Italy-Switzerland Rebates: The 'Health Tax' Case (cross-border guide)

Contesto

The cross-border commuters' regime between Italy and Switzerland is now based on the Convention of 9.3.1976 and the related special agreements: the 1974 Agreement (with the mechanism of rebates) and the new Agreement of 23.12.2020/Law 83/2023, which introduces concurrent taxation and tax credit in Italy, with withholding tax in the State of employment up to 80% of the ordinary tax, including local taxes. The Convention delimits the "taxes considered" (including regional and municipal income surcharges) and regulates, among other things, subordinate employment and the elimination of double taxation. The 1974 Agreement supplements the Convention and provides for financial compensation ("rebates") in favour of the Italian border municipalities, with the transfer of a share (historically 40%) of the revenue collected in Switzerland to the salaries of cross-border workers; The aim is to rebalance the costs of public services in the area of residence. The functional link between withholding tax in Switzerland and rebates in favour of Italy is also recognised in the formal links between the agreement instruments.

Dettagli operativi

For conventional purposes, income taxes levied by the state or local authorities, "whatever the system of levy", including local taxes, fall within the scope of the DTA. Italian practice has sometimes qualified the so-called "health tax" as a parafiscal contribution extraneous to the Convention, with the consequence of excluding the tax credit. However, if the levy presents, in substance, the typical features of an income tax (coercive levy, not synallagmatic, linked to the ability to pay and intended for general financing), it falls within the scope of art. 2 CDI, as well as the regional/municipal surcharges. Once the levy is classified as income tax, its application to cross-border commuters affects the conventional allocation: employment income is taxed in the source State with a withholding tax of up to 80%, while the State of residence applies its own tax by recognizing the tax credit for the foreign levy. A further regional taxation "out of frame" alters the contractual balance and risks frustrating the mechanism for the elimination of double taxation overseen by art. 24 DTA and the Agreement on Cross-Border Commuters.

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Punti chiave

In this sense, the argument of the violation of tax agreements acquires strength precisely if the "health tax" is, in fact, a tax within the meaning of the Convention. In the presence of a levy which, due to its substantial characteristics, qualifies as income tax, the full continuation of the rebates would risk consolidating a structure that does not comply with the contractual commitments that govern the entire balance between withholding tax, tax credit and financial compensation. In the light of concurrent taxation and the contractual limits (taxes considered; subordinate employment; credit), a measure of partial payment and precautionary suspension is, from a legal point of view, an inevitable solution to preserve the fair execution of the Convention and the Agreement on cross-border workers until the necessary bilateral clarifications. If the so-called "health tax" is, in essence, an income tax, it falls under art. 2 DTA and must comply with the agreement referred to in art. 15 and the new Agreement on cross-border commuters (withholding tax of up to 80% and tax credit), without introducing additional charges that alter the balance of the rebates. In this perspective, the decision to suspend the full repayment as a precautionary measure is not only prudent: it is the necessary consequence to ensure consistency with the tax agreements between Switzerland and Italy pending the final qualification of the levy and clarifications between the competent authorities.

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