A new study released by BAK Economics has found that Canton Nidwalden in Switzerland has the lowest tax burden for companies worldwide. After reforms to taxation were made nationwide in 2019, Nidwalden went one step further, cutting business taxes to encourage company growth.

Canton Nidwalden beats Hong Kong for the first time

The BAK Taxation Index is a study that measures the tax burden on companies in Switzerland and other nations. The metric shows what the "effective tax rate" for companies is, once all taxes and financial incentives are accounted for.

According to BAK, Nidwalden is now the cheapest place for international companies and new businesses to set up shop. The Swiss canton pushed Hong Kong out of first place with a “real” tax burden of 9,8 percent, the lowest in the world.

Swiss tax reform led to lower business taxes

BAK noted that the reduction in taxes can be attributed to a referendum in May 2019, when Swiss citizens approved the Federal Law on Tax Reform and AHV Financing, also known as the TRAF. The TRAF abolished financial incentives for international companies, instead choosing to allow tax breaks to be applied to businesses regardless of where they are from.

In 2020, Nidwalden went one step further, cutting company income taxes after a cantonal referendum. Coupled with the tax cuts given by the TRAF, the BAK Taxation Index says the “effective tax burden for companies” fell in Nidwalden from 10,3 to 9,8 percent.

With Switzerland currently examining plans for a global minimum tax rate for companies with a turnover of more than 750 million Swiss francs, Nidwalden and other Swiss cantons must prepare for more changes in company taxation. Concluding the report, BAK wrote, “It remains to be seen how this will affect international tax competition, especially for companies that fall below the turnover threshold."

Cheapest places in the world for companies

The list of the top 10 cheapest places for companies, in terms of taxation, is full of Swiss cantons, along with some global competitors. Here are the places with the lowest effective tax burden for companies in 2021, according to the BAK Taxation Index:

1. Canton Nidwalden (9,8 percent)
2. Hong Kong (9,9 percent)
3. Canton Uri (10 percent)
4. Canton Obwalden, Canton Appenzell Ausserrhoden (10,3 percent)
5. Canton Lucerne, Canton Glarus (10,5 percent)
6. Canton Thurgau (10,6 percent)
7. Hungary (10,9 percent)
8. Canton Basel Stadt (11 percent)
9. Canton Schwyz (11,1 percent)
10. Canton Schaffhausen (11,8 percent)

For more information, check out the BAK Economics website.