If you decide to get an offshore license, you may run into problems when the banks are reluctant to open a bank account for you. So, rather than looking offshore, you could consider getting your financial services (MiFID) Forex license in Bulgaria, which is backed by the EU and therefore is recognized worldwide.
In the past, the only companies that could afford to apply for and obtain financial licensure in the major, respected jurisdictions such as the EU, United States, and Canada, were the major multinational companies that seemed to have unlimited money and resources. However, since that time, the world has majorly changed, and almost every family in the world has some access to the internet. Because of these relatively recent changes, there are now financial licenses that can be obtained by more ordinary companies that are just starting out. Instead of unlimited resources, all companies really need to obtain these licenses is a strong vision and sustainable business model. Of course, it still does require some financial commitment, but it is a much simpler process and significantly cheaper than it ever has been before. When it comes to financial licensure, you can divide it into two main categories: applying in the EU or outside of the EU.
There are a number of different advantages to getting your Forex license to EU countries such as Bulgaria. First of all, all of the financial licenses that are issued anywhere in the EU are considered a part of the MiFID II directive, which allows them to be standardized.
This means that MiFID licenses can be used throughout the EU easily, no matter which country you actually obtain the license in. For instance, if you choose to obtain your Forex license in Bulgaria but want to set up a unit in Ireland or Germany in addition to Bulgaria, you just notify the authorities in those areas.
When you go to notify the authorities in another EU country, you will need a couple of different things. First, you will need to provide the authority with your corporate file. Second, you will need the actual Bulgarian Forex license. With those two things, you will be able to prove that you have an authorized EU license, and you will not have to go through the process of the expense of obtaining another one. In short, this is the main benefit of getting your license in an EU country: if you get a license in one, you have it for all of them.
On the other hand, if you go to another country like Vanuatu, which is not considered an EU country, you will not be able to expand within the EU without getting more licenses (for example Forex license in Bulgaria), and most banks will be reluctant to even open you a bank account.
Forex License in Bulgaria and Taxation
Taxes are an important part of any business, but it is especially important when it comes to a Forex business that is fully licensed. One reason that people end up looking towards offshore jurisdictions is that some offer a 0% tax rate, but these jurisdictions are constantly being targeted by major authorities around the globe, so they are not the most stable jurisdictions to get your license in. Some countries use what is called see-through taxation incase of offshore jurisdictions, while others ban it all together with anti-offshore legislation. You could also run into additional taxation problems such as Common Reporting Standard and the inability to benefit from agreements that would allow you to avoid double taxation.
On the other hand, when you choose to license with a respected jurisdiction, you will have to pay taxes, but you will not run into the plethora of other problems that come with offshore jurisdictions. However, it is true that the tax framework in the EU is rather high. Most countries in the EU apply corporate tax rates in excess of 30% of profit, but there are two countries that offer better opportunities as far as tax rates go: Cyprus and Bulgaria. Cyprus applies a tax rate of 12.5% and Bulgaria a rate of 10%.
The difference between Cyprus and Bulgaria is not huge, but Bulgaria’s tax rate is flat. This means that it is the same across both corporate and personal incomes and has no upper limit making it, arguably, the most advantageous tax jurisdiction in the EU.
Types of licenses
Underneath both the Bulgarian national legislation and the EU’s MiFID directive, there are three main types of licenses. All three different kinds of lines only require 25% of the capital to be deposited before the application. Once the application is approved, the remaining capital will need to be deposited within 14 days. Read more about the differences between the three license types below.
Forex License in Bulgaria – Type I
Forex License in Bulgaria – type I is best for financial intermediaries that do not hold financial instruments or capital for their customers. It is also best for companies that do not provide services for their own accounts or IPOs (Initial Public Offerings). If you get License type I, the minimum capital requirement is 100,000 BGN which equates to 51,130 EUR.
Forex License in Bulgaria – Type II
License type II is the most common type of license. It is still recommended for companies that do not provide services for their own accounts or IPOS, but that do hold their customer’s capital/money and financial instruments. Companies that get type II licenses also usually provided services related to executing financial instrument orders, intermediary services for financial instruments, portfolio management, and execution of customer orders. For type II licenses, the minimum capital requirement is 250,000 BGN which equates to 127,823 EUR.
Forex License in Bulgaria – Type III
This third type of licensure is the highest financial type license. It is for any companies that trade on their own accounts. When you get a type III license, your trading rights are practically completely unrestricted. License Type III in Bulgaria equates to the market maker license in Cyprus. It does have a significantly higher minimum capital requirement at 1,500,000 BGN or 766,938 EUR.
Forex License in Bulgaria and Capital Requirements
While it is cheaper than it has been in the past to obtain a Forex license, it is still important to consider the minimum capital requirements and all other costs early on in the process.
If you are looking to jurisdictions outside of the EU, the best choice cost-wise is Belize. The legislation in Belize requires a relatively small amount of capital. However, if you are looking to Belize, you need to consider ongoing annual costs and the limitations on operations because both are rather large.
On the other hand, if you are looking to EU countries to obtain your licensure, both Bulgaria and Cyprus have the minimum capital requirements. The best, of course, is Bulgaria because Cyprus will require you to deposit all of the capital requirements before obtaining the license, while Bulgaria only asks for 25%. Even the set-up costs are lower in Bulgaria.
When you decide to work with us, we will provide you with a feasibility evaluation in addition to legal consultations. Most other providers have a broad knowledge of a variety of different jurisdictions. While these companies may be able to help you choose a jurisdiction, they will likely not have enough information to really help you beyond that point. On the other hand, we have decided to focus our expertise so that we can help you throughout the whole process. Because we understand the entire picture of Forex legislation in Bulgaria, we will be able to help you with all the particulars related to your case so that you can get your Forex license in Bulgaria as cheap and fast as possible.