recent report indicates that a specific region of Switzerland is on track to become a more significant tax haven than Hong Kong. According to the report, the cantons of Nidwalden will have the lowest taxes in 2025.
The report in question is the BAK Taxation Index 2020 from BAK Economics. The organization regularly measures how attractive the Swiss cantons are as tax havens, comparing them with each other as well as other locations around the world known as tax havens.
It is no secret that Switzerland has been in the process of implementing tax reforms, which are commonly referred to as the most significant in recent decades. As part of these reforms, the taxes on corporate profits will drop significantly in several of the Swiss cantons. One of the cantons with the highest impact will be Nidwalden, which is on Lake Lucerne.
Figures in Nidwalden
Nidwalden is on track to have a corporate tax rate of just 9.8 percent by 2025. This will be lower than that of Hong Kong unless Hong Kong makes changes to its own taxation policies.
Figures Across Switzerland
Currently, Switzerland has a corporate tax rate of 16.8 percent, which will drop to 13.5 percent by 2025 when the planned reforms are in place. As a comparison, this rate would make Switzerland more of a tax haven than Singapore.
The study also found that Bern has the country’s highest tax burden, and it is ahead of London, Vienna, Milan, Paris, and Munich.
A Refresher on the Tax Reforms
For those who need a refresher on the tax reforms, projections expect the weighted Swiss average of GDP following the STAF implementation across the 26 cantons to reach 13.5 percent from the previous 16.8 percent.
Of the Swiss cantons, Basel-Stadt has the largest reduction in its standard business tax burden, dropping 8.7 percent. In total, six Swiss cantons will have a reduction of more than 5 percent, and 12 will drop the rates by more than a percentage point. Four of the cantons will have a reduction of less than 1 percent, and only three will not have any reduction. These figures are all based on projections for the planned reforms.
The goal of these tax reductions is to improve Switzerland’s fiscal competitiveness globally. The planned tax reforms are designed to boost innovation as well as give companies security since they will be able to make more accurate and better-informed long-term projections.
Switzerland’s planned tax reforms and the impact of them, specifically the fact that the country is on track to have lower tax rates than Hong Kong, which is known for its corporate-friendly taxation policies, is very important for international companies and high-net-worth individuals.
People and companies alike tend to choose where they will be based depending on the tax rates. As such, it is common for reductions in taxes to bring in a wave of new businesses and high-net-worth individuals who want to take advantage of the low rates.
One example of this in action would be when Italy made a flat income tax in Tuscany for new residents. So many people bought homes in this region that the local market became very tight and prices skyrocketed.
Time will tell how many new businesses Switzerland attracts with its planned tax reforms, but given the projected figures and the fact that it will have lower rates than Hong Kong, the country is likely to see growth in international businesses that choose to base themselves there. Of course, it also remains to be seen whether Hong Kong will issue tax reforms before the Swiss ones are fully implemented, as that could help the jurisdiction remain competitive.
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