By 2025, Hong Kong will become a part of China and lose its privileged status of the territory with the lowest taxation, a study found. Curiously enough, it will be replaced by the small mountainous canton of Nidwalden in Switzerland.

The study was conducted by BAK Economics. According to its taxation index that regularly measures the attractiveness of Swiss cantons compared with each other as well as foreign countries, Nidwalden will have the full potential to become a new tax haven for companies. In addition, Hong Kong is unlikely to be able to maintain its status for more than five years as geopolitical tensions around China is growing.

At the same time, Switzerland is going to implement one of the most important tax reforms in decades. After the reorganization of the Swiss tax system, tax burdens on corporate profits are expected to fall dramatically in certain cantons, especially Nidwalden. Consequently, this canton may become the one with the lowest tax burden that will push it far ahead of Hong Kong.

If Hong Kong wants to remain at the forefront, it also needs to change its own tax regime. Otherwise, in five years, the tax rate in Nidwalden will be at 9.8%, which is lower than the current rate of 9.9% in Hong Kong.