I recall from the last Freetrade investor meeting that one of the former Freetrade founders has been working hard to get Freetrade Italia set up (raising money separately, getting licenced/regulated, etc).
Please can you remind us of the details of the deal between Freetrade Ltd and Freetrade Italia? Off the top of my head, Freetrade Italia will be utilising the software stack built by Freetrade Ltd. In return, Freetrade Ltd has c.30% stake in Freetrade Italia. Are there any additional services agreed?
Finally, any updates on the progress of Freetrade Italia? Community waitlist, fundraising, team members, etc.?
To recap, Davide (one of the Freetrade cofounders) returned to his native Italy about a year ago for personal reasons. We thought it would be a good opportunity to explore expansion in Italy and set up a minimum corporate presence there in the form of a 100% owned subsidiary, Freetrade Italia Srl. We looked at a few options, including having FT Italia as a separate ringfenced entity and Freetrade Ltd providing a license for the territory.
Ultimately, we decided the best way to expand to other European countries in the short term is to utilise our FCA regulatory passport. We’re going to start with Ireland and go from there. With Brexit happening, and a lack of clarity on what will happen to the regulatory passport post-Brexit, we are in the process of setting up a locally regulated EU subsidiary, too (this only needs to be done in one EU country and Italy is not the ideal jurisdiction for a number of reasons).
We started the formal process to shut down Freetrade Italia in January. It then takes some months after notifying the government before it can be closed, which we’re still waiting for.
This is where you realise how deeply the team has thought the expansion through and what growth prospects into the 0.5bn population market there currently are.
Thanks Adam. Well thought through and sounds sensible.
Definitely agree that Italy isn’t the best place to set up shop. Going by other tech firms, Ireland sounds the most attractive. But looking at other financial firms, Frankfurt sounds like a runner up.
I’d rather hope that Freetrade don’t take that path @Vlad.
Stripping out the ethical and moral perspectives that envelope tax avoidance discussions, it would seem a little disingenuous of a business that’s founded on democratising investment and doing things differently to then seek to avoid paying tax using controversial loopholes.
From a shareholder’s perspective, I’d also be concerned by the reputational risk such a move might have on the business, especially as the tide has changed wrt the use of aggressive corporate tax avoidance structures.
Difficult to disagree with you @CTE, but as Adam says, an EU presence with its own passporting rights is becoming increasingly necessary as uncertainty re: Brexit continues. In selecting that country, tax should and will be one of the influencing factors and I don’t think that is aggressive.
@freetrade_cal@adam, apologies guys. I think I may not have been as clear as I could have been.
I totally understand and agree with you on the need for an EU presence for the purpose of passporting, Brexit is, if you don’t mind me saying, a joke and a nightmare. I also fully expect and support optimal tax planning to factor into that decision.
However “the double Irish, Dutch sandwich” to which @Vlad referred to, though in jest, is what many, including the IMF would refer to as an aggressive tax avoidance structure. There is a big difference between exploiting loopholes to avoid paying tax, and benefiting from the super competitive Irish tax regime. Personally I think it would be a shame if Freetrade took the former route, for the reasons I pointed out above.
Before I acquire more negative perceptions and unfavourable comments, let me make a declaration. I only meant double Irish as a joke. And whilst it may have sounded fairly unethical, it did not reflect my genuine intentions or expectations for Freetrade to follow that route. It was only to infuse some informal input into the formal conversation.
Hope you could now stop believing that I promote illegal tax avoidance schemes as with all honesty, I do not.
It’s cool, Vlad! @CTE said as well you referred to it “in jest”.
I think @Rob or @freetrade_cal will write a blog post once we have made the decision on where to set up a locally regulated EU subsidiary. That should describe the thinking behind the decision.
As @freetrade_cal said, tax is only one of the influencing factors. It’s not irrelevant, but there is a lot more that goes into it (e.g. which city has / can attract the talent for us to make Freetrade the best in the world?).
I knew that it won’t be possible at the moment. My question was whether it would happen before a subsidiary is set up in some EU country and German/French/etc. stocks are available, or would that happen all the same time. In other words, would I (as EU resident) be able to start buying UK stocks before Euro-denominated stocks are available on the platform.
Very likely yes, as we could onboard any EU resident right now. We have the regulatory permission to do so.
Before we do onboard EU residents in any of the markets, we want to be satisfied that our systems, controls and processes (think e.g. customer ops) are robust enough to deliver an outstanding experience for them.
Great question! We’ll be on the continent as soon as possible. Keep you posted!
Thanks for the answer ! But I was talking about the locally regulated EU subsidiary that @adam was mentionning to benefit from EU passporting rights in the (not that unlikely) scenario of a hard Brexit
(that not being serious, of course)
