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FDL Licenses in Vanuatu

calendar 8/31/2021 8:00:00 AM
author Admin System

The small archipelago of Vanuatu may not be the first country that comes to mind for banking and brokerage services but over the years it has made a name for itself. Aside from having

no Income tax - only consumption tax, so a territorial tax system that make it ZERO tax on worldwide income, and business-friendly policies, Vanuatu has become one of the premier destinations for financial services, brokerages. These are just a few of the reasons why Vanuatu should be at the top of your list and we will break down some of the advantages this small island nation has to offer. 

Why Vanuatu?

While Vanuatu has been regarded as a low-tax jurisdiction with an attractive citizenship by investment program, the following will focus on the Financial Dealer License (FDL). Despite the fact some of the requirements have changed in the last few years, Vanuatu is arguably one of the best countries when it comes to offering brokerage services, especially for startups and smaller firms and implies lower initial capital requirements. 

Here are some of the advantages of the Vanuatu SDL.

-The initial capital requirement of $50,000 is much lower than other countries, making it ideal for smaller firms.

-The licensing fees generally start from $10,000 and up.

-The license can be obtained remotely. 

-Licensed firms may offer a wide range of services traditionally offered by banks and brokerages. 

-There are no income taxes and profits derived from foreign sources are tax exempt.

-May do business with clients all over the world.

-All firms are regulated by the Vanuatu Financial Services Commission (VFSC), a government regulatory body.

Types of Financial Licenses

Currently, there are three licenses (Class A, B, and C and D) that cover financial services and you would apply based on the type of transactions you are conducting. It is important to note a license is required for the firm and any agents trading on their behalf although there are lesser requirements for the latter.

Class A license: Debenture and loan stocks, bonds, certificates of deposit, and proceeds from foreign exchange.

Class B license: Not limited to but includes futures contracts and derivatives.

Class C license: Shares of capital in a corporation, proceeds from precious metals and commodities, a right under depository receipt, buying and selling of securities, a right under contract for the acquisition of securities.

What Are the Requirements?

The requirements are fairly straightforward and not that high when compared to other jurisdictions. This requires basic paperwork about the company and its directors/owners and usually does not take a lot of time. 

-Certified copy of passports.

-A clean criminal background check from your home country.

-A declaration stating there is no history of bankruptcies.

-A bank reference letter.

-Bills or other documents showing a proof of address.

-An updated CV and other documents that demonstrate the ability and experience to perform the firm’s business activities.

-Information regarding how the services will be offered and where.

-A deposit of appx. $50,000 on deposit in the form of a surety bond.

In addition to the above documents, there are additional requirements that must be met.

-The firm must have an independent auditor that meets the requirements of the Financial Dealers Act and has experience with auditing financial firms. 

-Have an appointed Anti-Money Laundering (AML) officer, hold annual AML audits. This person may not be the director or hold any other title. In addition, an alternate AML must be designated.

-You will also need one of the 6 official Registered Agents as your agent as these RA are the gatekeepers.

-Have indemnity insurance. This must be obtained for the company and any representatives operating on its behalf within three months after the license has been issued. There is currently no minimum amount but at least $250,000 is recommended.

Is the Vanuatu SDL Safe?

Absolutely. While Vanuatu may have lower capital requirements than many jurisdictions, there are laws in place to verify that licensed companies are reputable. It is more than simply filling out an application and paying the fee. Anyone providing financial services must prove they have an educational background or prior work experience. Likewise, they must provide certified copies of their criminal records and have no history of bankruptcies. In addition, applicants must have a viable business plan with clearly stated goals, objectives, and the means to carry them out. All of those requirements must be met before a license is granted. 

On the other hand, Vanuatu has a history of business-friendly policies. The country has a history of stability and the regulatory agency, the VFSC, is well-respected internationally.

What Activities Are Permitted with a Securities License?

The Security Dealer’s License allows a company to engage in transactions that are typically associated with banks and brokerage firms. This is defined as buying and selling a variety of financial products for a profit. Among the permitted activities are:

-The purchase and sale of stocks and bonds.

-Proceeds of foreign exchange (FX) transactions, precious metals, and commodities.

-Manage portfolios for clients.

-Process payments, though no third-party payments included

As you can see, the SDL permits a wide range of activities offered by traditional banks and brokerages with the benefit of lower capital requirements and greater flexibility that is not offered in many countries. 

Why Should You Consider a Vanuatu SDL License?

There are a lot of benefits offered by the Vanuatu SDL and here are a few reasons why you should consider it.

-The initial capital requirement (deposit) of $50,000 is much lower than many jurisdictions. In addition, the deposit is refundable if the firm is in good standing.

-A stable government with English being the official language.

-Low taxes. There are no taxes on foreign-sourced income, capital gains, and dividends.

-Licensed firms may have clients all over the world and offer a wide range of financial products.

-Affordable license fees.

While Vanuatu has initiated some recent changes to the SDL, most notably the residency requirement and raising the minimum deposit to $50,000 it is still an attractive financial license program. Many countries have more regulations and require initial capital of at least $500,000, effectively making obtaining a license out of reach for smaller brokerage firms. 

In addition, there are benefits as Vanuatu does not tax foreign-derived profits. At the same time, there are no income, inheritance, and capital gains taxes. All of these make Vanuatu an attractive option for providing financial services and asset protection. This is why the Vanuatu Security Dealer’s License is still one of the best options for brokerages despite the new changes.

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