Swiss border payroll: AVS, LPP and real net

Context

In brief

• Withholding tax only in Switzerland from 1 January 2024
• Exemption €7,500 (old cross-border workers) or €10,000 (new cross-border workers)
• AVS/AI/IPG 5.3%, LPP 7-18%, LAMal optional for Permit G

Key facts

• What: New payroll rules for Italian cross-border workers
• When: 1 January 2024 (New Cross-Border Agreement in force)
• Where: Switzerland (all cantons)
• Who: Italian cross-border workers with Permit G/B
• Old exemption: €7,500 annually (transitional regime 2024–2033)
• New exemption: €10,000 annually
• AVS/AI/IPG: 5.3% of gross salary (employee)

The New Cross-Border Agreement, signed on 23 December 2020 and effective from 1 January 2024, has redesigned the payroll rules for Italian cross-border workers in Switzerland. One of the most relevant novelties concerns the withholding tax regime, now exclusively withheld in Switzerland and never in Italy. The paradigm shift to avoid double taxation passes through the new exemption, which varies depending on whether you are an 'old cross-border worker' (already such before 17 July 2023) or a 'new cross-border worker' who entered after that date.

The Italian ratification of the agreement took place through Law No. 83 of 13 June 2023. For old cross-border workers, the transitional regime provides an exemption of €7,500 gross per year, with the right to tax credit in the Italian 730 model. New cross-border workers, on the other hand, benefit from a franchise of €10,000. In the transitional regime from 2024 to 2033, the amount subject to withholding tax varies depending on the year, until the distinction between the two categories ceases.

The Convention against Double Taxation Italy-Switzerland (signed on 9 March 1976) remains the legal foundation for the tax credit that cross-border workers report in the CE section of the 730. Italy, in fact, does not apply income tax to the work of those who work in Switzerland — because Switzerland is not a member of the EU/EEA and has its own tax regime. The withholding therefore takes place only once, with the Swiss employer, eliminating the risk of double taxation.

Composition of mandatory withholdings in the pay slip

Understanding the composition of the pay slip is the first step to verify that the withholdings are correct. The main mandatory contributions that you will see in the pay slip are AVS (old-age and disability insurance), AI (disability), IPG (loss of earnings allowance) — together withheld at 5.3% of the gross — and the LAMal fund (health insurance) which, unlike AVS/AI/IPG, is optional for cross-border workers with Permit G, although it remains an essential coverage. Discover which contributions a LAMal coverage entails and which deductible to choose.

In addition to employee contributions, the pay slip shows AD (unemployment insurance) and AC (insolvency compensation), both at 1.1% (with a maximum of CHF 148,200 of insured salary) and LAINF (accident insurance), which varies between 0.7% and 1.5% depending on the risk of the activity. The employer also pays their share of contributions (not directly visible in the pay slip, but still a company expense).

Finally, there is the LPP (second pillar pension fund), with contribution rates ranging from 7% to 18% depending on the age group, starting from 25 years. This age differentiation reflects the risk profile and the number of years until retirement.

Operational details

How the net salary is composed

The net salary that a cross-border worker receives each month is the result of a methodical subtraction between the agreed gross salary and a series of mandatory deductions. In the case of Italian cross-border workers, the calculation is complicated by the two different withholding tax rates applied depending on whether the worker is a "old" or "new" cross-border worker.

Let's take a generic scenario: a cross-border worker receives an agreed gross salary (Bruttolohn in Swiss German). From this amount, the following deductions are made, in order:

1. AVS/AI/IPG: 5.3% of the gross, withheld as a mandatory contribution for social benefits. 2. AD/AC: 1.1% up to a maximum of CHF 148,200 of insured income per year. 3. LAINF: 0.7-1.5% depending on the sector of activity. 4. LPP: 7-18% depending on age (from 25 years onwards). 5. LAMal: Optional for Permit G. If joined, approximately 5-8% of the gross is withheld (but varies based on the premium and deductible, generally CHF 300–2,500 for adults). 6. Withholding tax: Now withheld only in Switzerland. The first amount (€7,500 for old, €10,000 for new) remains tax-free.

Old vs new cross-border workers: the impact on the paycheck

The distinction between those who were already cross-border workers before July 17, 2023, and those who entered afterward is not merely academic—it has direct implications for the monthly paycheck and the annual tax return.

Old cross-border workers: Benefit from an exemption of €7,500 per year in the transitional regime that develops from 2024 to 2033. During the transitional regime, the amount subject to withholding tax varies year by year, allowing a gradual adjustment to the new system.

New cross-border workers: Enjoy a fixed exemption of €10,000 per year, without reductions. This greater protection reflects the intention to attract new cross-border labor to the Swiss market.

In both cases, the tax-free amount translates into a slightly more advantageous monthly paycheck and, above all, a lower amount to be declared in the Italian 730 tax return. The tax credit in the CE section of the 730 covers the Swiss withholding tax paid, eliminating double payment.

Deadlines and tax return procedure

Each month, the Swiss employer delivers the paycheck to the cross-border worker (in German/French depending on the canton). The Italian tax return is made by November 30 of the following year using the 730 form, filled out at a CAF or accountant. In the CE section, the taxes paid at source in Switzerland must be indicated to obtain the tax credit. Read the guide on declaring Swiss income to correctly integrate the data in Italy.

It is essential to keep all annual paychecks and Swiss tax certificates (such as the employer's certificate reporting the gross and deductions), as the Italian Revenue Agency and the MEF may request them in case of checks. Switzerland does not automatically transmit tax data to Italy (since it is not a member of the EU/EEA), so the correct declaration depends on the cross-border worker.

Useful planning tools

To estimate your pension strategy, use the pension planner and the pillar 3 simulator.

Key points

Checklist: how to verify your payslip every month

Once you receive your payslip from your Swiss employer, the cross-border worker should follow a simple procedure to check that the calculations are correct:

1. Check the gross amount: Verify that the gross salary corresponds to the amount agreed in the contract. Any difference (increments, agreed increases, bonuses) must be documented.

2. Verify AVS/AI/IPG deductions: These should be 5.3% of the gross amount. If the gross amount is, for example, CHF 4,000, the AVS/AI/IPG deductions should be approximately CHF 212.

3. Check AD/AC: Approximately 1.1% up to the annual maximum of CHF 148,200. If the cross-border worker has not yet reached the annual maximum, the deduction appears; once exceeded, it disappears from subsequent payslips.

4. Verify LAINF: Depends on the sector (between 0.7% and 1.5%). Compare with previous payslips to ensure consistency.

5. Check LPP: Should vary between 7% and 18% depending on your age bracket (from 25 years old). If you are under 25, it should not be deducted.

6. Check withholding tax: If the annual gross income exceeds the exemption (€7,500 for old, €10,000 for new), the deduction starts on the income above.

7. Keep the payslip: Digitally archive (scan) all Swiss payslips and tax documents.

Annual deadlines and available tools

By December 31 of each year, the Swiss employer issues the tax certificate (Lohnausweiskopie) which reports:

• Annual gross salary
• All social deductions
• Withholding tax paid

In March-May of the following year, the cross-border worker completes the 730 form at a CAF or accountant, entering:

• In section RA the employment income
• In section CE the taxes paid at source in Switzerland for the tax credit

How to reduce the risk of errors in the payslip

The Swiss payslip remains one of the most important documents in the life of the cross-border worker. Understanding each element allows you to avoid surprises, verify the correct payment of contributions, and prepare calmly for the annual tax return. If you notice discrepancies, contact your Swiss employer and your Italian accountant promptly to avoid future disputes. You can use our payslip calculator to simulate the net monthly amount and check the impact of deductions on your specific contract.