[K]eurig Green Mountain has moved its coffee acquisition operations from Vermont to Switzerland, a legal maneuver that could save the company millions in taxes.
In a move that the news service Reuters called “entirely legal,” Keurig has switched its coffee-buying base from Waterbury to Lausanne, Switzerland. The move allows the company to reap tax benefits from a 1975 legal loophole.
Reuters reported that internal conversations within the company confirm it is taking advantage of a tax loophole that companies like Starbucks have been taking advantage of for years. By moving to Lausanne, the company can shift its profits for commodity procurement there and enjoy a lower tax rate.
The tax rate in Switzerland, which has become a commodities trading hub, is less than 10 percent, according to Reuters. In Vermont, the income tax rates range from 3.5 percent to 8.5 percent. Without the write-offs that many corporations take, the U.S. corporate income tax is 35.4 percent.
Suzanne DuLong, a company spokesperson, said Tuesday that the employee relocations are now complete since the company announced the commodities headquarters’ move to Switzerland in December 2014.
Lindsey Bolger, a vice president for coffee sourcing and excellence, leads a group that includes American and Swiss workers, according to DuLong. She called the move overseas “strategic” and did not disclose how many employees relocated.
DuLong said the story by Reuters is a follow-up on the company’s December announcement to move to Switzerland using a new legal entity called Keurig Trading Sà rl.
“The new entity expands Keurig’s ability to implement best-in-class operational strategies in our coffee purchasing process and that the decision was a strategic one in keeping with Keurig’s growth and evolution towards being a global beverage player,” DuLong said.
The company, which started as Green Mountain Coffee Roasters in 1981, has also been a regular recipient of Vermont’s incentives for job creation since 2007. Under the Vermont Employment Growth Incentive, or VEGI, the company has received more than $7.7 million in four separate payouts.
In August, the company announced it would lay off 270 employees following a disappointing earnings report. About 200 of those were in Vermont, and the majority were in the Waterbury headquarters where workers make the single-cup hot brewing system. Many were encouraged to apply for jobs in Essex, where the company is manufacturing and getting ready to launch the Keurig Kold system for making cold beverages.
Brian Kelley, the president and chief executive officer of Keurig, makes a roughly $1 million per year salary, plus $1.9 million in bonuses and $4.7 million per year in stock options.