Euro franc exchange rate: is it really worth it?

Context

In brief

• Swiss withholding tax: direct deduction from employment income
• New Cross-Border Workers Agreement from January 1, 2024: exemption of €7'500 for old cross-border workers
• CHF-EUR exchange rate: crucial choice to maximize actual net income
• Exchange strategies: timing and platform determine results

Key facts

• What: Hybrid tax system CH-IT + currency exchange for cross-border workers
• When: From January 1, 2024 (new agreement in force)
• Where: Switzerland (withholding) and Italy (IRPEF and tax credit)
• Who: Cross-border workers with Permit G
• AVS rate: 5.3% (employee social contributions)
• LAMal deductible: CHF 300–2500 adults

The cross-border worker who works in Switzerland and lives in Italy faces a dual challenge: Swiss taxes on every salary and currency exchange to have money in euros. This is not a subtle accounting issue — it is a concrete impact on the monthly wallet.

Starting from January 1, 2024, the New Cross-Border Workers Agreement has changed the taxation rules. "Old" cross-border workers (already such before July 17, 2023) benefit from an annual exemption of €7'500, with a transitional regime from 2024 to 2033. New cross-border workers, on the other hand, have a deductible of €10'000. But these benefits do not eliminate Swiss withholding taxes: the tax on salaries and social contributions remains applied directly to gross income in the Canton where you work.

Switzerland is not a member of the European Union. According to the Convention to avoid double taxation Italy-Switzerland, signed on March 9, 1976, the taxation of employment income is the competence of the State where the work is performed — that is, Switzerland. Italy does not apply a second federal tax, but uses the tax credit in the CE framework of the income tax return (model 730) to compensate for what has already been paid in Switzerland.

At the Swiss cantonal level, a cross-border worker pays in AVS/AI/IPG the employee rate of 5.3% plus the AD/AC contributions of 1.1% (up to CHF 148'200 of income), LAINF from 0.7% to 1.5%, and the payment to the pension fund LPP between 7% and 18% depending on age (from 25 years). Added to the cantonal withholdings for direct taxes, the gross → net total is significant. Only after paying in Switzerland, the cross-border worker converts the remaining net from CHF to EUR to live in Italy.

In Italy, IRPEF is applied to the worldwide income declared. The rate is progressive: 23% up to €28'000, 33% from €28'001 to €50'000, 43% over €50'000. However, the tax credit reduces the Italian IRPEF by what has already been paid in Switzerland — and this is the mechanism that avoids real double taxation.

Why the CHF-EUR exchange is not neutral

Let's take a scenario. A cross-border worker receives a gross pay slip of CHF 4'500. After AVS/AI/IPG (5.3%), AD/AC (1.1%), LAINF (1%), LPP (for simplicity 7%), and cantonal taxes (about 20%), the net could be about CHF 2'800–2'900. This amount, converted to EUR at the day's exchange rate, determines the actual purchasing power in Italy. If the CHF-EUR exchange rate is at 0.92, the net is about €2'576–2'668. If the exchange rate drops to 0.88, the same CHF 2'900 becomes €2'552 — a loss of €16–24 per month, which on an annual basis makes several hundred euros.

The choice of when and where to exchange the money is not marginal. Many cross-border workers exchange at the bank of their Swiss account, with commissions integrated into the exchange rate. Others use digital platforms, which often offer rates close to the mid-market (interbank rate) and transparent commissions. Some resort to multi-currency accounts, which allow holding CHF and EUR separately and exchanging at the most opportune moment.

Operational details

The tax impact of the exchange rate choice

A common mistake is to believe that the exchange rate is a matter of speculation or short-term timing. It is not — at least not for the cross-border worker who simply converts their salary. The real impact is the hidden cost of conversion, that is, the difference between the mid-market rate (real interbank rate) and the rate applied by the bank or platform.

Let's return to our cross-border worker with CHF 2'900 net monthly. A traditional bank might apply an exchange rate of 0.90 (a spread of 0.02 compared to the mid-market rate of 0.92). The hidden cost: €58 per month, or €696 per year. A digital platform might offer 0.918 (spread 0.002), reducing the cost to €6 per month, or €72 per year. The annual difference is €624.

This calculation does not take into account Italian taxation. The cross-border worker must declare their worldwide income, including foreign income. In Italy, foreign employment income is taxed according to IRPEF rates (23% up to €28'000, 33% from €28'001 to €50'000, 43% over €50'000). The tax credit mitigates the effect, but only up to the point of what has already been paid in Switzerland. If the cross-border worker has earned CHF 54'000 gross annually (CHF 4'500 per month), they will have paid approximately CHF 11'000–13'000 in taxes and contributions in Switzerland. In Italy, on CHF 54'000 converted to EUR according to the average exchange rate of the year, they will have an IRPEF taxable base. If the average exchange rate has been 0.91, the declared income is approximately €49'140. The IRPEF of 33% (approximate for that range) would be approximately €17'200; the tax credit of €11'000 reduces it to €6'200. Total paid in CH + IT: approximately €17'200–19'200.

What makes the exchange rate choice relevant for the declaration is the final taxable base. If the cross-border worker had exchanged at less favorable rates, the average exchange rate of the year would have been 0.88, reducing the declared income to €47'520 and decreasing the Italian tax burden — an apparent paradox, since a worse exchange rate reduces the declared taxable base. This does not mean that it is advantageous to exchange poorly; it means that the interaction between the exchange rate, Swiss taxation, and Italian taxation is complex and deserves attention.

Multi-currency accounts and exchange flow management

A practical solution for many cross-border workers is to open a multi-currency account with a Swiss or Italian bank. These accounts allow you to hold CHF and EUR simultaneously, without the obligation of immediate conversion. The cross-border worker receives their salary in CHF, keeps it in CHF until they need to spend in EUR, and then converts only the necessary amount.

The advantages are evident. First, the freedom to choose the moment of exchange, not constrained to the payday. Second, access to mid-market rates or close, if the platform allows it. Third, the possibility to manage the exchange flow in a reasoned (non-speculative) way based on monthly needs. Fourth, reduction of commission costs, if the multi-currency account offers internal transfers at favorable rates. Before the New Cross-Border Workers Agreement (signed on December 23, 2020, and in effect from January 1, 2024), many cross-border workers did not have this option easily available. Today, with the new regulation that clarifies the status of cross-border workers and protects their legal rights, banks have significantly increased the offer of dedicated products.

Comparative scenario: old vs new cross-border workers

Old cross-border workers (those who were such before July 17, 2023) enjoy an annual exemption of €7'500 with a transitional regime from 2024 to 2033. What does this mean concretely for the exchange rate? If the cross-border worker's income is CHF 54'000 gross, the exemption reduces the Italian taxable base by that amount. Converting €7'500 at the average exchange rate, a significant portion of the income escapes Italian IRPEF, saving on Italian taxes.

New cross-border workers have a higher exemption (€10'000), which further increases the tax benefit, but only applies to those hired after July 17, 2023. In both cases, the exchange rate strategy does not change the nature of taxation — but it affects conversion costs and, marginally, how and when income is declared in Italy, influencing the final 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

Practical procedure: how and when to change

If you are a cross-border worker and receive your salary in CHF, here are the concrete steps to manage the euro-franc exchange effectively.

Step 1: Evaluate your account options

Contact your Swiss bank (where you receive your salary) and ask if they offer multi-currency accounts. If so, ensure that:

• It allows you to hold CHF and EUR without immediate conversion
• It offers competitive exchange rates (mid-market or spread <0.5%) for internal transfers
• It does not apply hidden fees for currency transfers

If your Swiss bank does not offer this option, consider specialized digital platforms — but before using them, verify their exact fees and published rates.

Step 2: Decide the frequency of exchange

Some cross-border workers change once a month (upon receiving their paycheck). Others only change the amount needed to cover monthly expenses in Italy. A pragmatic strategy involves:

• Maintaining a CHF "buffer" fund equal to 2–3 months of net income (for emergencies)
• Changing 70–80% of your net salary to EUR monthly
• Leaving the rest in CHF for expenses in Switzerland (gas, car insurance, parking) or for savings

This diversification reduces the risk of being fully exposed to an unfavorable exchange rate in a given month.

Step 3: Track the annual average exchange rate for tax declaration

When you fill out the 730 form in Italy, you must declare your foreign income in EUR. The Italian Revenue Agency accepts the average exchange rate of the year published by the Bank of Italy or OSCE-authorized sources. You cannot use the exchange rate of the conversion day — you must use the average.

Tip: Throughout the year, keep a simple spreadsheet with the exchange rates applied each month (you can find them on neutral financial services sites, such as XE or OANDA). Calculate the simple average at the end of the year. This number will be the "average exchange rate of the year" to declare. When filling out the 730, in the CE section, you will enter the gross income in CHF (converted to EUR at the average exchange rate), the taxes paid in Switzerland, and the Italian IRPEF taxable base. The tax credit will offset the Italian IRPEF up to the amount already paid in Switzerland.

Step 4: Verify the tax credit in Italy

In the 730 declaration, fill out the CE section (tax credit). There you will declare:

• The gross amount earned in CHF (converted to EUR at the average exchange rate)
• The taxes paid in Switzerland (AVS/AI/IPG, LPP contributions, direct cantonal taxes)
• The Italian IRPEF taxable base
• The tax due in Italy according to progressive rates (23%, 33%, 43%)

The tax credit offsets the Italian IRPEF up to the amount already paid in Switzerland. If the Swiss taxes exceed the theoretical Italian IRPEF (common for average incomes), the cross-border worker pays nothing extra and may receive a refund.

Tools and final checklist

Before each exchange, perform these checks:

• ✓ Compare the mid-market rate (available on XE, OANDA, Xe, or your bank's website) with the rate offered to you
• ✓ Calculate the spread (difference). If it is >1%, look for an alternative
• ✓ If you use a multi-currency account, perform the exchange via the app, where spreads are often more transparent
• ✓ Always keep the exchange documentation (bank statement, receipt): they are needed for the 730

To maximize the net income, the strategy is not to "speculate" on the exchange rate — it is to reduce conversion costs by choosing the right platform and managing the exchange flow rationally. Simulate the impact of different exchange and taxation scenarios on your monthly net income using our cross-border salary calculator.

Remember: the CHF-EUR exchange is advantageous when the choice of where and how to exchange saves you fees and spreads — not because the exchange rate itself goes up or down.