Executives looking to start a FX/CFD broker in Vanuatu are not alone. The small island nation has become a popular place to start an FX/CFD broker over the last decade.
The reason for that is because a Vanuatu FX/CFD license offers lower corporate tax, a less bureaucratic regulatory regime, and low operational costs compared to more developed markets.
Having said that, to start a FX/CFD broker in Vanuatu is not as simple as it once was. At one point, there were literally hundreds of brokers in Vanuatu. Today that figure is under 70.
The reason for that is the Vanuatu Financial Services Commission (VSFC), the local regulator, made several changes to its FX/CFD license, which made it harder to start a FX/CFD broker in Vanuatu.
However, we would argue those changes were actually positive, providing a better regulatory framework for brokers and pushing out bad actors. And despite making it slightly harder to start a FX/CFD broker in Vanuatu, the fact is this is still one of the cheapest jurisdictions to start an FX/CFD broker and there continue to be many other attractive features of the license. We look at these in more detail below.
Why start a FX/CFD broker in Vanuatu?
We think the FX/CFD license in Vanuatu today is a mid-tier jurisdiction. It is not a developed market like the UK or Australia. But it is also not an unregulated offshore jurisdiction like St Vincent and the Grenadines or St Lucia. That being the case, we would put it in the same sort of playing field as regions like the Seychelles or Mauritius. Some of the main benefits of the FX/CFD license include…
1. Corporation tax is 0%
Brokers operating in Vanuatu pay no corporation tax. That compares to figures in excess of 20% in many developed countries. As a result, you keep a far higher proportion of your net income at financial year end if you do start a FX/CFD broker in Vanuatu.
2. Low capital requirements
A Vanuatu FX/CFD license, even if it is a full scope one with market making functionality, has a low capital requirement of 5,000,000 Vanuatu Vatu – the local currency. This currently translates into approximately $42,000.
3. Lower regulatory burden
In the past Vanuatu was an unregulated region. Today that has changed and regulations are more stringent. Nonetheless, compared to other markets, you have to deal with much less bureaucracy in Vanuatu compared to other markets, which is one of the appeals of starting a FX/CFD broker in the country.
Overview of FX/CFD license in Vanuatu
| FX/CFD license in Vanuatu overview | |
| Time to launch | Approximately 8 months |
| Company registration and licencing costs | $150 + any agent fees |
| Company annual operational cost | $100 + any agent fees |
| Tax | 0% |
| Accounts filing | Not required |
| Physical presence | Required – you must have a physical office and at least one direct company employee or employ a local licensed manager |
| Capital requirement | 5m Vanuatu Vatu (approx. $42,000) Note this is a bond held by the regulator, not a cash deposit held with a bank |
| Anonymity | Yes |
| CFD regulations | CFDs are regulated in Vanuatu but there are currently no restrictions on leverage or certain marketing promotions, such as deposit bonuses and contests. |
Steps to start a FX/CFD broker in Vanuatu
1. Register a local company
Brokers typically set up in Vanuatu as International Companies. The documents required to do this are fairly standard – you will need copies of IDs, bank statements, and other legal documents. You’ll also need to have an articles of association.
2. Physical presence preparation
One of the key factors in the Vanuatu FX/CFD license process is having a physical office with a local employee or hire a local licensed manager. All of the necessary factors must be in place here before your application to the VSFC is made, otherwise they will not approve it.
3. Capital requirements
We’ll look into this in greater detail further on in this article but one of the downsides of the FX/CFD license in Vanuatu are the capital requirements. This is not because of the cost, which is approximately $42,000 at the time of writing, but the nature of it. When you start a FX/CFD broker in Vanuatu, you are required to make a deposit with the VSFC, which they call a bond. This can be taken from you if your license is revoked and is fairly illiquid asset – you cannot ‘redeem’ the bond and take your cash away quickly. Regardless, you must have this before you can be approved by the VSFC.
4. File application to VSFC
The actual application process is the last thing you must do in this process. It requires some extensive documentation, which you will have to attach to your application. This includes but is not limited to:
- A business plan
- Three year financial projections
- Complaints handling procedure
- AML procedure
- Certified copies of passports, police records, and proof of address for owners
- Risk management procedure
How long does it take to get a FX/CFD license in Vanuatu and start a broker there?
We think that in a ‘hope for the best, expect the worst’ scenario that you should be expecting the total process to start a FX/CFD broker in Vanuatu to take 8 months. Note that it could be much faster than this depending on various factors, like how long it will take you to gather certified copies of the necessary documents.
Some providers may claim that you can get a license in three months or even less. We think this information is either outdated or simply misleading.
With regard to the latter, it may be the case that it ‘only’ takes three months to get your license from the date the application is made. However, as should be clear from the above, there is a lot of work that needs to be done prior to that application being made.
For example, the setting up of a local office is not something which can be done overnight. Nor can you put together a business plan or get the requisite documents in a day. These things take time.
Having said that, you can speed things up by making sure the company you work with to speed up your application gets all the documents from your end as quickly as possible.
How much does it cost to start a FX/CFD broker in Vanuatu?
We know how annoying this is but…it depends.
The biggest cost of your application is likely to be the deposit you have to make with the VSFC, which is approximately $42,000 at the time of writing.
Actual registration and application fees are not that high. We note that many providers appear to actively push high mark ups on these fees, without being transparent as to what they are doing.
To give one example of this, at current currency conversion rates, the application fee to the VSFC for a FX/CFD license is less than $500. We are seeing providers that claim it is $2,000 or higher.
Aside from this, there are factors that are more variable. For example, getting a bank account, setting up a local office, and hiring lawyers to put together a business plan are going to vary in price.
That last point is perhaps the most important one as well. The reality is that you are almost guaranteed to have to deal with lawyers or consultants who will help you get the license. Some providers are transparent (or appear to be) about how much they will charge you but the majority are not.
Combined with your own idiosyncratic costs – how much it costs you to get documents notarised, for example – this means it is hard to quote a firm figure on how much it costs to start a FX/CFD broker in Vanuatu.
What are the capital requirements for a Vanuatu FX/CFD license?
Anyone that wants to start a FX/CFD broker in Vanuatu will have to deposit a 5m Vanuatu Vatu ‘bond’ with the VSFC. At the time of writing this is approximately $42,000.
Among the offshore jurisdictions that are popular for FX/CFD brokers to get regulated, this puts Vanuatu below the Seychelles and Labuan. However, Mauritius has a lower capital requirement for brokers.
However, it is worth noting that, at the time of writing, there are no further capital requirements once you receive your license. Assuming you get a FX/CFD license from the Vanuatu regulator, you do not have to increase or maintain a certain level of funds. The bond is sufficient.
At the same time, we would note that there are two key components of the bond which are not particularly attractive.
Firstly, the regulator is able to withhold those funds from your company if they revoke your license or for various other reasons, such as you going out of business.
Secondly, and as the first point implies, this is not easily accessible, liquid cash. The regulator holds your funds. Even if you wind up your business in a completely legitimate way, they will still take 90 days to give your cash back.
What are the yearly costs when you start a FX/CFD broker in Vanuatu?
As with the start up costs discussed earlier in this article, you have some fixed costs when running a broker in Vanuatu. Others vary, making it hard to provide a firm figure for annual operational costs.
For example, you currently have to pay an annual fee to the regulator of 100,000 Vanuatu Vatu, the local currency, which is just under $1,000 at the time of writing.
However, you then have a huge number of variable costs. For example, as noted, you have to have a local employee and rent a physical office in Vanuatu or employ a local licensed manager. These are not ‘cookie cutter’ costs and will depend on how you go about structuring your Vanuatu brokerage operation.
The ‘positive’ here is that most of these costs should become apparent as you go through the application process. For instance, you must have the physical office and banking in place before you can start your broker’s operations. This means you will have a good idea of your annual costs before you actually start operations.
Vanuatu FX/CFD license physical presence requirements
Unlike unregulated jurisdictions, such as St Lucia or St Vincent and the Grenadines, if you start a FX/CFD broker in Vanuatu, you need to have a presence there.
This has been a requirement since 2021 and reflects a raft of changes the local regulator has made to try and set itself up as a more respectable offshore hub for financial services.
There are two ways that you can go about meeting the physical office requirements for Vanuatu.
1. Local office and employee
This what the regulator seems to want to encourage and is where a broker rents an office and hires a direct local employee. Note that this means the employee cannot be a contractor or part time employee. They have to be employed by the company.
On the office side, you cannot simply have a post box shared by 100 other companies. The office must be ‘real’ and be only used by your business.
2. Local licensed manager in Vanuatu
Another option, which brokers may prefer, is to effectively outsource many of your Vanuatu operations to a local licensed manager.
This may be more cost effective. The downside is that the manager may be working for lots of other brokers and thus be paying little attention to your business.
We would note that the regulator in Vanuatu has revoked licenses before and appears to be in the process of making more changes to its existing FX/CFD regulatory regime. The point being that this is not like St Lucia or some other unregulated offshore region. So if you simply see your local employee as an annoyance and try to minimise the cost, this may end up negatively impacting your business in the future.
Are FX/CFDs regulated in Vanuatu?
Unlike some offshore regions, there is a regulatory regime governing FX/CFD trading in Vanuatu.
However, we find that most people looking to start a FX/CFD in Vanuatu or similar regions tend to be concerned about leverage, marketing, and operational costs. Regulations governing these are as follows…
1. Leverage
There are currently no restrictions on leverage for Vanuatu. We are also reasonably confident that this will not change in the near future as the regulator appears to believe this is one of the jurisdiction’s competitive advantages.
2. Marketing restrictions – deposit bonuses and contests
There are currently no restrictions on deposit bonuses or FX/CFD broker trading contests in Vanuatu. Again, we do not see this changing in the near term.
3. Operational costs and capital requirements
As noted above, Vanuatu does not have capital requirements beyond the bond that is kept with the regulator.
However, there are operational costs to be aware of. Brokers must submit AML reports annually, for example.
Starting a FX/CFD broker in Vanuatu – the positives and negatives
There are strengths and weaknesses to starting a FX/CFD broker in Vanuatu today. Hopefully this article has highlighted what those are but we look at them more explicitly below.
Vanuatu FX/CFD license – positives
1. No corporation tax
Vanuatu does not have corporation tax. This means any profits your broker makes are kept in their entirety. By comparison many brokers operate in regions where corporation tax is 15% or even in excess of 20%.
2. Low capital requirements
Vanuatu’s bond deposit, which is only about $42,000 at the time of writing, is substantially lower than many developed markets. We appreciate that for someone trying to bootstrap a brokerage business this may not seem cheap but on a relative basis it absolutely is. Moreover, this is a fixed cost, meaning even if you manage to massively increase the size of your brokerage in Vanuatu, there is no commensurate rise in your capital requirements.
3. No marketing or leverage restrictions
Unlike many other developed markets, an FX/CFD license in Vanuatu does not prevent you from offering high leverage or certain marketing promotions, like deposit bonuses, to clients.
Vanuatu FX/CFD license – negatives
1. Banking is poor
The quality of banking services in Vanuatu today is poor. Your options in this regard are thus limited and can prove extremely frustrating. There are alternatives here but the point remains that it is not simple and is probably going to be your biggest pain point.
2. Regulatory gray area potential
Brokers operating globally may not be able to directly solicit clients using a Vanuatu entity. This means you may be either breaching regulations or be in a regulatory grey area when onboarding clients.
3. Capital requirement structure is odd
Although Vanuatu’s capital requirement is low, the fact it’s structured as a security bond is more unusual. Stipulations around how these funds are treated may also not be to some brokers’ liking.
Vanuatu FX/CFD license final thoughts
If you are a boot strap, start up broker looking to keep costs as low as possible then Vanuatu may not be for you.
However, even for start up brokers with some funding behind them or existing, small FX/CFD brokers, we think it’s a region that is worth considering.
Vanuatu has ultimately changed a lot over the past few years and is no longer a region for unregulated cowboys. The local regulator wants the country to become an attractive place to do business, more in line with established offshore financial centres.
The main downside, as in most offshore jurisdictions, is likely to be banking. However, this is a surmountable problem and one that, if managed well, will mean that it can be a great option to start a FX/CFD broker in Vanuatu.
