This article was written by Adv. Nir Porat. He is the Co-Managing Partner at Ben Basat, Porat & Co., and is also responsible for leading the Corporate and International Law departments in the firm.

Adv. Nir Porat, Co-Managing Partner, Ben Basat, Porat & Co.

Lately, a new and very attractive jurisdiction has been offered to business owners in the industry looking for a license: a Binary options license or Forex license from the small Pacific Island of Vanuatu, under the regulating and supervising body for all financial licenses in Vanuatu – the Vanuatu Financial Services Commission, established in 1993 ("VFSC").

Vanuatu (formerly known as the New Hebrides Islands) might not be as well-known as some of the other tropical paradises in the Pacific Ocean, but it has plenty to offer business owners, especially those active in the finance industry. As such, Vanuatu offers a variety of tax benefits, as the nation has no income tax, no capital gains tax nor inheritance tax. It is therefore no surprise that Forex and Binary Options companies are not the only ones drawn to this specific jurisdiction. Many international ship-management companies are known to sail their ships under the flag of the nation as well as several well-known file-sharing services, such as KaZaA and WinMX which are incorporated in Vanuatu too in order to avoid the legal challenges they would have faced if incorporated in other jurisdictions.

While being regulated anywhere, including in Vanuatu, is a great advantage for both Forex and Binary Options companies worldwide as it increases trust among traders and improves their reputation, regulation can also assist with a number of additional issues, such as: opening bank accounts internationally, acceptance to payment processors, usage of a Vanuatu license as a part of a corporate structure together with another broker license, such as an EU one, where the Vanuatu licensed company is able to serve as a ‘market maker’ for an EU licensed brokerage.

Low costs and fast registration

In addition to the above, perhaps the two main reasons for the quick increase in popularity for Vanuatu licenses are:

(a) The fact that this is the fastest available Forex/Binary Options regulation out there (it is possible to be granted a license in only 2 to 3 months); and

(b) Very low capital requirements, even compared to other known licensing jurisdictions, such as Mauritius and Belize for example. Currently, the capital requirements for brokers looking to be regulated in Vanuatu are only $2000 USD!

There are, naturally, some additional expenses in connection with the regulation process, such as incorporation and administration of a Vanuatu financial company, annual registered office and secretarial services fees, application for trading in financial and commodity-based derivative instruments and other securities from VFSC, including VFSC regulatory application fees, governmental fees, agents consulting fees, legal fees, etc. However, these expenses are still smaller compared with other regulating jurisdictions.