For entrepreneurs that want to start their own forex brokerage, the first consideration they need to make is which jurisdiction they wish to incorporate in. The registration of a forex brokerage company in the wrong jurisdiction can result in costly complications, therefore the decision is not one that should be taken lightly.
These guidelines are based on our decades of experience and serve to assist new forex brokers on making the decisions of where to incorporate their new business.
Forex broker license vs company incorporation
We advise against trying to incorporate a forex company in a jurisdiction that requires a forex license to operate. For example, in Cyprus, if you were to register a new corporate entity and then apply for a forex license afterwards, you could find it automatically rejected as it could be perceived that you attempted to operate without a license.
You should always apply for the forex broker license first and incorporate the company, as a part of the application process.
Offshore considerations for forex broker incorporation
Offshore jurisdictions are the ideal choice for those looking to incorporate a forex broker, but those new to the industry should be sure to exercise caution here as well. Many offshore jurisdictions also have licensing requirements so it is vital that you partner with an advisory firm such as Fast Offshore to ensure that you take the right steps at the right time.
The ideal offshore jurisdiction for your brokerage will depend on a number of factors including what kind of brokerage you want to start, the countries you want to target, and the vision and goals you have for your business.
Jurisdictions to consider:
A fully-fledged EU member state, Cyprus is jurisdiction of choice for countless forex brokerages that want an EU base. A mix of highly skilled workers, a modern infrastructure, and an attractive tax regime, it is not hard to see why it is a popular choice. CySEC, the body that regulates forex is known for being one of the most respected in the world and the application process and granting of license takes between 4 to 8 months. The cost varies between EUR 2,000 and EUR 51,000 for the license and EUR 80,000 to EUR 1,000,000 depending on the type of license.
With English as the official language and a well regulated and stable business environment, Belize is a great option for setting up a forex brokerage. The licensing requirements are stringent and rigorous but it takes around 40 days from start to finish and is inexpensive, costing around $2,500 to apply. The initial capital is $100,000 but this can be offset when you consider that there is no corporate tax payable in the country. Last but not least, secrecy laws in Belize are comprehensive meaning that it is not easy for governments to obtain information on beneficial owners and shareholders.
One of the most popular jurisdictions for forex brokers, BVI licenses take around 6 to 8 weeks to obtain. The initial capital requirement starts at $30,000 and depending on the type of license you opt for, you are looking at a set up time of four months at a cost of around $45,000.
Offering a favourable tax regime with a corporate tax rate of just 15%, this can be reduced to 3% depending on individual circumstances. Setting up a company is low cost and the license application process is low-cost and relatively straight forward. You are looking at a set-up time of 4 to 5 months and the minimum capital requirement is around EUR 20,000.
Located in the Indian Ocean, Seychelles offers a stable political and economic structure and an excellent business environment to those looking to set up a forex brokerage. Company law is flexible and there is no tax payable on business income, dividends or banking transactions. As long as your forex brokerage conducts its business outside of Seychelles and will not have an operating office in-country, you do not need a license, but if you want to have an operational base, you need to apply for one. On average, the whole process of incorporating and applying for a forex broker license in Seychelles is around $25,000 with $50,000 paid up capital.
If you are looking to set up a forex broker and want to gain professional advice on your options, Fast Offshore are here to help.