NEW YORK (Reuters) - Bermuda's business climate is getting chillier, so some multinational companies are seeking more hospitable locales — like wind-swept Ireland and snowy Switzerland.

In recent weeks, there has been an exodus of large companies incorporated in Bermuda and the Cayman Islands to Europe in search of more favourable tax treatment and other benefits. They're looking to reincorporate ahead of US legislation that could require companies based there to pay regular income tax.

Multinationals face higher taxes in the United States than in many other countries — a difference that some have argued hurts their competitiveness. By incorporating in low-tax jurisdictions, a company can narrow the difference with foreign-based peers.

Those heading across the pond include Tyco International Ltd. and Tyco Electronics Ltd., Weatherford International Ltd. and Foster Wheeler Ltd., among others. Other moves are likely.

"They're worried about legislation two or three years out," said Marc Teitelbaum, who chairs the taxation practice at global law firm Sonnenschein Nath & Rosenthal LLP. "People are worried about proposals that Obama and (Senator) Carl Levin have made to try to take more vigorous action against entities formed in tax haven jurisdictions."

A US Senate bill, co-sponsored by Barack Obama when he was a senator from Illinois, would treat companies in tax havens as domestic corporations, taxed on their worldwide income, and likely increase costs.

The bill lists dozens of tax havens — including Barbados, Malta, Mauritius, Belize, and a number of Caribbean and Pacific nations. Many of these would likely amend their laws to try to get off the US list, said Joseph Calianno, a partner in Grant Thornton's national tax office.

"If this gets passed, all the income is subject to US tax, so they're looking at low-tax jurisdictions that are not on this list," Calianno said.

While Congress is now working on a proposal to pull the US economy out of a deep recession, lawmakers eventually will reconsider how US companies' foreign earnings are taxed. Given that the US House, Senate and the White House are all controlled by Democrats, higher taxes are expected.

Places like Switzerland stand to benefit. It has a tax treaty with the United States and boasts a deep pool of legal and finance professionals needed to run a headquarters. It is also an appealing place to live for expatriates and has low individual tax rates.

Such treaties involve coordination between governments on issues like income tax and sharing information about taxpayers.

With the U.S. government keen on greater transparency in the current climate of bailouts and pricey stimulus plans, companies could face criticism for being offshore. But not enough for them to change.

"While it's possible this could be viewed (as hurting a company's image), I think many companies view these things as very prudent business steps," said Tim Hanley, a Deloitte consultancy specialty in industrial companies.

The decision to move abroad comes at a price, including possible removal from the closely watched benchmark the Standard & Poor's 500 index

For companies like Tyco International and Tyco Electronics, the proposed move to incorporate in Switzerland could hit their shares since it would likely make the stocks ineligible for inclusion in some widely tracked stock indexes.

Tyco shareholders will be asked to vote on the proposal at a special meeting in March, and the change of domicile would take place as soon as possible after approval. Tyco says the move would help maintain a competitive tax rate and strengthen its presence in Europe.

Companies based in Bermuda and the Caymans are typically considered US companies, while those incorporated in Switzerland may not qualify for inclusion in the index, said Dave Guarino, a spokesman for Standard & Poor's. He declined to comment on specific stocks.

A spokesman for the Russell indexes said members of US indexes are removed when foreign reincorporation is final.

Credit Suisse analysts estimate index funds would sell about 67 million shares each of Tyco and Tyco Electronics. With fewer than 500 million shares outstanding, that's a big chunk of a company's shareholder base.

When insurer Ace Ltd. moved its incorporation to Switzerland from the Caymans last year and was removed from the S&P 500, its shares sank.

Transocean Ltd. won shareholder approval in December to move to Switzerland from Bermuda. Its stock underperformed peers by a wide margin in the week after it was dropped from the S&P 500.

Oilfield services company Weatherford is also moving to Switzerland from Bermuda, targeting reincorporation by March, while Noble Corp is leaving the Caymans. Shareholders of engineering and construction company Foster Wheeler have approved a move to Switzerland from Bermuda.

Another Tyco spin-off, health-care products maker Covidien Ltd., is moving its headquarters to Ireland, citing a favourable tax structure and access to international markets.

Some two dozen companies that trade on US stock exchanges are incorporated in Bermuda, and more are likely to depart, said Grant Thornton partner Paul Beecy, an expert on international tax issues. If tax benefits evaporate, he said, companies will face a significant choice.

"I can either stay in Bermuda and pay no tax, but there is no comprehensive income tax treaty, or go to a place like Ireland which has a 10 percent rate and a comprehensive income tax treaty."

Beecy said it is often easier to reincorporate in a country that is also a market, like Ireland and Switzerland, while avoiding the possible consequences of a change in US law. "They're trying to get ahead of the curve," he said.