One of the SEO tips given by many professionals is to make sure to host your web site in the country you want it to rank in. The truth is, it isn't that important and may be irrelevant in many cases, Google said.
In a Google Webmaster Help thread, Google's John Mueller said in response to the question of SEO and server location:
For search, specifically for geotargeting, the server's location plays a very small role, in many cases it's irrelevant. If you use a ccTLD or a gTLD together with Webmaster Tools, then we'll mainly use the geotargeting from there, regardless of where your server is located. You definitely don't need to host your website in any specific geographic location -- use what works best for you, and give us that information via a ccTLD or Webmaster Tools.
Q: Is the server location important for geotargeting?
A: If you can use one of the other means to set geotargeting (ccTLD or Webmaster Tools’ geotargeting tool), you don’t need worry about the server’s location. We do, however, recommend making sure that your website is hosted in a way that will give your users fast access to it (which is often done by choosing hosting near your users).
But overall, it is nice to see such a strong word used by John, as "many cases it's irrelevant."
So if you are not using a ccTLD and you didn't set your geo-details in Webmaster Tools and the language and content on the site don't strongly suggest country bias, then server location is important but you'd have to think, how important...
Forum discussion at Google Webmaster Help.
Image credit to BigStockPhoto for global servers