Is a low tax rate the only reason for companies to relocate to Switzerland?

When choosing a jurisdiction to migrate, the perception would be that taxation is of the utmost importance to foreign companies’ decision makers, however this is not entirely true. Whilst only countries with low taxation rates will be part of the shortlist, other factors play important parts, and which make Switzerland stand out as the domicile of choice for many multinationals.

Evaluating the tax regime

The complexity of the tax system, the corporate tax rate and the support of the administration is the first line of assessment. Then evaluation will take place between jurisdictions which tax on a territorial basis and those jurisdictions that have a low tax rate worldwide.

It is paramount to not only consider the current situation but how it may change in the future.

Decisive factors

Following taxation, there are other crucial criteria which a country must satisfy before a foreign company will choose to migrate.

• Labour flexibility
• Quality of life
• Political Stability
• Education of workforce
• Economic neutrality
• Proximity to key matters in Europe
• Ability to raise, invest and optimise its capital
• Employment environment

Considering the above, the jurisdiction which continues to attract and retain large number of foreign companies is Switzerland.

The attractiveness of Switzerland beyond tax

Switzerland suits economic neutrality as it is widely accepted for a headquarters to be based in a European country where decisions are influenced by local political power. It also scores highly on political stability as it has created comfortable economic conditions for foreign companies.

Switzerland is further recognised for offering a highly flexible labour market. This is especially attractive to US multinationals as the deregulated labour market is similar to its own. The highly-educated workforce is also of utmost importance for any prospering business.

Switzerland excels with the quality of life criteria, with Geneva and Zurich consistently being named best cities worldwide. This has an incredible high importance when senior managers are deciding on the location.

Switzerland also profits from its central European location. Its gateway to Europe is a significant advantage to foreign companies’ headquarters located here.

Competition

As foreign companies re-evaluate their locations every five years, Switzerland with its streamlining of regulatory procedures, simplification of their fiscal system, and enhanced offerings of international schools will continue to attract foreign companies. However it will need to hold its advantage as countries in competition such as Belgium, Luxembourg, Poland and Singapore are making significant progress in their fundamentals to attract multinationals.

In terms of tax recruitment

We have represented a number of firms which have relocated to Switzerland – assisting them recruit talent throughout Europe for their headquarters. If you are interested in the current opportunities with leading multinational which may suit your career needs, please contact our Head of EMEA Taxation, Marisa Hari on +44(0)20 7429 4421.