foreign Corporation
The term “controlled foreign corporation” refers to a type of corporate entity that is registered and conducts business in a different jurisdiction or country than the residency of those who are deemed to control it, as a function of their ownership.
The term is not unique to the U.S., but the concept is used by the U.S. in considering the tax obligations of Americans who own stakes in such entities – which have been expanded as a result of the Tax Cuts & Jobs Act of December, 2017.
CIP: Centralised Investment Proposition
A relatively new term used to describe a type of investment holding structure, such as investment platforms, that typically make use of model portfolios set up by discretionary fund managers. Such CIPs have the effect of standardizing investment advice, which can be a good thing, except in cases in which a client would ideally be better suited to a bespoke structure.
CIPM: Certificate in Investment Performance Measurement
The Certificate in Investment Performance Measurement – formerly the “Certificate in Global Investment Performance Standards” – is awarded by the CFA Institute.
CLN: Certificate of Los of Nationality (of the United States)
Certificates of Loss of Nationality (of the United States), aka Form DS-4083, are issued by the U.S. State Department and represent the official documentation of the “relinquishment” of an individual's U.S. citizenship. CLNs are applied for and issued by U.S. consulates and embassies around the world.
COPA: Certification of Pre-existing Accounts
The Certification of Pre-existing Accounts is a term that has to do with the U.S. Foreign Account Tax Compliance Act (FATCA). It is basically a one-time certification showing that due diligence requirements for pre-existing accounts have been met by the "foreign financial institution" in question. Information on COPAs may be found on the IRS's website here.
CRS: Common Reporting Standard
The Common Reporting Standard, also known more formally as the Standard for Automatic Exchange of Financial Account Information, is a new framework set up under the auspices of the organization for Economic Cooperation and Development. It establishes a system for enabling the automatic exchange of information (AEOI) between constituent countries, based on an OECD legal framework known as the Convention on Mutual Administrative Assistance in Tax Matters.
The CRS’s information-sharing concept is seen as borrowing heavily from the Americans’ Foreign Account Tax Compliance Act (FATCA), which was signed into law in 2010 and came into force globally – and in many cases controversially – in 2014.
The U.S., though, is not a signatory to the CRS, arguing that because of FATCA, it has no need to be. (Some other countries dispute this, arguing that FATCA is not as reciprocal, with the result that their taxpayers could keep assets in the United States without having them disclosed to their home country’s tax authorities.)
The CRS began to take effect in 2017, when some 58 “early adopters” – including the UK, Spain, France, Portugal, Cyprus, Malta, Germany, Italy, all of the UK’s key overseas territories, Ireland, Iceland, Liechtenstein, Luxembourg, Argentina, and South Africa –began sharing information automatically. More than 40 additional jurisdictions were scheduled to come online in 2018, including Australia, Canada, China, Hong Kong, Monaco, Qatar, Russia, Singapore, the United Arab Emirates, and Switzerland.
Because FATCA is already established and well known, the CRS is sometimes referred to as “GATCA”, as in “Global Account Tax Compliance Act”, or “Global FATCA”, even though technically-speaking it is not, in fact, simply a global version of the American FATCA.
The Common Reporting Standard became a reality in May, 2014, after 47 countries tentatively agreed on a reporting standard, and to automatically share key financial information on any non-citizen residents living inside their borders with other CRS-member countries.
Until now, such information-sharing that has taken place has tended to occur only in response to requests by one country of another, which, some experts have argued, has done little to discourage tax evasion.
DAC6: Directive Administrative Cooperation
DAC6 is an EU directive that was introduced in 2011, although it has taken some years to come into force, that aims to target the use of under-the-radar cross-border structures to facilitate tax evasion, by increasing transparency. It requires EU "intermediaries", such as banks, accounting firms, law firms, corporate service providers and similar types of entities that are involved in cross-border arrangements to make a disclosure to their tax authority, in certain instances, with penalties possible for those that fail to comply. DAC6 can also affect individuals. The first DAC6 reports aren't due until August 2020, but all reportable transactions dating from 25 June 2018 onwards must be disclosed.
DLT: Distributed Ledger Technology
Distributed Ledger Technology, also known as “blockchain” technology, is currently being embraced by the international financial services industry, which sees it as a potentially revolutionary way to cut costs and boost efficiency. It falls under the broader headline of fintech (financial technology).
DTA: Double tax agreement
Double tax agreements are agreements between countries that seek to eliminate the risk of individuals and companies being taxed twice for the same thing. They may be bilateral or multi-lateral.
The European Union is an example of a multilateral DTA, being a group of countries which seek to recognise certain double taxation principles among the member states.
EBITDA: Earnings before interest, taxes, depreciation and amortisation
Pronounced “eh-bit-DAH”, EBITDA is a widely-used measure of company performance and indicator of value. It is calculated by subtracting expenses, excluding tax, interest, depreciation and amortisation, from total revenue. In other words:
EBITDA = Revenue – Expenses (excluding tax, interest, depreciation and amortisation).
Or put another way, EBITDA is basically net income with interest, tax, depreciation, and amortisation added back.
E&OE: Errors & Omissions Excepted
“Errors & Omissions Excepted” is a traditional disclaimer against clerical error that is often used in invoices. (Sometimes “Excluded” is used in place of “Excepted”). It is used to reduce the risk of legal liability for any mistakes.
E&Ps: Earnings & Profits
Earnings and profits is the financial term; in the area of oil exploration, it is often used to describe explorers and producers, as well as energy and production. PTEPs or PTE&Ps means "previously-taxed earnings & profits".
ECA: Eastern European and Central Asia (region)
ECA, as an abbreviation for the “Eastern European and Central Asian” region, is a definition used mainly in connection with government organizations, NGOs, schools and universities and the military.
ECI: Effectively Connected Income
Effectively Connected Income is an IRS term, and there is even an IRS website page devoted to it. Here you learn that "generally, when a foreign person engages in a trade or business in the United States, all income from sources within the United States connected with the conduct of that trade or business is considered to be Effectively Connected Income (ECI). This applies whether or not there is any connection between the income, and the trade or business being carried on in the United States, during the tax year."
Also, "you must be engaged in a trade or business during the tax year to be able to treat income received in that year as ECI.
"Deductions are allowed against ECI, and it is taxed at the graduated rates or lesser rate under a tax treaty."
EEA: European Economic Area
The European Economic Area (EEA) came into force on 1 January 1994, and is the European Union area in which the free movement of “persons, goods, services and capital” are to be permitted. It is normally defined as consisting of the 28 member states of the EU, along with three members of the so-called European Free Trade Association (EFTA): Iceland, Liechtenstein and Norway.
EGM: Extraordinary general meeting
An EGM, or extraordinary general meeting, is a type of corporate gathering that is called to take place for a specific purpose, unlike, for example, the “annual” general meeting, which takes place at a set time every year. It is called in order for key people involved in the entity, such as shareholders in a publicly-traded company, to deal with some matter that has arisen.
The reasons for calling the EGM are always given at the time it’s announced, although the specific rules under which the EGM takes place will normally vary between organizations.
Convening an EGM is mandatory in the UK whenever the net assets of a business fall to half or less of the amount of its so-called “called-up share capital”, according to section 656 of the 2006 Companies Act.
E&P: Earnings and profits
Self-explanatory. Earnings and profits.
ESMA: European Securities and Markets Authority
The Paris-based European Securities and Markets Authority is the main regulator of the European Union’s securities industry, and one of the EU’s three so-called European Supervisory Authorities. It replaced the Committee of European Securities Regulators, or CESR, in 2011, and strives to ensure the smooth functioning of Europe’s financial markets, the fair and accurate credit rating of EU entities, and to see to it that Europe’s investors are fairly treated by its investment product purveyors.
ET: East [Coast] Time
ET, or US “East [Coast] Time”, is a time zone encompassing 17 US states, generally five hours behind GMT. Also written EST, or Eastern Standard Time.
FANG (or FAANG): Facebook, Amazon, Netflix and Google (or Facebook, Amazon, Apple, Netflix and Google)
also F.A.A.M.G. (Facebook, Apple, Amazon, Microsoft and Google)
the FANG/FAANG acronym stands for a group of a certain type of blue-chip internet-based tech stock, with a heavy weighting in the “internet of things” arena. Credit to coining this acronym is generally given to US stock market guru Jim Cramer, who presents CNBC’s Mad Money show and co-founded TheStreet.com. (It is sometimes noted that Google should actually be represented by another A, since its parent is Alphabet Inc, but no one seems to mind, since people tend to think of Google as Google and not “Alphabet”, anyway…)
Commenting on role in the birth of the FANG acronym, Cramer observed, in a May 2017 broadcast: “I guess when you mention something for about 50 straight shows, other [people] start picking up on it.”
FATCA: Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance "Act" was signed into law by President Obama in March, 2010, as part of a piece of domestic jobs legislation known as the HIRE Act, and changed forever the way Americans overseas were treated by financial institutions at home and abroad – to the extent that many American expats and dual citizens subsequently renounced their citizenships, and continue to do so.
While FATCA is an acronym for "Foreign Account Tax Compliance Act", tax experts will point out that was never actually passed in the form of an Act of Congress, but rather, its text became Title V of the Hiring Incentives to Restore Employment Act (HIRE Act), and the acronym FATCA has now passed into common usage for this element of the HIRE Act.
FATCA requires all non-U.S. ('foreign') financial institutions to report the assets and identities of any U.S. account-holders they have on their books to the U.S. Internal Revenue Service, while at the same time, requiring all Americans to self-report their non-U.S. financial assets annually.
The fact that FATCA applies to U.S. citizens and green card holders residing in other countries in addition to the U.S. itself is what has created the problem for U.S. expatriates, as many of them have held overseas bank accounts, mortgages and owned businesses for decades without having the U.S. tax authorities scrutinising them for potential tax.
To read more about FATCA on the IRS’s website, click here.
FCA: Financial Conduct Authority
The FCA was created on 1 April 2013, and is the successor to the UK’s Financial Services Authority. It is a financial regulatory body which operates independently of the UK government, and is financed by charging fees to the UK’s financial services industry’s member firms.
The FCA regulates those financial firms that provide services to consumers, and is responsible as well for maintaining the integrity of the UK’s financial markets.
FDII: Foreign-derived intangible income
One of a number of new acronyms created in December, 2017, by Donald Trump’s tax reform legislation, the Tax Cuts & Jobs Act, and refers to what some tax experts say is a new deduction opportunity, potentially capable of reducing the effective tax rate on qualifying income to 13.125%.
FDII is a newly-designated category of income, which doesn’t have to come from intangible assets, but rather, under the new tax law, a fixed rate of return is assumed on a corporation’s tangible assets, and any remaining income is then deemed to have been generated by intangible assets.
FDII is intended to operate in tandem with newly enacted Sec. 951A, which includes global intangible low-taxed income ( see GILTI) in the structuring for tax purposes of the income of U.S. shareholders.
FFI: Foreign Financial Institution
The term “Foreign Financial Institution” was formally created by FATCA, the 2010 Obama legislation that aimed to make it more difficult for Americans to hide financial assets outside of the U.S. FATCA effectively created a new category of non-U.S. financial services institution – the “Foreign Financial Institution” – which, to look after the assets of U.S. citizens, must register with the U.S. Internal Revenue Service and agree to report to it, in the words of the IRS, “certain information about their U.S. accounts, including accounts of certain foreign entities with substantial U.S. owners”.
Under FATCA, these FFIs are required to withhold 30% on certain payments to these American clients if these clients fail to comply with their tax reporting obligations. Examples of the types of institutions considered to be FFIs by the U.S. definition include banks and other depositary institutions, mutual funds and other custodial entities, and such investment structures as hedge funds or private equity funds.
Certain types of insurance companies that have cash value products or annuities may also be considered FFIs.
Unless otherwise exempt, FFIs that do not both register and agree to report to the IRS on their American clients’ holdings face a 30% withholding tax on certain U.S.-source payments made to them.
Almost as soon as FATCA was signed into law, many non-U.S. banks and other FFIs began to stop accepting new American clients, and asking existing American clients to take their deposits and investments elsewhere, causing difficulties for American expatriates and long-time dual citizens of other countries that continue to this day. (See FATCA.)
FFS: Fee for service
Fee for service is typically used in the healthcare sector, especially in the US. Under fee for service systems, services are paid for separately; the X-ray, the operation, then the hospital stay, for example, rather than for the package of treating someone with, say, a broken leg. If the patient is insured, he or she is reimbursed.
FIAR: le fonds d’investissement alternatif réservé
Le fonds d’investissement alternatif reserve, or FIAR, is the French acronym for what is known to the English-speaking funds industry as the Reserved Alternative Investment Fund (“RAIF”).
FILTH: Failed in London Try Hongkong
In 1997 the British colony of Hong Kong was due to be handed back to the Chinese. It’s almost hard to believe now, but back then, there were genuine concerns that Hong Kong would lose its place as one of Asia’s most important and booming cities. China wasn’t open to the outside world the way it is now, and the sense was that Hong Kong would become like the rest of that country.
Against this backdrop, as 1997 approached, many businesses and people hedged their bets – with the result that the only ones were willing to take jobs in Hong Kong, or so legend would have it – were those who couldn’t get a job or flourish career-wise in London. (Back then, with Hong Kong still a British colony, the British called the shots there, and therefore, until Handover Panic set in, it was the UK’s natural Asian outpost.)
Thus the acronym was coined for those who were willing to brave Hong Kong in the lead-up to 1997, and immediately after it: Failed in London, Try HongKong.
FPE: Factor Price Equalisation
Factor price equalisation is an economic theory proposed by Paul Samuelson which holds that over time, the prices of identical factors of production – such as wages – will equalised across countries, as a result of international trade in commodities. The concept rests on an assumption that there are two goods and two factors of production, i.e., capital and labor.
FTC: Foreign tax credit
Foreign tax credits are a relatively widely-used technique for avoiding double taxation that is typically used by governments around the world that tax individuals and/or entities on the basis of their world-wide income. Such FTCs generally apply only to taxes of a nature similar to the tax being reduced by the credit, and are also typically limited to the amount of tax attributable to foreign source income.
FY: Fiscal year
The fiscal year is a U.S. government term which applies to the federal government’s traditional accounting period and begins on October 1 and ends on September 30.
Fiscal year is also a term used to describe the tax year that some U.S. taxpayers adhere to by choice or necessity, instead of a conventional “calendar year” which begins on January 1 and ending on December 31. A “fiscal year”, for tax reporting purposes, according to the IRS, can be any period of 12 consecutive months ending on the last day of any month except December (which would make it a calendar year).
A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month, the IRS says.
See also TY (tax year).
G7: Group of Seven
The Group of 7, or G7, is a “club” of the world’s major global economic powers, as ranked by the International Monetary Fund (IMF), which consists of the U.S., U.K., Canada, France, Germany, Italy and Japan.
The G7 grew out of an earlier organization, known as the Group of Six (G6), which came together informally in 1975, at the suggestion, it’s said, of then-French president Giscard d’Estaing, who thought an informal gathering of the leaders of the world’s largest economic powers would be a good idea. An annual summit continues to be held each year, along with emergency meetings held in-between as needed.
G6: Group of Six
(See G7, above)
GFC: Global Financial Crisis
This acronym, when preceded with the word “the”, is particularly popular in Asia (Singapore, Australia and Thailand), and refers to the global financial downturn that took hold in 2008, in the wake of key events that led to it began at least a year earlier.
Business dictionaries often have a definition for the generic term of “global financial crisis”, which is described as an event similar to the one that occurred in 2008, when concerns about the future stability of world financial markets begin to mount.
GILTI: Global intangible low-taxed income
GILTI is an acronym that was bestowed on American expatriates on 20 December, 2017, by Donald Trump, in the form of the signing into law of the so-called Tax Cuts & Jobs Act (see also TCJA)
It refers to a new category of income for U.S. taxpayers who own a stake in what the IRS refers to as a “controlled foreign corporation” (CFC).
The GILTI provisions are said to be intended to discourage individuals with U.S. tax obligations from shifting and/or keeping profits outside of the U.S., by imposing tax on “foreign-sourced intangible income”.
Under the new GILTI provisions, found in the new IRC Section 951A, each person who is a U.S. shareholder of any controlled foreign corporation (CFC) must include their share of GILTI in gross income for the tax year.
U.S. individual shareholders are subject to GILTI at their regular individual marginal tax rates.
GILTI is defined to include most business income of a CFC, reduced by 10% of the adjusted tax basis of the CFC’s “depreciable tangible personal property” (generally, plant and equipment, but not land).
Tax experts say that this new GILTI rule, which is intended to subject all of a CFC’s above-routine income to a minimum tax, results in a significantly higher tax cost to U.S. shareholders who are not C corporations (“non-C corporation U.S. shareholders”) than to U.S. shareholders who are C corporations.
GWP (Insurance term): Gross written premium
Gross written premium is an insurance industry term used to refer to the total premiums received from policies issued by an insurance company during a specific period of time; written premiums may be measured as a gross (before deduction of reinsurance costs) or net (after reinsurance costs) number, according to industry sources.
HCTA: Host country tax authority
The tax authority in the country in which an expatriate is resident. For example, for an American living in the United Kingdomc the HCTA would be HM Revenue & Customs. The HCTA of a British person living in the States would be the Internal Revenue Service.
HENRYs: High earners, not rich yet
A Fortune magazine writer named Shawn Tully is acknowledged as the one who, in 2003, came up with this term for a cohort of individuals, described by writers in the first decades of this century as "mostly millenials", who earn more than US$100,000 but less than US$250,000, but don't feel or act (or spend) like they're wealthy.
(Some later definitions put the income range for HENRYs above US$250,000, evidently reflecting inflation.)
Definitions of HENRYs typically note that in spite of their seemingly-high incomes, these individuals don't have much left over for building genuine wealth after paying their children's school fees, their own student-loan debt, and for a relatively-lavish lifestyle by the standards of their age group.
In a 2008 article for CNN, Tully noted that HENRYs were being actively targeted at that time by then-Democratic presidential nominee Barack Obama in campaign pledges to pay for middle-class tax cuts and credits by "[making] folks who make over US250,000 a year...pay their fair share".
HMRC: HM (Her Majesty’s) Revenue & Customs
Her Majesty’s Revenue & Customs (HM Revenue and Customs is the UK government’s tax-collecting agency. It was created in 2005 by the merger of the Inland Revenue and Her Majesty’s Customs and Excise. Its head offices are in London.
ICE: Immigration and Customs Enforcement (agency, of the U.S. government)
The U.S. Immigration and Customs Enforcement agency is a part of the U.S. Department of Homeland Security that is responsible primarily for immigration enforcement as well as cross-border criminal activities. The agency was created in 2003, in the wake of the Sept. 11, 2001 terrorist attacks, out of a re-structuring of such then-existing U.S. agencies as the U.S. Immigration and Nationalization Service.
IDD: Insurance Distribution Directive
A relatively new term; the IDD was created in June 2015 by the European Parliament and the European Commission, when they decided to re-cast and repeal an earlier set of EU regulations covering the insurance industry, known as the (2002) Insurance Mediation Directive, at that point known as IMD1.
The original IMD was created to establish a single market for insurance intermediaries and the sale of retail insurance. Over time, it was felt this needed to be overhauled, particularly in the wake of the financial crisis, and plans to re-cast it, as IMD2, were drawn up.
These were subsequently set aside, with the plans for the IDD, which, according to the European Parliament, aims to “create a level playing field” while at the same time “curbing further fragmentation of the EU market for retail insurance and its brokers” and establishing “a single electronic registration system for intermediaries in the EU”.
Member States, including the UK, were required to implement the IDD into national law by July 1, 2018, with the understanding that it would begin applying to companies in these states three months later, on October 1.
IMD: Insurance Mediation Directive
The Insurance Mediation Directive was a 2002 package of legislation created by the European Parliament and the European Commission, in an effort to establish a single market for insurance intermediaries and for the sale of retail insurance. It was replaced in 2018 by the Insurance Distribution Directive. (See IDD.)
IoT: Internet of things
The “internet of things” refers to the network of physical devices, vehicles, home appliances, smart phones and other objects embedded with electronic workings that enable all these objects to connect and exchange data.
IRA: Individual retirement account
The Individual Retirement Account is a type of tax-advantaged retirement plan that is standard in the U.S., similar to the UK’s Individual Savings Account (ISA). It is provided by U.S. financial institutions, although Americans who move abroad sometimes find that the institutions which have long overseen their IRA accounts no longer wish to have them as clients, because of the added reporting requirements, and thus costs, involved in having expatriate clients. Such clients are typically told that they must move their account to a provider willing to accept American expat clients.
IRS: Internal Revenue Service
The Internal Revenue Service is the tax collecting agency of the United States’ federal government. It dates back to 1862, when it was set up to oversee the collection of the country’s first income tax, which had been introduced to pay for the Civil War taking place at that time (1861 – 1865).
The IRS is a bureau of the U.S. Department of the Treasury, and is headquartered in Washington D.C.
ITIN: Individual Taxpayer Identification Number
An Individual Taxpayer Identification Number is a nine-digit tax processing number issued by the U.S. Internal Revenue Service. It always begins with the number 9, and has a 7 or 8 in the fourth digit, such as 9XX-7X-XXXX. The ITIN program was created in 1996 for the purpose of allowing tax return filing by individuals who lacked a Social Security number. The receipt of an ITIN does not in itself confer the right to work and receive income in the United States. More information on ITINs may be found on the IRS's website, by clicking here.
JCT: the Joint Committee on Taxation
The Joint Committee on Taxation is a non-partisan committee of the U.S. Congress, originally established under the Revenue Act of 1926.It is made up of members of both houses of Congress (from both major political parties), who work with what the agency says is “an experienced professional staff of PhD economists, attorneys and accountants…on tax legislation”. Recently the JCT has been involved in considering how the U.S. tax regime might be changed to make it fairer for expatriate Americans. (www.jct.gov )
JGBs: Japanese Government bonds
Japanese Government bonds, as the name suggests, are issued by the Japanese government. The government pays interest on the bonds until maturity, at which point the bond is returned to the bond-holder. Like US savings bonds, JGBs are fully backed by the issuing government, giving them a good credit rating and high degree of liquidity, making them popular among risk-avoiding investors.
KID: Key Information Document
The Key Information Document, in Europe at least, is part of the Packaged Retail and Insurance-Based Investment Products legislation, which sets out the structure under which certain types of “packaged retail investment products” and “insurance-based investment products” are to be regulated and sold. It is a document that informs the buyer, in a regulated way, what he or she is getting.
KSA: Kingdom of Saudi Arabia
The country located in the Middle East which supplies much of the world with oil.
LDI: Liability driven investment/investing
LDI is what such entities as defined-benefit pension funds in particular engage in. The investment strategy’s focus is not to make a fast return, but to ensure that enough money is made that all the investor’s liabilities may be met, both current and future. With pension funds, the emphasis is on future liabilities, so the longer investment horizons of private equity funds, for example, may be an option.
LMIC: low- and middle-income countries
LOMBARD: Loads of Money But A Real D….head
MBFA: Management by flying around
This acronym is meant to accentuate the implicit humour in the idea that flying around from place to place might in itself be a type of management. Most people in business, particularly in the international arena, can name plenty of individuals and companies that employ the MBFA technique.
MFS: Married Filing Separately
A U.S. tax-filing term that arises when a married couple files individual tax returns instead of a single "joint" return. ("Married filing jointly" is the expression there.) MFS means each spouse is taxed like a single individual, which normally would result in a higher combined tax liability, but is sometimes used when it is determined that it would make more sense, for reasons having to do with income amounts, deductions etc., than would be the case if filing jointly.
MCO: managed care organization
A managed care organization refers to an entity, such as one located in the U.S., that seeks to provide a good standard of healthcare at a price, for organizations. This is achieved by such techniques as giving physicians economic incentives to select less costly forms of care; programmes for reviewing the medical necessity of specific services or treatments; etc. I
The concept was developed in the U.S. in the wake of the 1973 enactment of the Health Maintenance Organization Act.
MINT: the group of countries consisting of Mexico, Indonesia, Nigeria, and Turkey
This acronym was coined in 2013/2014 by Jim O’Neill, a former Goldman Sachs chief economist, to describe a group of four countries he thought shared certain characteristics. He introduced the acronym around a decade after he famously gave the world the acronym BRIC, to refer to Brazil, Russia, India and China, in a research paper entitled The World Needs Better Economic BRICs.
MPC: Monetary Policy Committee
The Monetary Policy Committee is an eight-member committee of the Bank of England that, among other things, meets every month to decide the official interest rate in the U.K. This rate is known as the Bank of England Base Rate. It is headed up by the Governor of the Bank of England.
MIDLAND (“A MIDLAND meeting”): Much Is Discussed, Little Agreed, Nothing Done
MiFID, and MiFID II: Markets in Financial Instruments Directive (2004) and the second Markets in Financial Instruments Directive (took effect on January 3, 2018)
The Markets in Financial Instruments Directive was a piece of European law that was introduced in 2004, and was intended to oversee the activities of companies that provided products and services to clients that fit the definition of ‘financial instruments’ (shares, bonds, units in collective investment schemes and derivatives), and the venues where those instruments were traded.
The directive’s main objective was to increase competition and consumer protection in investment products and services, and it took effect on November 1, 2007, replacing the Investment Services Directive.
MiFID II, which came into force on January 3 2018, updated the original MiFID II. It introduced sweeping reforms to the original legislation, which some critics said would put pressure on asset managers’ fees, increase competition, and further drive consolidation in Europe’s asset management industry. The goal was to boost transparency of the marketplace, while ensuring that consumers received advice and products best suited to their needs and desires.
NIC, NIE: Newly Industrialised Countries/Economies
These two more or less interchangeable acronyms refer to a socioeconomic classification applied to a group of major emerging market countries. They are generally described as countries which have economies that have not yet reached “developed country” status, but have, in a macroeconomic sense, developed more fully than those in the larger “developing” category. They are typically also undergoing rapid economic growth, often fuelled by exports. Other typical characteristics include a population that is increasingly moving from the countryside to cities, and growing rapidly. Countries now said to be in this category typically include South Africa, Mexico, Brazil, China, India, Indonesia, Malaysia, the Philippines, Thailand and Turkey.
NPPR: National Private Placement Regime
The AIFMD National Private Placement Regime is a mechanism to allow Alternative Investment Fund Managers (AIFMs) to market Alternative Investment Funds (AIFs) that are not allowed to be marketed under the AIFMD domestic marketing or passporting regimes. This principally relates to the marketing of non-EEA (European Economic Area) AIFs and any AIFs managed by non-EEA AIFMs. However, it also relates to the marketing of feeder AIFs where the master funds manager is a non-EEA AIFM or the master fund is a non-EEA AIF.
OCIO: Outsourced chief investment officer
The OCIO is similar to the Turnkey Asset Management Program, in that it is a largely U.S. term for a variation of outsourcing of asset management operations by companies that regard their value-add to be in a related but different sphere, such as law, investment structuring, etc. OCIOs are marketed as being more customized than TAMPs; and, in spite of their name, don't necessarily replace chief investment officers so much as help them. As pressures continue to build on investment management costs, meanwhile, the recent rapid growth of OCIOs and TAMPs is expected to slow, as both add to the total fees end-use investors are expected to pay.
OECD: organization for Economic Cooperation and Development
The OECD was founded in 1961, and now consists of 34 countries. It was created to pool the efforts of constituent countries in order to foster global economic growth and world trade. Its head offices are in Paris, and its secretary-general since 2006 has been José Ángel Gurría.
The OECD membership includes 21 of the 28 European Union member states. (those that aren’t members are Bulgaria, Croatia, Cyprus, Latvia, Lithuania, Malta and Romania.) The US, Canada, Japan and Australia are members; Russia, China, Brazil, India and the countries of Africa are not.
The member countries are expected to share a commitment to democracy and a market economy, thus providing a standardised platform on which to develop ideas aimed at boosting trade, identifying and promoting good practice within a specific framework, and otherwise working towards a common goal.
Among the efforts currently being fostered by OECD members is the new so-called Common Reporting Standard (CRS), formally referred to as the Standard for Automatic Exchange of Financial Account Information. This standard, to be implemented by more than 60 countries in 2016 and beyond, sets out a methodology for the automatic exchange of information (AEoI), sought by growing numbers of countries’ tax authorities, which are keen to access what they see as untold riches held off the books in overseas accounts.
P.B.T.: Profit before tax
Another way of saying pre-tax profit.
PE: Private equity/ies
PE, when used in a financial context, normally refers to those businesses and individuals engaged in the business of private equity, which is a type of investment that involves investors taking stakes in companies, but doing so privately, typically through a private equity fund organised by a private equity firm (the “general partner”, or GP) rather than through a public stock exchange. The investor in the GP’s fund is called the “limited partner”, or LP.
Most PE investors are either large institutions, such as pension funds and insurance companies, or multi-family offices, or “accredited” HNW individuals, as the time horizons are long. The companies acquired through PE deals make use of the capital to grow their businesses. At the end of the investment period, the PE stake in the business is typically sold on, often to a rival company in the same industry or a large business that is looking to enter that area.
PEP: Profits per equity partner
This is a legal term, and is used to refer to a figure that those in the legal industry use to evaluate a firm’s profitability.
PFI: Private finance initiative
Private finance initiatives are a way of financing large infrastructure projects “on the never-never” – in other words, not on balance sheet, but “off balance sheet”, through some form of structuring that makes use of outsourcing to private entities, something that governments often find agreeable.
PFIC: Passive Foreign Investment Company
Passive Foreign Investment Companies are a U.S. government term for fairly conventional pooled investments -- such as mutual funds, hedge funds, insurance products and non-U.S. pension plans --registered outside of the United States. A bank account might also be a PFIC if it's a money-market fund rather than simply a deposit account, because money market accounts are essentially short-maturity fixed-income mutual funds.
The tax treatment of PFICs is extremely punitive compared to the tax treatment of similar investments that are incorporated in the U.S.
PFIC rules can and often are applied as well to investments held inside foreign pension funds, unless those pension plans are recognized by the U.S. as “qualified”, under the terms of a double-tax treaty between the U.S. and the host country.
PTEPs or PTE&Ps: Previously-taxed earnings & profits
Self-explanatory: Earnings and profits of an individual or entity that have already been through the tax mill once, and thus should not have to be taxed again.
QDOT: Qualifying domestic trust
A qualifying domestic trust, or QDOT, is a type of trust that allows the spouses of U.S. citizens who are not U.S. citizens themselves to claim the marital deduction for estate-tax purposes. Without such a trust, spouses without U.S. citizenship are not eligible for the marital deduction.
Some people say it’s a better choice than having the spouse apply for U.S. citizenship, as it’s typically easier and faster, but it needs to be set up properly, otherwise it may not be considered acceptable.
QI: Qualified Intermediary
A Qualified Intermediary is an IRS term for a non-U.S. financial institution that has entered into a formal contract (QI Agreement) with the U.S. government. This contract enables these QIs to undertake certain specified activities “as an intermediary”, on behalf of a non-U.S. person subject to U.S. tax.
The current QI Agreement can be found in Internal Revenue Code (IRC) Revenue Procedure 2017-15. The QI agreement provides benefits to financial institutions, e.g., no disclosure of direct clients to other financial institutions or the IRS, authority to grant tax treaty benefits.
In return, in addition to their regulatory obligations, QIs must meet certain contractual obligations with respect to documentation, withholding, depositing and reporting of US sourced FDAP (Fixed, Determinable, Annual or Periodic) income paid to recipients outside the U.S., and submit to a control and triennial oversight and certification procedure.
The QI Agreement references Chapters 1, 3, 4 31 and 61 of the US Internal Revenue Code.
Americans with accounts at QIs will, subject to certain rules, be reported by the QI under Chapter 61 (1099 reporting) and/or Chapter 4 (FATCA reporting).
More information on QIs may be found in a 2019 book by UK-based tax expert and TConsult Ltd chairman Ross McGill, U.S. Withholding Tax: Practical Implications of QI and FATCA, published by Palgrave Macmillan.
QNC: Qualified Nonresident Citizens
The term Qualified Nonresident Citizens was introduced to the American expat vernacular at the end of December, 2018, with a new piece of legislation proposed by North Carolina Republican congressman George Holding, in his Tax Fairness For Americans Abroad Act. The act sets out how Americans who live abroad may qualify to be deemed QNCs, and therefore, taxed, in most cases, like nonresident alien individuals – that is to say, not taxed by the U.S. However, such QNCs would technicallyremain U.S. taxpayers, and fully taxable, and subject to normal filing requirements, on any U.S.-source income they might have.
QROPS: Qualifying recognised overseas pension scheme
QROPS are a type of overseas pension scheme in the United Kingdom that meets certain requirements set by Her Majesty’s Revenue & Customs (HMRC), and which thus may receive transfers of U.K. pensions without incurring a tax penalty (such as an unauthorised payment charge). They came into being after a change in the UK’s pension legislation in 2006, known as A Day, as part of a pan-European move to making it possible for financial services transactions to take place freely across EU borders.
Americans who are considering transferring their U.K. pensions, if they happen to have one, into a QROPS (sometimes now referred to as simply a “ROPS”) are advised to take advice, as there can be major U.S. tax problems if they are structured incorrectly, and some say that for this reason few Americans should consider a QROPS.
RBT: Residence-based (or residency-based) taxation
Residency-based taxation is the name given to the system by which individuals are taxed on the basis of where they live, rather than, for example, where they were born, or are a citizen of. The U.S. is famously one of only two countries in the world (the other being the East African coutry of Eritrea) which taxes on the basis of citizenship, although non-citizens of the U.S. will also be expected to pay tax if they live there. The American Citizens Abroad has been promoting a particular type of RBT, as an alternative to the U.S.'s current regime; it is different from the TTFI that the Republicans Abroad have been advocating, although both would see the U.S.'s CBT, or citizenship-based tax regime, replaced.
RDR: Retail Distribution Review
The Retail Distribution Review is a package of new regulations that came into force in the U.K. from 2013. Since the day it was announced RDR has transformed the wealth advice industry in Britain, and influenced the way things are done in other countries as well. It called for greater transparency on the part of the industry, and banned the use of commission as a way of paying advisers for their time, which critics have said has resulted in many people no longer receiving advice, since there is reluctance to pay the advice fees advisers say they must charge instead.
RMBS: Residential mortgage-backed securities
Residential mortgage-backed securities are a type of mortgage-backed debt obligation which involves a securitized package of residential loans, such as mortgages, home-equity loans and so on, typically created by banks. They are best remembered to many investors as one of the causes of the 2007 – 2008 financial crisis, as they trapped investors in investments that plunged in value as home-owners defaulted on their mortgages and home prices collapsed.
RMD: Required minimum distribution
Required minimum distribution is a term that has to do with U.S. individual retirement accounts (IRAs). The RMD is the amount that the U.S. government requires those who have IRAs to withdraw annually from their traditional IRAs, as well as from any employer-sponsored retirement plans they may have.
They are required to begin making such withdrawals from their IRAs no later than April 1 of the year following the year in which they reach the age of 70½ . (The rules for employer-sponsored retirement plans may vary slightly from this.)
In recent years, Congress has enabled individuals who want to avoid having to pay tax on the RMD income to direct their RMD payments directly to a charity.
ROA: Return on assets
Return on assets is a basic ratio: it’s simply ROA is equal to the net income, divided by average assets, as follows:
ROA = net income/average assets
SCE: Same country exemption
The same country exemption is an idea proposed by the American Citizens Abroad (ACA) in 2015 as a means of helping American citizens living overseas to maintain foreign bank accounts, and otherwise live normally with respect to financial products such as loans, mortgages and investments, in spite of the then-new FATCA regulations.
Under FATCA, non-US banks and other foreign financial institutions are obliged to report on US account holders’ accounts, which, the ACA noted, was resulting in these institutions “turning away American customers or asking existing American customers to find another” institution willing to look after them – a phenomenon the ACA called “lock-out”.
The Same Country Exemption would have enabled those US taxpayers who “truly reside” in a foreign country to have their “normal” banking accounts to be exempt from the FATCA reporting rules. Such banks “could treat [such accounts] as if [they] belonged to someone who is not a US taxpayer, and the US taxpayer would not have to list [them] on tax form 8938,” the ACA argued.
In January 2017 the U.S. Treasury Department denied the request to permit Americans living overseas to be given such an exemption on their bank accounts arguing, the ACA noted, that “the risk of U.S. tax avoidance by a U.S. taxpayer holding an account with an FFI exists regardless of whether the U.S. taxpayer holds an account in his or her foreign country of residence or another foreign country”.
To read the ACA’s statement on the Treasury Department’s decision, click here.
SICAV: société d’investissement à capital variable
The SICAV, (or “société d’investissement à capital variable”, in French), is an open-ended collective investment structure that is a mainstay of the Western European investment landscape. SICAVs are similar to America’s open-ended mutual funds. Like other open-end collective investment entities, investors are, in theory at least, entitled at any time to redeem their stake in a SICAV, and to receive their payment in cash. SICAVs have become popular in the EU as a result of the UCITS directive, which enables them to be traded across member-state borders.
SICAVs are not normally recommended for Americans because of the way the U.S. taxes such assets.
SMSF: Self-managed super funds
Self-managed super funds are a type of Australian “superannuation”, or super, fund, which are a type of retirement savings account designed to encourage people to save.
SRO: self-regulatory organization
A self-regulatory organization is an entity that oversees an area of industry of a profession in a manner similar to a government, but which is, in fact, independent, although it may operate alongside an arm of government, or in lieu of it.
In the U.S., the Federal Securities Exchange Act of 1934 formally defined what a self-regulatory organization was, conferring the definition on such entities as the National Association of Securities Dealers (NASD) and the national stock exchanges, such as the New York Stock Exchange.
(In 2007 the NYSE and NASD enforcement arms were merged to create a new SRO, the Financial Industry Regulatory Authority, or FINRA.)
Some other U.S. SROs include the American Medical Association (AMA); the American Arbitration Association; the U.S. Municipal Securities Rulemaking Board (MSRB); and the National Association of Realtors (NAR). Similar types of bodies may also be found in other countries.
SWUSL: Schroders Wealth US Ltd.
Schroders plc, the London Stock Exchange-listed, London-based asset manager, has a specialist division that caters to American expats, mainly but not exclusively living in the UK. It is known as Schroders Wealth U.S. Ltd. – or SWUSL (pronounced "Swuzzel"). For more information, click here.
TAMP: Turnkey Asset Management Program
A turnkey asset management program is a term mainly used in the States to refer to a type of investment platform that financial advisers, broker-dealers, insurance companies, banks, law firms, and CPAs pay a fee to use, to oversee their clients’ investment accounts. In addition to providing basic asset management services, TAMPs typically also oversee account admin tasks, billing and reporting. Advocates of TAMPs claim that they free up professionals’ time so that they can focus on the areas that they add value to, as the basics of asset management are taken care of by these products. An example of a major U.S. TAMP is SEI Investments, the Pennsylvania-based, NASDAQ-listed giant.
TCJA: Tax Cuts and Jobs Act
The Tax Cuts & Jobs Act was a package of major changes to the U.S. tax code signed into law by U.S. president Donald Trump on 20 December, 2017. The law hit American expatriates like a bombshell, as it contained a number of provisions that affected them and their offshore holdings.
Among them was a provision relating to certain foreign companies known as controlled foreign corporations, or CFCs, defined as non-U.S. corporate entities that are more than 50% owned by U.S. shareholders who each own at least 10% of the business.
Under the TCJA, such entities will be subject to new U.S. taxes – a “deemed transition tax” and a new minimum tax on foreign earnings, known as the GILTI. (global intangible low-taxed income) tax. Both have been the subject of significant commentary and push-back in the expatriate community.
TCK: Third culture kid
“Third culture kid” is a term used to refer to children who were raised in a culture other than that of their parents for a significant portion of their childhood. A related term describes the adults they become: Adult third culture kid, or ATCK.
TFFAA: Tax Fairness for Americans Abroad
“Tax Fairness for Americans Abroad” (H.R. 7358) is the formal name for a piece of legislation introduced, finally, at the end of December, 2018, after months of anticipation, by North Carolina Republican Congressman George Holding.
Among the central features of Holding's bill is an option for American citizens who are living abroad to elect to be taxed on the basis of their residency, rather than their citizenship. But those who wished to continue to be taxed as U.S. citizens would be allowed to do so.
In January 2019 the Republicans Overseas organization said the bill would be re-submitted in the new year.
TMT: Technology, Media and Telecommunications
Refers the technology, media and telecoms sector, which is best remembered by some investors for a bubble that burst spectacularly in around 2000.
TPD: Total and Permanent Disablement (insurance)
TPD is a type of protection insurance.
TTFI: Territorial Taxation for Individuals
Territorial taxation for individuals is a term for a type of tax regime that taxes people on the basis of where they live, as opposed to their citizenship (citizenship-based taxation or CBT, which is the current, controversial U.S. system.) TTFI tends to be a term used by the Republicans Overseas, as it correlates to another term, territorial taxation for corporations, which was introduced in the Republican tax overhaul known as the Tax Cuts and Jobs Act (TCJA) at the end of December, 2017.
TY: Tax year
The tax year is a widely used time frame used by tax authorities around the world to build their tax regimes around. In the U.S., the Internal Revenue Service allows most businesses the choice of using a calendar year or the company’s own fiscal year as its tax year.
As for individual Americans’ tax year, the U.S. norm is a calendar year ending on December 31, with tax returns due on the 15th of April the following year.
Expatriates, though, have an extra two months to file (making the deadline June 15th).