Starting up a FX Brokerage: Incorporating a Company in a Foreign Jurisdiction

30 August 2016

Just imagine: nowadays, the foreign currency exchange sector sees trillions of dollars being traded daily all over the world. Due to these amazing volumes and potential handsome returns, many people have started to think about the possibility of opening their own FX brokerage business. However, keep in mind that obtaining a currency trading license in such countries as the USA, Japan, or Great Britain will cost you up to 10 times more than incorporating a Forex brokerage in the BVI or Belize.

Opening your future foreign exchange trading business in a tax-friendly and low-fee foreign jurisdiction is a good solution for people who want to overcome strict regulatory requirements, reduce license-obtaining time and cut down operational costs. A FX broker license obtained in a well-established and reputable business jurisdiction will satisfy international financial institutions and payment platforms for the purpose of opening a bank account.

Choosing a Suitable Forex Jurisdiction

When choosing an appropriate Forex trading jurisdiction to operate from, take into consideration the complexity of obtaining a proper license and how much time it usually takes, all operational costs including license and annual fees, requirements obliging to have an actual office in the jurisdiction in question, and double taxation regulations concerning your country.

Regulatory agency: The Cyprus Securities and Exchange Commission

CyprusThe Republic of Cyprus, an island country in the Mediterranean Sea, is considered one of the most preferable jurisdictions for getting a Forex license due to two key factors: its European Union membership allowing Cyprus-based companies to provide FX services to other EU members, and a beneficial tax regime – its corporate tax rate is just 12.5%.
All Forex trading firms wishing to incorporate in the Cyprus jurisdiction must obtain a Cyprus Investment Firm license. The minimum capital requirements range from €40,000 to €1,000,000. The process of getting a license generally takes 6-8 months and costs €3,000, plus an additional fee depending on the services that your FX company will provide.

British Virgin Islands
Regulatory agency: The British Virgin Islands Financial Services Commission

British Virgin IslandsThe British Virgin Islands (BVI) is one of the most popular FX jurisdictions – according to statistics, more than half of all new Forex trading companies are registered in the BVI. This island country is regularly called an “offshore tax haven” due to the absence of the most common types of taxation – there is no corporation tax, no profit tax and no capital gains tax.
The process of obtaining a BVI Financial Services Commission License usually takes 4 months, the license cost depends on the types of financial services you are planning to provide – for example, for the Investment Management & Advice category, the initial license fee is $1,500 and the renewal license fee is $1,500. As for the initial capital, the requirements start from $30,000.

Regulatory agency: The Belize International Financial Services Commission

BelizeBelize, an English-speaking country in Central America, is a quick and cost-efficient variant for people wishing to open a Forex brokerage. The biggest advantages of the Belize jurisdiction are the absence of a corporate tax and a favorable legal system making it highly difficult to find out the owners or shareholders of a company.
The time frame for getting a license in Belize in just 6 weeks. The IFSC application fee is $1000, the annual license fee has recently jumped to $25,000. The minimum paid up capital requirements for obtaining a license have also grown to $500,000.

Regulatory agency: The Mauritian Financial Services Commission

MauritiusThe Republic of Mauritius, an island country in the Indian Ocean, offers an attractive tax regime – a corporate tax rate is 15%, and a preferred corporate tax rate for global business companies is 3%. Plus, the Mauritius business jurisdiction has low minimum capital requirements – just $20,000, or Rs. 700,000.
Getting a Mauritius Forex license is not complicated and takes around 4-5 months. The application form should be submitted to the Financial Services Commission along with all necessary supporting documents. The application fee varies basing on the business type – for example, Investment Dealers (all services including underwriting) should pay $3,000 for processing an application and $7,500 annually.

Regulatory agency: The Malta Financial Services Authority

MaltaBeing a part of the EU, Malta is a well-established and reputable business jurisdiction for companies engaged in Forex exchange due to its solid regulatory framework and the possibility of opening a new branch or providing financial services in other EU countries.
The FSA offers two types of investment licenses for foreign currency exchange brokers: a Category 2 license for companies acting as riskless principals and a Category 3 license for companies dealing on their own account. If you need to get the first type of license, the application fee is €1,500, the license fee is €3,000, the initial capital requirements are €125,000. As for the second license type, the application fee is €2,000, the license fee is €4,000, the initial capital requirements are €730,000.

New Zealand
Regulatory agency: The New Zealand Financial Markets Authority

New ZealandAlthough New Zealand is not directly associated with an offshore zone, this island state in the Pacific Ocean has established itself as a stable and reputable financial services center providing access to the Asia-Pacific region. Businesses offering financial services and wishing to incorporate in NZ must receive a Derivatives Issuer license.
The application fee is $10,695 NZD, the minimum capital requirements are $1,000,000 NZD. The time frame to obtain a Derivatives Issuer License is about 6-12 months. Keep in mind that the FMA requires the applicant company’s management stuff to have proper skills and experience to hold their positions and work in an office in New Zealand.

Regulatory agency: The Seychelles Financial Service Authority

SeychellesWith its worldwide income taxation rate of 1,5%, the Republic of Seychelles has become a popular low-cost solution for numerous Forex start-ups. You can create a Special License Company (CSL) in just 4-12 weeks. The application fee is $200, the annual license fee is $1000.
If a Seychelles-incorporated firm doesn’t have an office in the country and is providing Forex trading services outside of the Seychelles, then it doesn’t need any license at all. However, in this case it will be impossible to make a deal with payment systems and banks requiring to have a license for opening an account and performing FX activity.

Impressive growth in the financial services sector and notably in foreign currency exchange markets has attracted thousands of new traders and investors. If you’re also interested in establishing your own Fx brokerage business, the no.1 question you should start from is where to obtain a license. When choosing a suitable jurisdiction, research all possible variants and take into consideration their hidden drawbacks. Poor decisions will result in loosing money and business reputation.

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