How to Apply for a Forex License in Malta

18.09.2023

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Applying for a forex license in Malta is a strategic move given the country's growing prominence in the global financial landscape. In this article, we will provide a detailed overview of the brokerage licensing process in Malta to ensure it proceeds smoothly.

Prosperity of the Forex market in Malta

In the 21st century, Malta has become a key hub for global financial institutions and investors in Forex trading. Several factors contribute to its attractiveness:

Tax incentives:

Malta offers moderate tax rates and special tax incentives for financial institutions, making it an attractive destination for brokers and investors seeking favorable conditions for their activities.

Strict Regulation:

Malta has established strong regulatory standards in its financial sector, reinforcing its reputation as a safe environment for Forex trading. These rules emphasize transparency and honesty, promoting trust and confidence.

Gateway to European financial markets

Obtaining a Forex license in Malta offers brokerage companies a valuable gateway to European financial markets, opening doors to a range of positive outcomes:

1. Expanding the Client Base:

European financial markets offer access to a diverse clientele from various countries. This provides opportunities for brokerage companies to attract clients searching for trustworthy and regulated services in the forex market. A broad and diverse client base enhances a company's market presence and revenue potential, offering a stable foundation for growth.

2. Opportunities for Diversification:

Access to European markets enables forex companies to diversify their investment opportunities and expand their portfolio of services. Diversification helps mitigate risks and allows brokerage companies to adapt to changing market conditions while catering to a broader range of client needs.

3. Business Expansion:

Forex companies licensed in Malta can increase their transaction volume and expand their customer base, ultimately boosting revenue and solidifying their market position. Expanding the business footprint is a key goal for any brokerage company. Access to European markets facilitates this expansion and provides a larger market to serve.

4. Customer Support:

European clients often prefer working with companies regulated within Europe. Obtaining an MFSA license ensures compliance with European expectations, helping to attract and retain clients seeking regulatory security. Meeting client expectations regarding regulation is fundamental in the forex industry, as it contributes to client loyalty and trust.

5. Diversity of Services:

Access to European markets may encourage companies to offer new services, including those tailored to institutional clients. This diversification can create additional revenue streams. Expanding service offerings can cater to a wider range of clients and strengthen the company's competitive position in the market.

Gaining access to European financial markets through an MFSA license in Malta is a strategic move for forex companies.

Categories of Brokerage Licenses in Malta

Below, we provide an overview of the different categories of brokerage licenses available in Malta, along with their descriptions, minimum share capital requirements, and associated fees:

Category	Description	Minimum Share Capital	Application Fee	Annual Supervisory Fee
1а	Authorized to receive and transmit orders, provide investment advice, place instruments without holding client funds.	€50,000	€2,500	Up to €50,000 in revenue = €2,000. Additional tranche from €50,000 to €1 million = €350
1б	Authorized to receive and transmit orders, provide investment advice to professional investors, place instruments without holding client assets.	€20,000 (with PI restriction), €50,000 (without PI restriction)	€3,000	Up to €50,000 in revenue = €2,750. Additional tranche from €50,000 to €1 million = €350.
2	Authorized to provide all investment services, hold and control client assets (typically for managers from CISs).	€125,000	€5,000	Up to €250,000 in revenue = €4,500. Additional tranche from €250,000 to €5 million = €400.
3	Authorized to provide all investment services, hold and control client funds or assets.	€730,000	€7,000	Up to €250,000 in revenue = €6,000. Additional tranche from €250,000 to €50 million = €400.
4а	Authorized to act as trustees or custodians for all types of CISs.	€730,000	€17,000	€15,000
4б	Authorized to act as custodians for AIFs with no redemption rights for 5 years and AIFs marketed in Malta under third-country AIFM rules.	€125,000	€7,500	€5,000

These categories provide flexibility for brokerage firms in Malta to choose the license type that aligns with their specific operational needs and services offered.

Tax system for brokerage companies in Malta

Malta's tax system for brokerage companies offers a combination of advantages, including double tax treaties, moderate VAT rates, no taxes on royalties and dividends, and a corporate tax refund system.

Taxation	Description
Double Taxation Treaties	Malta has an extensive network of double taxation treaties with many countries, which prevents double taxation of income and capital gains. This optimizes tax obligations for brokerage companies engaged in international trade.
VAT (Value Added Tax)	Malta's 18% standard VAT rate, while applicable, is moderate compared to some other EU countries. This can result in a lower tax burden for brokerage companies operating in the EU market.
Royalty and Dividend Tax	Malta does not impose taxes on royalties and dividends, making it an attractive location for international investment, particularly in intellectual property-driven businesses.
Corporate Tax	Malta's official corporate tax rate is 35%, but there is a refund system for shareholders. This allows companies to efficiently distribute profits to shareholders, effectively reducing the overall tax burden.

Possible legal forms of companies and types of brokerage licenses in Malta

Registering an LLC (Private Limited Liability Company) to provide brokerage services in Malta:

Establishing an LLC in Malta represents an excellent opportunity to offer brokerage services on an international scale. This business structure combines the management flexibility and control security required in the financial industry.

Process of setting up an LLC for brokerage services in Malta

Choosing a company name: Start by choosing a unique company name that avoids duplication of existing ones.
Preparation of documents: To register a company, you need to prepare the necessary documents:
Company Articles of Association: This document sets out the structure of the company, the rights and obligations of the members, its objectives and other important aspects.
Founder's Agreement: This records the agreement of the founders regarding the formation and operation of the company.
Statement of Incorporation: A formal statement expressing the intention to register a company.
Formation of authorized capital: registering an LLC in Malta requires a minimum authorized capital, which can be in cash or in the form of a property contribution.
Submitting documents to the MFSA: Submit all required documents to the Malta Financial Services Authority for careful review and subsequent registration. This process ensures compliance with the country's legal requirements.

This comprehensive process underscores the commitment to transparency and compliance necessary for success in the Forex industry. Malta's attractive tax regime and regulatory framework make it a favorable jurisdiction for Forex brokerage operations.

Setting up an LLC (Private Limited Company) or registering a JSC (Public Limited Company) in Malta for brokerage services brings distinct advantages, each tailored to specific business goals and sizes. Here are the advantages of both options:

Advantages of Registering an LLC for Brokerage Services in Malta:

High Business Image: Establishing an LLC in Malta underscores the company's commitment to professionalism and responsibility, fostering trust and confidence among clients and partners. This image is paramount in the brokerage industry, where reliability is key.
Global Market Orientation: An LLC offers favorable conditions for brokerage activities both within Malta and on the international stage. Its flexible structure allows for effective management and control, catering to the demands of the global market.
Favorable Tax Climate: Malta's tax regime makes it an attractive destination for financial institutions. Reduced tax rates and specialized tax benefits create an optimal environment for financial operations, enhancing profitability.
International Recognition: By establishing an LLC in Malta for brokerage services, companies gain international recognition and access to a thriving financial ecosystem. This recognition can open doors to global partnerships and collaborations.

Advantages of Registering a JSC for Large Brokerage Operations in Malta

Attracting Investments: Registering a JSC in Malta offers enhanced potential for attracting investments through the issuance of public shares. This ability to raise capital from a broader investor base is particularly advantageous for large-scale brokerage operations and expansion plans.
Diversity of Operations: The JSC structure provides flexibility to engage in a wide array of brokerage operations and offer various financial services. This diversity enables companies to adapt to changing market conditions and customer demands.
Strategic Growth: JSCs present additional opportunities for strategic growth and the expansion of activities. They can undertake mergers, acquisitions, and partnerships more effectively, positioning the company for long-term success.
Enhanced Business Development: The public nature of a JSC can attract attention from institutional investors and potential collaborators. This visibility can lead to strategic alliances that drive business development and market penetration.

Obtaining an MFSA license in Malta for Forex operations goes beyond a formal requirement. It is a strategic approach to building trust, enhancing reputation, and nurturing lasting relationships with clients and investors. This license signals dedication to maintaining the highest levels of trust, transparency, and professionalism in the dynamic world of Forex trading.

Right Company Structure: Selecting between an LLC and a JSC

Selecting between an LLC and a JSC depends on the company's size, objectives, and growth plans. Smaller entities may find the LLC structure more suitable, emphasizing professionalism and convenience. On the other hand, large enterprises seeking significant capital infusions and diverse operations may opt for a JSC to harness the advantages of attracting a broader pool of investors and expanding their business horizons.

Establishing an LLC or a JSC in Malta for brokerage services offers unique advantages that cater to different business aspirations. Careful consideration of these advantages and their alignment with the company's strategic goals is crucial in making the right choice for long-term success in the international forex market.

Concise overview of obtaining an MFSA license

The key stages of obtaining a brokerage license through the Malta Financial Services Authority include:

Preparation of Documents and Application for a Brokerage License in Malta. Clear and complete documentation is vital for demonstrating credibility and regulatory compliance.
1. Compile essential documents, including statutory papers, a well-structured business plan, financial statements, and management team details.
2. Develop a detailed business strategy outlining your approach to operating in the forex market, including client attraction methods.
3. Formally submit your application to the MFSA, signaling your intent to obtain a brokerage license.
4. Conduct a thorough risk analysis and outline strategies for risk minimization and management.
Consideration of Application
1. The MFSA carefully reviews submitted documents to ensure they meet regulatory criteria.
2. Effective communication with the MFSA may be necessary to address queries or provide additional information.
Timing and Stages of Approval
1. The entire process, from document preparation to approval, can take up to one year, with actual timelines varying based on factors like application complexity and document availability.

Obligations After Obtaining a Brokerage License in Malta:

Companies must regularly submit reports to the Malta Financial Services Authority (MFSA) to monitor compliance with financial regulations.
Independent audits are required to verify report accuracy and compliance.
Offer high-quality services, truthful information to clients, and prompt resolution of complaints.
Ensure the security of client funds and protection against fraud.
Continuously adhere to the financial, tax, and other laws of Malta, including all regulatory requirements and standards.

Obtaining a brokerage license in Malta is a meticulous process requiring thorough preparation and adherence to regulatory standards. The benefits of gaining access to European financial markets and establishing industry credibility make this effort worthwhile.

Opening a private bank account in Malta

Banking services in Malta offer Forex companies numerous advantages.

Opening a private bank account in Malta for a forex company involves specific documentation requirements:

Documentation Requirements for Opening a Private Bank Account in Malta:

Application for Opening an Account: A formal application expressing the company's intent to open a corporate bank account in Malta.
Company's Statutory Documents: These include the charter, articles of incorporation, and other legal documents that confirm the company's structure and legal status.
Passports and Documents of the Founders: Personal identification documents of the company's founders.
Business Plan: A detailed business plan outlining the company's activities and objectives.
Confirmation of the Source of Funds: Documentation confirming the source of funds to be deposited into the account.

Other requirements for obtaining a Forex license

1. The Need to Have a Physical Office in Malta: Maintaining a physical office in Malta is crucial for transparency, accountability, and regulatory oversight. It signifies active involvement in business processes and compliance with Maltese laws.
2. Requirements for Office Size and Structure:
- It should provide adequate space for employees, meeting rooms, document storage, and necessary technology.
- The office must be equipped with modern technology, including computers, telephones, and internet access.
- Security measures should be in place to protect client data and control access.

Final recommendations

Here are some final recommendations for opening a Forex license in Malta:

Review the MFSA requirements carefully.
Seek advice from experts.
Commitment to the highest standards.
Ensure financial stability.
Follow the rules strictly.
Be patient throughout the process.
Take advantage of the experts' opinions.
Focus on quality services.
Be ready to innovate.
Build a reputation based on trust.

Obtaining a Forex license in Malta is a painstaking process, but the benefits of gaining access to European financial markets and establishing an authority in the industry make it a worthwhile endeavor. If you require further assistance, consider consulting our experts who can provide personalized advice and support in obtaining your brokerage license in Malta. Contact us using the method convenient for you from the “Contacts” section.

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