Double Taxation: How the Tax Credit Works (cross-border guide)

Context

TL;DR

• Foreign tax credit
• Double taxation
• Cross-border workers

Key facts

• Date: July 17, 2023
• Taxation: Concurrent taxation for new cross-border workers
• Credit: Swiss tax paid, within the limits of Art. 165 TUIR
• Swiss withholding: maximum 80% of ordinary Swiss tax
• Italian allowance: EUR 10,000 on Swiss employment income
• Documents: Lohnausweis and Quadro CE
• Exchange rate: Average annual CHF/EUR rate

For thousands of new cross-border workers hired after July 17, 2023, the Ticino payslip has changed. The new tax agreement between Italy and Switzerland introduced concurrent taxation: Switzerland withholds a reduced tax at source and Italy taxes the same employment income in the annual tax return, granting a foreign tax credit within the limits set by Article 165 of the Italian TUIR.

The essential point is this: the tax credit prevents full double taxation, but it does not always erase the Italian balance. For a new cross-border worker, you must convert Swiss francs into euros correctly, apply the Italian EUR 10,000 allowance, calculate IRPEF and local surcharges, then apply the foreign tax credit under Italian rules. For old cross-border workers, Swiss employment income normally remains taxed only at source in Switzerland.

Operational details

Calculating the Credit: From Lohnausweis to Quadro CE

The core step is correctly completing the Italian tax return, especially Quadro CE for foreign-source income. The cross-border worker must report the gross Swiss employment income and the withholding tax paid in Canton Ticino. Amounts shown in Swiss francs on the Swiss salary certificate (Lohnausweis) must be converted into euros using the average annual exchange rate for the tax year.

📊 Calculator-aligned example for 2026: New cross-border worker resident in Italy, hired after July 17, 2023, with a gross annual salary of CHF 65,000 and simulated exchange rate 1 CHF = EUR 1.099.

• Converted gross income: CHF 65,000 x 1.099 = EUR 71,435.
• Swiss social contributions: about EUR 8,144 deductible in the simulation.
• Cross-border worker allowance: EUR 10,000 applied before Italian IRPEF.
• IRPEF taxable income: about EUR 53,291.
• Swiss withholding tax: CHF 4,784, about EUR 5,258, because Swiss withholding for new cross-border workers is estimated at 80%.
• Gross IRPEF and local surcharges: about EUR 15,555 gross IRPEF plus EUR 1,066 local surcharges.
• Usable foreign tax credit: about EUR 3,922 in the simulation, not necessarily the full Swiss tax paid.
• Estimated Italian balance: about EUR 12,699, equal to CHF 11,555 at the exchange rate used.

This example clarifies two common mistakes: if the rate is expressed as euros per 1 Swiss franc, the Swiss gross income is multiplied, not divided; and Swiss withholding tax is not subtracted before calculating Italian IRPEF. The credit is applied afterwards, subject to statutory limits.

Key points

Checklist and Practical Tips to Avoid Mistakes

Facing the first tax return with Swiss income may seem complex, but a methodical approach avoids expensive errors. Documentation is the key. Keep the Swiss salary certificate (Lohnausweis) issued by the Ticino employer at the beginning of the year, because it is the official proof of income received and tax withheld at source.

💡 Cross-border worker checklist:

• Get the Lohnausweis: make sure your employer gives it to you by February/March.
• Use the correct exchange rate: use the average annual CHF/EUR rate published for the tax return. Always check whether the rate is expressed as EUR per CHF or CHF per EUR.
• Apply allowance and credit in the right step: first determine Italian taxable income, then calculate IRPEF and local surcharges, then apply the foreign tax credit within the allowed limits.
• Ask an expert: for the first tax return, use a CAF or accountant experienced in Italian-Swiss cross-border taxation.

⚠️ Mind the deadline: the ordinary Modello 730 filing deadline is September 30. Starting early is essential to collect all documents and calculate without rushing.

Before filling out the return, it is useful to understand the real tax impact on your net salary. Simulating Swiss deductions and the Italian IRPEF balance in advance can make a major difference for household planning. Tools like our net salary calculator help produce a consistent estimate and prepare for the tax return without surprises.

Source: Agreement on the taxation of cross-border workers and Art. 165 TUIR. Data and calculations for 2026 are simulations based on currently applicable rules.