Garmin Ltd., which made its name pioneering GPS navigation, says it wants to trade its beach home in the Cayman Islands for new digs closer to the mountains of Switzerland.

The Cayman Islands-based company says it wants to reincorporate in Switzerland so that it can be closer to its growing European operations and to potential acquisitions in that market. That is doubtless true as far as it goes, but experts says there are compelling tax and political advantages that lead companies such as Garmin to incorporate offshore, even though they are essentially U.S. enterprises. Garmin has an operating headquarters in Olathe, Kansas.

The company's global positioning systems allow operators of cars, boats, and other vehicles and vessels to navigate with satellites and computers. The 21-year-old company, which was founded by radio industry engineers Gary Burrell and Min Kao (hence the name Garmin), has seen sales drop over the last year, although it is the market leader with a share of about 33 percent. It recorded nearly $3 billion in sales in 2009, down from about $3.4 billion in 2008. It is looking for global growth opportunities, and a presence in Europe makes sense.

“We believe that the change of our jurisdiction of incorporation will enhance our global business operations and reputation consistent with our status as an international company with significant operations in Asia, North America, as well as Europe,” Kao, chairman and CEO of Garmin Ltd., said in a prepared statement. “Switzerland also offers a well-developed corporate, legal, and regulatory environment with an extensive network of tax treaties with other countries.”

Shawn Carson, international tax director at CBIZ MHM in New York, said the Cayman Islands currently does not have a network of tax treaties, which means that dividends, royalties, and interest payments made by companies incorporated there can be subject to taxes in multiple jurisdictions, Carson said. However, Switzerland has a wide network of treaties, which vastly reduces the amount of tax on those payments.

“That should be a major benefit to Garmin, should it wish to move its money around its corporate group,” Carson said.

Garmin’s decision might also be motivated by impending changes in Congress, as the political winds have shifted against offshore sites like the Cayman Islands, said J. Robert Brown Jr., who teaches corporate and securities law at the Sturm College of Law at the University of Denver.

While many companies incorporate in places like the Cayman Islands because of secrecy laws, Garmin is likely there because of the tax benefits, Brown said.

“Many, including the Obama administration, view the use of these jurisdictions by companies that operate in the U.S. as a ‘loophole’ in the tax system and want to close the loophole by increasing the taxes imposed on these companies,” he said. “Anticipating these possible changes, a number of companies have left the Caribbean, with Garmin simply the latest.”

Any attempt to close loopholes in the tax system to capture profits from companies operating in places like the Cayman Islands would be less likely to apply to companies in countries like Switzerland, Brown said.