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US-Based Snapchat Setting International Headquarters In Post-Brexit UK, Marking An Odd Move

10 January 2017, 10:01 am EST By Alexandra Burlacu Tech Times
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While other tech firms such as Google, Facebook and Uber settle in countries with lower tax rates, Snap is making an odd move. Snapchat's parent company has decided to set its international headquarters in post-Brexit UK.  ( Carl Court | Getty Images )

Snapchat's parent company, Snap Inc., is going across the pond and setting its new international quarters in London, UK.

London has been the site of Snap's overseas operations since 2015 and it currently has 75 company employees. Becoming Snap's global HQ, however, will likely mean that more Snap staff will be located in London.

Why A UK Snap HQ Is An Odd Choice

It's not unusual for U.S.-based technology companies to base their international headquarters in another country, but post-Brexit London is an odd choice. Other firms such as Facebook, Google and Uber decided to settle in countries such as Ireland and Luxembourg because they have lower tax rates, but that's definitely not the case with the UK.

On the other hand, these companies have been facing criticism for looking to pay lower taxes, so Snap's move to settle in the UK could prove to be a smart choice after all. By setting its international headquarters in London, Snap could be preemptively protecting itself against potential criticism over schemes to avoid hefty taxes.

Snap International Headquarters: What It Entails

With its international headquarters set in London, all of the advertising sales Snap makes in countries where it doesn't have local operations will be booked in the UK. Snapchat teams in Australia, France, Canada and Saudi Arabia, for instance, will be booked in the UK, a Snap spokesperson tells the Financial Times (FT).

While it's true that the UK has higher tax rates, this is not a problem for Snap just yet. The company is still struggling to turn a profit outside the United States so at least in the near future, it won't get huge tax rates.

In the future, however, this may turn out to be quite a challenge. Snap Inc. is growing at an impressive rate and it's expected to see a hefty spike in revenue soon enough, which will automatically translate to higher tax rates in the years to come.

New Snap Site Near Soho

While Snap Inc. currently has only 75 employees in London for now, the company reportedly plans to open a new site near its office in Soho and hire more people, including a few engineers.

"We believe in the UK creative industries. The UK is where our advertising clients are, where more than 10m daily Snapchatters are, and where we've already begun to hire talent," Claire Valoti, the Snap Group general manager in the UK, further tells the FT.

Snap's move to set its international headquarters in London will likely serve as a vote of confidence for post-Brexit UK, especially since the country's decision to exit the European Union is still controversial.

At the same time, Snap's UK expansion also paves the way for the upcoming IPO, which is reportedly targeting a $20 to $25 billion valuation.

It remains to be seen how things will pan out for Snap with its international headquarters based in the UK, but the odd and bold move could pay out in the end. Snap has yet to issue an official press release in this regard, but is expected to offer more details shortly.

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