January 12, 2017

Friedemann Thomma interviewed by Tax Notes on Snap’s move to book overseas advertising revenue through a United Kingdom entity

2 min

Tax Notes interviewed Venable partner Friedemann Thomma in a January 12, 2017, article on the recent move by Snap, Inc., the parent company of popular messaging app Snapchat, to book its overseas ad revenue through a new London office. Under the plan, the company will continue to pay local taxes in countries where it has branches, including the United States, but revenue generated in other countries will be processed through London. When announcing the new structure, Snap also corrected previous media reports that the company had chosen London as its new international headquarters and emphasized that its headquarters would remain in the United States.

“Snap's statement that it has not chosen London for its international headquarters but will book its ad sales there is odd,” said Thomma. “At the surface level, there's a tension right there, because usually headquarters functions demand a higher revenue allocation to that jurisdiction.” Nonetheless, he described the move as a symptom of a “postcreative tax planning phase” where multinational companies recognize that old creative tax planning techniques need to be adjusted.

“Snap's decision, along with similar decisions by other companies, clearly and directly are made in anticipation of changes coming as a result of the OECD's BEPS project, particularly the exchange of country-by-country reports under action 13,” according to Thomma. “What companies are saying now is: 'It's great if we have a fantastic structure, but if it invites scrutiny from both governments and the public, that comes with a cost.’”

Thomma speculated that Snap’s move is a trend from places like Ireland and Luxembourg and toward places such as the UK, which have worked to lower their corporate tax rate. “It's clear to me they have enough people over there...and they're recognizing that the U.K. is not such a bad place to do business in,” he said.