Frontier and new tax agreement: complete guide 2024 (cross-border guide)

Context

In a nutshell

• New agreement in force from 1 January 2024
• Withholding tax exclusively in Switzerland
• Tax credit in Italy to avoid double taxation
• Exemption of 7,500 euros for old border workers

Key facts

• What: New agreement between Italy and Switzerland on border workers
• When: Effective January 1, 2024
• Where: Italy-Switzerland cross-border working relations
• Who: Federal Tax Administration (FTA) and Revenue Agency
• Amount: Deductible €10,000 for new frontier workers
• Date signed: 23 December 2020

The new tax agreement between Italy and Switzerland, ratified by Law 83 of 13 June 2023, introduced substantial changes for frontier workers as of 1 January 2024. This regulatory system replaces the previous provisions, redefining the tax and contribution framework for those who provide cross-border services. The rule states that income tax on employees is withheld exclusively in Switzerland, following the principle of taxation at source administered by the Swiss authorities.

The current regulatory framework

Italy, in order to ensure harmonisation and prevent double taxation phenomena, applies the tax credit mechanism through the EC framework of model 730. It is essential to emphasize that Switzerland, while maintaining close economic ties with the European Union, is not a member of either the EU or the European Economic Area

Operational details

The operational analysis of the new regime reveals marked distinctions between workers defined as' old frontier workers' and new hires. Those who were already border workers before 17 July 2023 benefit from a transitional regime that will extend until 2033, with a tax exemption of 7,500 euros. On the contrary, for new frontier workers, the deductible is set at 10,000 euros. This distinction is crucial for individual tax planning.

Taxation and pension scenarios

The Swiss contribution system also provides for the payment of LAINF contributions, which range between 0.7% and 1.5%, and the LPP, the occupational pension that varies from 7% to 18% based on the age group for workers over 25. In Italy, the taxation on net income produced must comply with progressive IRPEF rates: 23% for income up to 28,000 euros, 35% in the 28,001-50,000 euro range and 43% over 50,000 euros.

For a border worker operating in the Canton of Ticino, managing the paycheck correctly means constantly monitoring the withholdings made by the Swiss employer. The correct application of the tax credit in the Italian tax return is the only tool to avoid paying taxes twice on the same salary. It is advisable to use the calcolatore fiscale to simulate the impact of the different rates on the net received, considering both the Swiss mandatory withholdings and the residual Italian tax burden.

Useful tools for your case

To verify your within/over 20 km tax scenario, use the net salary calculator and the tax return guide.

Key points

Health insurance management is another fundamental pillar for those working in Switzerland. Frontaliers with a G permit enjoy the right to opt for the Swiss mandatory health insurance, LAMal, which provides variable deductibles for adults ranging from 300 to 2,500 CHF. The choice between the Italian and Swiss healthcare systems must be carefully weighed, considering family situation and specific medical needs.

Check tax deadlines for cross-border workers: returns, Swiss declarations, rebates — all dates in one interactive calendar.