Top 3 Locations that Offer Favorable Corporate Tax to Set-Up a Forex Brokerage

| 29 Jun 2012 | 4 Comments

Despite the current financial turmoil, the foreign exchange industry stands unaffected – experiencing a boom of broker license applications sought by those seeking to engage in the lucrative money-making industry. As a result of the increased competition between new forex broker start ups, brokers must find the most beneficial location that strikes an even balance between low corporate taxes, and a globally recognized financial license.

Forex BrokerageThe global financial crisis has caused individuals to experience a downturn with regards to the value of their investments. Business professionals have taken to the forex platforms to trade different currencies and commodities, in an effort to regain and re-establish their wealth – thus dramatically increasing the demand for forex brokerages worldwide.

The high volume of forex companies in jurisdictions across the globe represents the global movement from alternative investment strategies to forex trading. The recent increase in forex license applications demonstrates the growing popularity and interest in this industry. International corporate investors are trying to locate the most profitable jurisdiction that offers a reputable financial regulatory body, and a favorable corporate tax system.

The process of obtaining a forex broker license is, in some respects, complex and lengthy, with a number of prerequisites that must be met in order to acquire the relevant license. The more credible and globally recognized the financial regulatory body is, the more stringent the requirements are to be met.  Companies that wish to offer forex services must acquire the relevant license from the financial regulatory body of their chosen jurisdiction. One of the most important factors that determines the reputation and success of a forex firm is the regulatory body from which the broker license is obtained.

Gaining a broker license from a globally recognized and reputable regulatory body enables companies to benefit from:

  • Client loyalty: Forex traders prefer to use companies that are regulated by credible regulatory bodies. This is an important factor as traders tend to research where the firm is regulated; conducting business with those that have licenses from the top regulators. By doing so, they approach the forex trading with confidence that high standards are being met
  • Monopoly: Only a minority of companies are able to acquire a license from a recognized regulatory body due to incredibly high standards that have to be met. Firms that obtain a license from top regulators such as CySEC can therefore dominate the forex market.
  • Profitability: By establishing a forex company within a tax friendly jurisdiction that is regulated by a well-known regulatory body, owners of forex firms are able to maximize profit through low or zero corporate tax.

Through obtaining a forex license from a respected regulatory authority, forex brokerages can demonstrate to new and experienced forex traders that they are a trusted and reputable broker. Once the brokerage has managed to build a loyal client base, the profitability of the forex firm is further enhanced according to the jurisdiction’s tax regulations. Forex brokers can generate maximum profits by setting up their forex firm in a tax friendly location that has a recognized financial regulatory authority.

The following are the top 3 most reputable and tax efficient locations to acquire a forex license and set up your forex brokerage:

Cyprus

Ranked as one of the top locations in the world to obtain a forex license from, Cyprus enables individuals to operate a forex business in a tax-friendly jurisdiction that is world-renowned for its reputable financial regulatory body – CySEC. The Cyprus Securities and Exchange Commission (CySEC) is a highly respected financial regulatory body that issues forex broker licenses to Cyprus companies to conduct financial activity. The strict set of requirements stipulated by CySEC – including a high minimum capital requirement – results in very few companies qualifying for the license, with only 12 forex licenses issued in 2011, adding to the exclusivity of being CySEC regulated.

Individuals who want to establish a forex brokerage must consider the location of their business carefully as it determines the stability, reputation and profitability of their company. Cyprus is a popular location amongst forex brokers as it offers a favorable corporate tax rate of 10% – one of the lowest in Europe.

Cyprus consolidated its position as a highly sought after location for forex licensing when it became one of the 27 European Union member states in 2004. As an EU member state, Cyprus follows the financial regulatory structure as outlined by the Markets in Financial Instruments Directive (MiFID). Cyprus based forex brokers must obtain the relevant license from CySEC – whilst complying with MiFID.

British Virgin Islands

Financial Services CommissionThe British Virgin Islands (BVI) is first choice for many due to its economic stability, favorable tax regime and asset protection opportunities for offshore companies. The zero percent corporate tax rate, as well as immunity from capital gains, profit tax and estate duty make the BVI a desirable location to set up a forex firm.

The jurisdiction’s financial regulatory body is the BVI Financial Services Commission (FSC), which is the authority responsible for issuing financial licenses to qualified persons who wish to set up a forex brokerage in the BVI. This reputable regulatory authority reviews applications and, upon approval, issues forex broker applicants with the Securities and Investment License, in accordance with the Securities and Investment Business Act 2010.

Applicants must submit the licensing application to the FSC, along with other documents including the business plan and capital adequacy. It is imperative that applicants deposit the set amount of capital in order to prove their financial standing to the FSC and demonstrate that they are able to professionally and competently operate as a fully licensed forex firm.

The bespoke financial laws, tax immunity, and highly reputable financial regulator make the BVI a prime location for forex trading companies. The FSC ensures that all forex entities are fully compliant with the regulations in a stringent manner to enable the BVI to maintain its position as one of the top locations in the world for forex company formation

Belize

As an offshore jurisdiction, Belize enables forex company owners to establish and operate their forex company without having to pay any corporate tax within the country. To take advantage of a Belize forex company, owners are required to meet the prescribed criteria as outlined by the International Financial Securities Commission (IFSC).

The Belize IFSC is a globally recognized financial regulatory body that has a set of strict, rigorous rules and requirements that must be complied with in order to obtain a forex license. As a Belize forex license holder, brokers can trade currency pairs and offer competitive rates to clients across the globe.

To obtain a Belize forex license, investors are required to form a Belize International Business Company for the sole purpose of providing forex activity. Once the company is set up, individuals must complete the necessary application and file documents with the IFSC. Requirements that must be met include depositing an initial minimum capital amount in a Belize bank account, and taking the Fit and Proper Test. Similar to the BVI, Belize offers individuals the opportunity to obtain a license from a tax-exempt location.

The formula for forex company success…

Gaining the trust of traders, and offering a diverse range of forex services, are two primary factors that determine the overall success of a forex company. The above-mentioned locations enable forex license holders to gain trader confidence because of the status they achieve by being regulated and monitored by a globally respected regulatory body. Licensed forex companies established in low taxed jurisdictions can therefore offer a wide range of foreign exchange services to their clients, whilst simultaneously benefiting from low or zero corporate tax obligations.

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Comments (4)

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  1. jayakumar says:

    Hi i need to open forex brokerage firm can please send price for belize,bvi,cyprus incorporation with license.how much time to take.

    Thank you

    JAYAKUMAR

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    • Mariam Nasir says:

      The time required to obtain a forex license from each jurisdiction is dependent upon the regulations outlined by the financial regulatory body in your selected jurisdiction. Please contact our corporate department for more information on the pricing for each jurisdiction: corporate@deltaquestgroup.com.

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  2. paul says:

    has the caymans been researched for this?

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    • Mariam Nasir says:

      Whilst the Cayman Islands is considered to be a favorable location for setting up a forex brokerage, the growing trend shows a particular increase in forex license applications in Cyprus, Belize and the BVI.

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