Border Municipalities: The Distance Worth 150,000 Euros (cross-border guide)

Context

TL;DR

• Misinto worker lost 150k euros in tax benefits due to border municipality status.
• New Swiss-Italian tax agreement impacts cross-border workers' net salaries.
• 72 Italian municipalities now recognized as border areas but lack retroactive tax benefits.
• Misinto's mayor fought for equity in cross-border worker tax benefits.

Key facts

• Misinto worker: Lost 150,000 euros in tax benefits due to border municipality status.
• Distance from border: 17,088 meters from the Swiss border.
• Misinto population: 5,754 residents.
• New tax agreement: Effective since July 17, 2023.
• Border municipality: Defined as within 20 kilometers of the border.
• New border municipalities: 72 Italian locations, including Misinto, recognized as border areas.
• Old cross-border workers: Worked in Switzerland since 2018, pay taxes only in Switzerland until retirement.
• New cross-border workers: Must pay taxes in both Switzerland and Italy.

Distance is sometimes more than just a geographical measure; it can represent a fiscal dividing line that makes a difference of tens or even hundreds of thousands of euros. This is the situation emerging strongly in Lombardy, where the definition of a 'border municipality' has taken on increasingly complex and, for many, unfair contours. The story of a worker from Misinto, in the province of Monza, is emblematic: for twenty years, she crossed the border to work in the Canton of Ticino but was never recognized as a cross-border worker with the associated tax benefits. Only thanks to the persistence of her husband, who calculated a distance of just 17,088 meters from the Swiss border, did a glaring disparity come to light: an estimated 150,000 euros in lost tax benefits for the family and a missed 20,000 euros in revenue for her municipality in terms of tax repayments.

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Operational details

The crux of the matter lies in the very definition of a 'border municipality,' a curious story rooted in over fifty years of treaties and established practices. The previous Italy-Switzerland agreement from 1974, surprisingly, did not provide a detailed definition. It allowed the cantons of Ticino, Valais, and Grisons to use their own unilateral lists of border municipalities, lists that, although not formally mentioned in the agreement, were tacitly accepted by the Italian authorities. Giordano Macchi, director of the Taxation Division of the Ticino Department of Finance and Economy (DFE), ironically admitted that he could not trace the original source of these lists, joking that in 1974 he was still learning to walk. However, it seems the origin can be traced back to a list related to grazing rights and livestock crossing, included in the 1953 Convention between Switzerland and Italy for border traffic and pasturing, which already mentioned 'cross-border workers' and 'border zones.'

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Key points

The current situation creates significant confusion and uncertainty, especially for cross-border workers residing in the 72 newly recognized municipalities. For these workers, the lack of retroactivity means facing a less favorable tax regime compared to their 'old cross-border worker' colleagues, despite performing the same job and having the same years of service. It is crucial for those in this situation to act with awareness and promptness. The first step is to verify whether their municipality is included in the new official list and the exact distance from the border, as the diligent citizen of Misinto did by consulting the Italian Military Geographical Institute (IGM). Subsequently, it is essential to understand the implications of their 'new cross-border worker' status for income tax declarations in both Italy and Switzerland. Remember that 'new cross-border workers' pay income tax on the Swiss portion up to 80% directly in Ticino and the remaining 20% (and other local taxes) in their Italian municipality of residence.

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