US fast-food chain will relocate to Geneva to take advantage of Swiss intellectual property tax laws

McDonald’s is shifting its European headquarters to Geneva, in a snub to the European Union, to benefit from Switzerland’s advantageous intellectual property tax laws.

The US fast-food chain is joining other foreign companies that have moved their European headquarters to a more favourable tax regime. US corporations that have based themselves in Switzerland include Kraft, Procter & Gamble, Colgate-Palmolive, Yahoo! and Google.

McDonald’s said its new European head office would be opened in Geneva before the end of the year. It will bring together all senior management, who are spread across four regional centres: London, Paris, Munich and Vienna. The company’s European president, Denis Hennequin, who until now has split his time between London and Paris, will be among the executives making the move to Geneva.

The four regional centres will remain open and the UK’s business will continue to be run from London by Steve Easterbrook.

A spokeswoman for McDonald’s said the move “will enable us to conduct the strategic management of key international intellectual property rights, which includes the licensing of those rights to McDonald’s franchisees in Europe, from Switzerland”.

She said the decision was “a long time in the planning” and was first announced internally in August 2008, denying that it was related to new UK tax rules that took effect at the start of the month.

The recent changes to the taxation of foreign profits relate to intellectual property rights such as patents, copyrights and trademarks. They have already prompted the publishing and conference group Informa to relocate its tax domicile out of the UK to Switzerland to escape “double taxation” – once abroad and again in Britain.

Under the new UK tax rules, the earnings companies receive from their overseas subsidiaries relating to “real” economic activity involving trade in goods and services will not be taxed by the UK authorities. But income derived from intellectual property rights does not fall into this category and will be taxed by HM Revenue & Customs, even if it has already been taxed overseas.

Other companies have recently moved from Britain to lower tax regimes such as Ireland, Luxembourg and the Netherlands. The list includes the advertising giant WPP, drugs group Shire, publishing company United Business Media, rented office group Regus, financial groups Henderson, Brit Insurance and Hiscox, and engineering firm Charter.

As part of governments’ efforts to stem corporate tax avoidance, there are moves under way to force multinational companies to reveal how much tax they pay in each jurisdiction they operate in.