live in Germignaga and work in Ticino as a border worker

Context

TL;DR

• Cross-border commuters residing in Germignaga pay withholding tax in Switzerland.
• They are exempt from double taxation in Italy.

Key facts

• What: Withholding tax in Switzerland.
• When: Effective January 1, 2024.
• Where: Switzerland.
• Who: Cross-border workers resident in Germignaga.

The Italian-Swiss Convention against double taxation was signed on 9 March 1976.

How withholding tax works in Switzerland

Withholding tax in Switzerland is a tax levy mechanism that is applied to the income of cross-border workers. Cross-border workers residing in Germignaga, a municipality in the Canton of Ticino, who work in Switzerland will be subject to this levy.

Exemption from double taxation in Italy

Cross-border workers resident in Germignaga are exempt from double taxation in Italy, thanks to the Italian-Swiss Convention against double taxation. The new cross-border workers also declare their income in Italy and recover the Swiss tax with the tax credit, while the old cross-border workers remain taxed only in Switzerland (art. 9 of the 2020 Agreement).

Concrete example

Let's suppose that a cross-border worker residing in Germignaga works in Lugano and earns 60,000 CHF per year. Withholding tax in Switzerland will be applied on gross income, for example, at 10%. The tax will be CHF 6,000, which will be withheld directly from the worker's salary.

Operational checklists

• Verify residence in Switzerland to benefit from double taxation exemption in Italy.
• Check your gross income to determine the amount of withholding tax in Switzerland.
• Check the start date of withholding tax in Switzerland, which is from 1 January 2024.

Comparisons between practical scenarios

• If a cross-border worker resident in Germignaga works in Switzerland and earns 60,000 CHF per year, the withholding tax in Switzerland will be 6,000 CHF, if the rate is 10%.
• If a cross-border worker resident in Germignaga works in Italy and earns 60,000 CHF per year, he will not be subject to tax in Italy, thanks to the exemption from double taxation.

Regulations and dates

• The Italian-Swiss Convention against double taxation was signed on 9 March 1976.
• Withholding tax in Switzerland has been in force since 1 January 2024.

Amounts

• The withholding tax rate in Switzerland is not yet specified.
• The concrete example above is based on a gross income of CHF 60,000 per year.

Tips

• Cross-border commuters residing in Germignaga should check their tax situation to determine whether they are subject to withholding tax in Switzerland.
• Cross-border workers residing in Germignaga should also check whether they are exempt from double taxation in Italy, thanks to the Italian-Swiss Convention against double taxation.

The tax situation of cross-border commuters residing in Germignaga is complex and requires careful evaluation to avoid setup errors. It is important to verify your residence in Switzerland, your gross income and the start date of withholding tax in Switzerland to determine the amount of tax and whether you are exempt from double taxation in Italy.

Operational details

live in Germignaga and work in Ticino as a cross-border worker

if you are a cross-border worker resident in Germignaga who works in Ticino, you must keep in mind the following procedures to avoid running into tax and employment problems.

Pay withholding tax in Switzerland 📊 Withholding tax in Switzerland is 20% on earned income. This means you have to pay tax in Switzerland before transferring the income to Italy.

Example: if you earn 5,000 CHF per year from work in Ticino, you have to pay tax in Switzerland of 1,000 CHF (20% of 5,000 CHF).

Be exempt from double taxation in Italy

"Double taxation is a problem for many cross-border commuters" (source: UNIPEV, 2020)

Italy has a double taxation agreement with Switzerland, which provides that the same income is not subject to double taxation. The new cross-border workers also declare their income in Italy and recover the Swiss tax with the tax credit, while the old cross-border workers remain taxed only in Switzerland (art. 9 of the 2020 Agreement).

Regulations and dates

• New Cross-Border Workers Agreement, signed on 23 December 2020 and applied from 1 January 2024.
• Federal Tax Law, art. 27, paragraph 1, which provides for the deduction of tax in Switzerland.
• Convention between Switzerland and Italy for the avoidance of double taxation, signed on 24 May 1999.

Municipalities of Ticino

• Germignaga: is one of the most populous Ticino municipalities with a population of around 1,500 inhabitants.
• Ascona: is a Ticino municipality located in the Locarno region, with a population of approximately 5,500 inhabitants.

Work examples

• I work in an Italian company in Ticino, with an annual income of 40,000 CHF.
• I work as an employee in a Swiss company in Ticino, with an annual income of 60,000 CHF.

Operational checklists

• Check if you are subject to double taxation in Italy.
• You pay tax in Switzerland.
• Check whether the double taxation agreement with Italy has been signed and whether it is in force.
• Check if your Italian company in Ticino is subject to double taxation.

Comparisons between practical scenarios

• The new cross-border workers also declare their income in Italy and recover the Swiss tax with the tax credit, while the old cross-border workers remain taxed only in Switzerland (art. 9 of the 2020 Agreement).
• If you don't pay tax in Switzerland, you have to pay tax in Italy.
• The new cross-border workers also declare their income in Italy and recover the Swiss tax with the tax credit, while the old cross-border workers remain taxed only in Switzerland (art. 9 of the 2020 Agreement).

In summary, if you are a cross-border worker resident in Germignaga who works in Ticino, you must keep in mind the following procedures to avoid running into tax and employment problems. Debting withholding tax in Switzerland and being exempt from double taxation in Italy are two of the main procedures you must follow.

Useful tools for your case

To conveniently check your scenario within/beyond 20 km, use the net salary calculator and tax return guide.

Key points

live in Germignaga and work in Ticino as a cross-border worker

For cross-border workers residing in Germignaga who work in Ticino, it is important to keep in mind the following procedures:

• Check the amount of withholding tax in Switzerland. This means that cross-border workers resident in Germignaga will have to pay taxes in Switzerland on their income from work in Ticino. The withholding tax in Switzerland is 5% for incomes up to 125,000 CHF, 11% for incomes between 125,000 and 150,000 CHF, and 13.2% for incomes above 150,000 CHF. 📊
• Make sure you are exempt from double taxation in Italy. Cross-border workers resident in Germignaga who work in Ticino can request exemption from double taxation in Italy. The new cross-border workers also declare their income in Italy and recover the Swiss tax with the tax credit, while the old cross-border workers remain taxed only in Switzerland (art. 9 of the 2020 Agreement). The Italian-Swiss Convention against double taxation, signed on 21 June 1963, provides that income from work is subject to tax in only one State. ⚠️
• Check if you are subject to tax in Italy. If you are subject to tax in Italy, you will have to pay tax in Italy on your income from work in Ticino. The tax in Italy is 23% for incomes up to 15,000 euros, 27.5% for incomes between 15,000 and 50,000 euros, and 38% for incomes above 50,000 euros. 📊
• Make sure you have a written employment contract. The written employment contract must contain the employment conditions, including employment income and withholding tax in Switzerland. Example of a written employment contract: "The cross-border worker resident in Germignaga will be subject to withholding tax in Switzerland of 5% on his income from work in Ticino."

For further information, we recommend consulting the New Cross-Border Agreement and the Italian-Swiss Convention against double taxation.

Concrete examples

Example 1: A cross-border worker resident in Germignaga earns 80,000 CHF per year working in Ticino. The withholding tax in Switzerland will be 5% on your earned income, so you will have to pay 4'000 CHF per year in taxes in Switzerland.

Example 2: A cross-border worker resident in Germignaga earns 120,000 CHF per year working in Ticino. The withholding tax in Switzerland will be 11% on your earned income, so you will have to pay 13'200 CHF per year in taxes in Switzerland.

Regulations and dates

• Italian-Swiss convention against double taxation, signed on 21 June 1963
• New Cross-border Workers Agreement, which entered into force on 1 January 2019
• Tax law in Switzerland, which entered into force on 1 January 2020
• Tax law in Italy, entered into force on 1 January 2020

Operational checklists

• Check the amount of withholding tax in Switzerland
• Make sure you are exempt from double taxation in Italy
• Check if you are subject to tax in Italy
• Make sure you have a written employment contract
• Pay taxes in Switzerland and Italy according to the conditions of the employment contract

Comparisons between practical scenarios

• If you earn 80'000 CHF per year, the withholding tax in Switzerland will be 5% and you will have to pay 4'000 CHF per year in taxes in Switzerland.
• If you earn 120'000 CHF per year, the withholding tax in Switzerland will be 11% and you will have to pay 13'200 CHF per year in taxes in Switzerland.
• If you are subject to tax in Italy, you will have to pay tax in Italy on your income from work in Ticino.

Is it your first day as a cross-border worker? Our practical guide accompanies you from cantonal registration to your first salary.