McDonalds, the ubiquitous global fast food chain, is to move its European headquarters from London to Geneva because Switzerland is a more suitable jurisdiction from which to manage its IP licensing throughout Europe.
The widely-reported relocation is due to be completed in the autumn of this year and has been a year in the planning. However, the switch is supposedly not being motivated by new UK legislation governing the taxation of foreign profits, which went into effect on July 1. Rather, it will, according to the company, enable “the strategic management of key international intellectual property rights,” including the licensing of those rights to McDonalds’s franchisees in Europe.
The company has said that its overall tax position will be largely unaffected by the move; currently, the headline corporate tax rate in the UK is 28%, and McDonald’s overall UK tax rate will remain about 30% after the relocation. Corporate tax rates in Switzerland can range from 13% to 25%, depending on the canton of residence.
Under the long-awaited reforms, dividends from overseas subsidiaries can generally be received completely free of UK corporation tax, bringing the British corporate tax system in line with many other countries having tax friendly holding company regimes, such as Luxembourg and the Netherlands. However, this exemption will only apply to dividends derived from ‘real’ economic activity, not income from intellectual property, trademarks and copyright – something which has led several companies with substantial IP income to move their tax domicile out of the UK, or to reconsider their UK tax position. Ireland, Luxembourg, and Switzerland have been the main beneficiaries of these corporate defections.
In May, Informa, the publishing and conference company, announced that it was switching its tax residence to Switzerland because the Alpine country has “a less complex taxation system which offers upfront certainty of treatment and does not seek to impose tax on the unremitted profits of subsidiary companies in other jurisdictions.”
The company also cited another of other factors that make Switzerland a more suitable location for a parent company, including its “highly stable political and economic environment.”
Quality of life issues have also ranked highly in the list of reasons why companies are increasingly transferring their regional HQs to Switzerland.
A comprehensive report in our Intelligence Report series, titled "Offshore For Corporates", discusses in depth the comparative merits of offshore HQs, with a Corporate Treasury section analysing how to get an optimal blend of tax-efficiency and profits and finally a study into how two types of international business can use onshore low-tax regimes in parallel with offshore jurisdictions to construct highly tax-efficient corporate structures, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report7.asp
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