Double Taxation: How the Tax Credit Works

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; quadri C and G of Modello 730 or RC and CE of Modello Redditi PF
• Exchange rate: reference rate of the day each salary is received (if none was set, the monthly average)

For thousands of new cross-border workers, i.e. people who became cross-border workers 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, i.e. those who worked as cross-border workers in Ticino, Graubünden or Valais between December 31, 2018 and July 17, 2023, Swiss employment income remains taxed exclusively in Switzerland, at source (transitional regime).

Operational details

Calculating the Credit: From Lohnausweis to Quadro CE

The core step is correctly completing the Italian tax return. In Modello 730 the Swiss salary goes in quadro C (code 4, full amount including the exempt portion) and the credit in quadro G (line G4); in Modello Redditi PF the salary goes in quadro RC and the credit in Quadro CE (730/2026 instructions). On the credit line, the cross-border worker reports the foreign income that entered total income and the withholding tax definitively paid in Canton Ticino. Amounts shown in Swiss francs on the Swiss salary certificate (Lohnausweis) are converted into euros at the reference rate of the day each salary was received (or the closest previous day; if no rate was set, the monthly average), published by the Banca d'Italia.

📊 2026 example based on the calculator model: New cross-border worker resident in Italy, who became a cross-border worker after July 17, 2023, with a gross annual salary of CHF 65,000 and simulated exchange rate 1 CHF = EUR 1.099 (kept constant for the whole year for simplicity).

• 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 4,745, about EUR 5,215: the 7.30% rate of Canton Ticino's R0 2026 table for new cross-border workers, which applies at most 80% of the ordinary tax.
• Gross IRPEF and local surcharges: about EUR 15,115 gross IRPEF at the 2026 rates (23%, 33%, 43%; Law no. 199/2025) plus EUR 1,066 local surcharges.
• Usable foreign tax credit: about EUR 3,890 in the simulation, not necessarily the full Swiss tax paid.
• Estimated Italian balance: about EUR 12,291, equal to CHF 11,184 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 CHF/EUR reference rate of the day you received each salary (if none was set, the monthly average), available on the Banca d'Italia website. 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.

Sources: Italy-Switzerland Agreement of December 23, 2020 (in force since July 17, 2023, ratified by Italy with Law no. 83/2023, whose Art. 4 raises the allowance to EUR 10,000), Art. 165 TUIR, Agenzia delle Entrate circular 25/E of August 18, 2023, Swiss Federal Tax Administration FAQ, 730/2026 and Redditi PF 2026 instructions, Canton Ticino 2026 table R, 2026 IRPEF rates (Law no. 199/2025). Data checked on September 25, 2026; the 2026 calculations are simulations based on currently applicable rules.