To Forex brokers contemplating expansion in Europe but unwilling to bear the hefty cost of maintaining a Cypriot or Maltese licensed company, we strongly advise considering Forex broker in Bulgaria license.
Key highlights
Broker in Bulgaria is formally categorized as investment enterprise and operate under an Investment Services License (ISL), which outlines the allowable array of services and financial instruments it can provide. In accordance with Bulgarian legislation, participating in forex trading is regarded as an funding endeavor that mandates a license from the Financial Supervision Commission. Consequently, acquiring a license is an obligatory prerequisite for conducting funding brokerage operations in the forex market. Local Forex market is extensively developed and on par with analogous markets in other nations.
Indisputable benefits of obtaining a Forex Broker in Bulgaria license
- Corporate tax in Bulgaria: 10%, VAT: 20%, as opposed to Cyprus with a corporate tax rate of 12.5% and VAT of 19%.
- Bulgaria boasts extensive experience in issuing brokerage licenses. The Financial Supervision Commission, similar to its Cypriot counterpart, comprises highly trained specialists and specialized departments, making the license issuance process well-established.
- Bulgaria adheres to the same European regulatory framework for funding company rule as Cyprus and other EU countries. Consequently, the requirements for authorized capital are identical. The authorized capital cannot be utilized for economic activities and remains frozen in a Bulgarian bank account.
- State fees for license issuance are substantially lower than those in Cyprus. For instance, the commission charges approximately 2,200 euros for reviewing documents for an STP license.
- Legal services necessary for supporting the entire process are at least twice as cost-effective as those in Cyprus.
- Office maintenance expenses in Bulgaria, encompassing rent, staff salaries, and miscellaneous costs, are approximately half the price compared to Cyprus. Additional savings can be attained by renting an office in a smaller city rather than Sofia.
- To operate in other EU countries after obtaining a Bulgarian license, the license holder must undergo a certification procedure in the respective jurisdiction.
- Upon submitting the application to the commission, the applicant is solely obligated to pay 25% of the authorized capital. The remaining 75% is only due upon the commission’s approval to issue the brokerage license.
- The contribution to the investment compensation fund is significantly lower than in Cyprus, with the precise amount contingent upon the license type.
- Linguistically diverse country, with residents fluent in English, Russian, and Bulgarian.
- Stable relations with Turkey and other Balkan states maintained. Its foremost trade partners within the European Union include Belgium, Germany, Austria, and the Netherlands, indicating well-established trade ties.
Licensed Activities:
- Funds;
- Fiscal tools other than funds;
- Money market tools;
- Shares of collective investment schemes;
- Options, futures, swaps, forwards, and other derivative contracts involving funds, currencies, interest rates, or other derivative instruments, indices, or financial indicators that can be granted physically or in cash;
- CFDs and other money tools.
Management
The company must be overseen by at least two directors who must be residents of the European Union (EU). The managing directors should possess substantial knowledge and experience in the financial sector, which must be supported by relevant documentation such as educational certificates and employment records. Additionally, the company is required to hire an accountant and submit financial reports. Furthermore, the license-holding company must undergo annual audits. A local head office must be situated inside of the territory.
Authorized capital
Investment company adheres to the general European standards outlined in MiFID 2004/39/EC (and in MFIA), the requirements for authorized capital are identical to those in Cyprus and Malta:
- STP License: €125,000 (BGN 250,000)
- Market maker license: €740,000 (BGN 1,500,000)
The total authorized capital will be deposited into the applicant’s account at a Bulgarian bank and remain frozen for the license’s duration.
The noteworthy advantage and distinction from Cyprus lie in the fact that, when submitting the application to the commission, the applicant is only required to pay 25% of the total authorized capital. The remaining 75% is payable into the account solely upon the commission’s approval to issue the brokerage license.
Both Bulgaria and Cyprus operate an Investment Compensation Fund. In Bulgaria, the amount is relatively small and contingent upon the license type (€2,000-5,000).
The commission pays close attention to the origin and transparency of shareholder funds. All funds, including those utilized to replenish the authorized capital, must be acquired by the shareholder through legal means.
Terms
The overall process typically spans 5-7 months from the submission date of the required documents to the commission.
Conclusion
In conclusion, for Forex brokers seeking to establish their presence in Europe without incurring the high costs associated with maintaining a Cypriot or Maltese licensed company, Bulgaria presents an appealing alternative. With a well-developed forex market and a regulatory framework aligned with other European Union countries, obtaining a forex license in Bulgaria offers numerous advantages.
These benefits encompass lower corporate tax rates, more affordable state fees, and cost-effective legal services when compared to Cyprus. Furthermore, Bulgaria’s multilingual population, stable relationships with neighboring countries, and strong trade partnerships within the European Union contribute to a favorable business environment.
