The mere fact of registering a broker in the offshore zone of many people leads to bad thoughts. Some refuse to work with him immediately, without delving into further details. But companies also understand that they scare away some customers in this way. And, nevertheless, most brokers are located exactly there - offshore. So there are good reasons for that.
Why do brokers register offshore
Some kind of offshore zones appeared in the Mediterranean back in the days of Ancient Greece. Then the merchants began to unload the goods not in the city ports, but secretly at the nearest quays. They did this in order not to pay taxes and duties. The essence has remained the same since then.
By registering in an offshore zone, a Forex broker receives a simplified and lightened tax regime from the local authorities. Benefits for both parties. The organization pays less than if it worked in its own country. And the offshore territory gets even a little, but it is much better than nothing. For example, who would start doing business in the Cayman Islands if there weren't a “tax haven” there? Nobody. And now, divisions of Intel, General Motors, Procter & Gamble, Bank of America, Deutsche Bank and many others are registered there. As we can see, not only brokers get rid of the tax burden.
By the way, the divisions of all the above-mentioned respected companies are listed at the same address in one office building. This suggests that the business is present in the offshore only legally. The physical headquarters of the same brokers are located in the major cities of the countries where they come from.
Both entire states and part of their territories with a special tax regime can act as offshores. The most popular brokers are Saint Vincent and the Grenadines, Seychelles, Marshall Islands, British Virgin Islands, Mauritius, Belize. And besides - Cyprus, which stands out from the list because it is a member of the European Union, and not an island lost in the ocean.
In addition to reducing the tax burden, these territories offer other advantages. The almost complete absence of regulation and control on the part of the authorities, hence, getting rid of accountability to them. All this is accompanied by the confidentiality of financial activities.
Risks for the trader
It is important to note that not only small start-up brokerage companies, but also the largest Forex participants with an impeccable reputation have offshore registration. In addition, many organizations are regulated in several jurisdictions, some of which are offshore and some are not.
Thus, when choosing a broker, a trader should consider many other factors and characteristics besides the location.
The disadvantages of offshore brokers are obvious. In case of disputable situations, they will have to be resolved in accordance with the legislation of the country of registration. Traders themselves do not understand the laws of the islands in the Caribbean or the Pacific. And finding a professional lawyer in a European country who would know them is also almost impossible. Defending your interests in the end can be too difficult and expensive.