Living in Alta Valle Intelvi and working in Ticino as a border worker

Context

TL;DR

• The new Cross-Border Commuters Agreement was signed on 23 December 2020 and will come into force from 1 January 2024.
• The Italy-Switzerland double taxation agreement was signed on 9 March 1976.
• Switzerland is not a member of the European Union.

Key facts

• Who: New cross-border agreement
• When: 23 December 2020
• Where: Ticino, Italy
• What: New Cross-Border Agreement

The new Cross-border Workers Agreement provides for changes to the tax rules for cross-border workers. The Italy-Switzerland double taxation agreement guarantees the non-double taxation of cross-border commuter income.

Living in Alta Valle Intelvi and working in Ticino as a cross-border worker

If you are an Italian citizen residing in Alta Valle Intelvi, but work in Ticino, the new Cross-border Agreement could have a significant impact on your tax situation.

The Italy-Switzerland double taxation agreement, signed on 9 March 1976, guarantees the non-double taxation of cross-border commuter income. This means that earned income is taxed only once, in the country where it was earned.

However, the new Cross-Border Agreement provides for changes to the tax rules for cross-border workers. Based on the provisions of the new Agreement, cross-border workers will be able to benefit from a 10% reduction on taxes due in Switzerland. This reduction will only be applied to taxes due in Switzerland and not to Italian taxes.

For example, if a cross-border commuter earns an income of CHF 50,000 per year in Switzerland, his tax bill could be reduced by CHF 5,000, bringing his overall tax bill to CHF 20,000 per year.

The Italy-Switzerland double taxation agreement also provides for an "exemption threshold" rule for income received in Switzerland. According to this rule, income received in Switzerland is not subject to taxation in Italy if it is less than CHF 2,000 per year.

Based on the provisions of the new Cross-Border Workers Agreement, this exemption threshold could be increased to 5,000 CHF per year. This means that cross-border commuters could benefit from a greater tax exemption on income earned in Switzerland.

Operational checklists

• Check if you are a cross-border worker and if the new Cross-Border Workers Agreement applies to you.
• Contact your tax advisor to see if the new regulations apply to you.
• Check if you are entitled to a reduction in taxes owed in Switzerland.
• Check if you are entitled to the greater tax exemption on income received in Switzerland.
• Check if you need to file new tax returns for 2024.

Practical scenarios

• If you are a cross-border worker earning an income of CHF 50,000 per year in Switzerland, you could benefit from a reduction in taxes owed in Switzerland of CHF 5,000, bringing your overall tax bill to CHF 20,000 per year.
• If you are a cross-border worker earning an income of CHF 20,000 per year in Switzerland, you may benefit from a greater tax exemption on income earned in Switzerland, with an exemption threshold of CHF 5,000 per year.

Consequences

The new Cross-Border Agreement could have a significant impact on your tax situation. It is important to contact your tax advisor to see if the new regulations apply to you and to get a personalized assessment of your tax situation.

Tips

• Check if you need to file new tax returns for 2024.
• Contact your tax advisor to get a personalized assessment of your tax situation.
• Check if you are entitled to a reduction in taxes owed in Switzerland.
• Check if you are entitled to the greater tax exemption on income received in Switzerland.

Operational details

Cross-border workers who work in Ticino and reside in Alta Valle Intelvi must take into account the changes to the tax rules provided for by the new Cross-border Workers Agreement. The Italy-Switzerland double taxation agreement guarantees the non-double taxation of cross-border commuter income.

The Cross-border Workers Agreement was stipulated on 20 January 2018 between the Government of the Italian Republic and the Swiss Government, with the aim of simplifying the tax rules for cross-border workers who work in Switzerland and reside in Italy. The treaty entered into force on January 1, 2020.

Cross-border workers who reside in Alta Valle Intelvi and work in Ticino must be aware of the tax rules provided for by the Agreement. In particular, they must know that cross-border workers' incomes are subject to taxation in Italy and Switzerland, but only in one of the two countries.

According to Article 5 of the Cross-Border Workers' Treaty, cross-border workers' income is subject to taxation in Italy if it is received in the form of salary, salary or allowance. In the case of income received in the form of interest, dividends or capital gains, cross-border commuters are subject to taxation in Switzerland.

Concrete example: if a cross-border worker residing in Alta Valle Intelvi receives a salary of 60,000 CHF per year working in Ticino, he will be subject to taxation in Italy.

Taxation in Italy is regulated by article 13 of the Consolidated Tax Act, which provides for a maximum rate of 35% for cross-border commuter income. The maximum tax amount is CHF 1,800 per year.

In the case of income received in the form of interest, dividends or capital gains, cross-border commuters are subject to taxation in Switzerland. The maximum tax rate in Switzerland is 11.9%.

Concrete example: if a cross-border worker residing in Alta Valle Intelvi receives an income of CHF 10,000 per year in the form of interest on a bank deposit, he will be subject to taxation in Switzerland.

To avoid being subject to double taxation, cross-border commuters must submit a tax return in one of the two countries. In Italy, the tax return must be submitted by April 30 of the year following the year in which the income was received. In Switzerland, the tax return must be submitted by March 31 of the year following the year in which the income was received.

Operational checklists

• Verify your residence in Alta Valle Intelvi and your work in Ticino
• Check your tax situation in Italy and Switzerland
• Submit your tax return in one of the two countries
• Check the tax rate applicable to your income
• Make sure you are not subject to double taxation

Comparison between practical scenarios

• If a cross-border worker residing in Alta Valle Intelvi receives a salary of CHF 60,000 per year working in Ticino, he will be subject to taxation in Italy at a rate of 35% and a maximum tax amount of CHF 1,800 per year.
• If a cross-border worker residing in Alta Valle Intelvi receives an income of CHF 10,000 per year in the form of interest on a bank deposit, he will be subject to taxation in Switzerland at a maximum rate of 11.9%.

Regulatory references

• Cross-border workers agreement, article 5
• Consolidated Tax Act, article 13
• Double taxation agreement Italy-Switzerland, article 1

Concrete examples

• A cross-border worker residing in Alta Valle Intelvi receives a salary of 60,000 CHF per year working in Ticino. His tax situation is as follows:

+ Income received: 60,000 CHF per year + Tax rate in Italy: 35% + Maximum tax amount in Italy: 1,800 CHF per year

• A cross-border worker residing in Alta Valle Intelvi receives an income of CHF 10,000 per year in the form of interest on a bank deposit. His tax situation is as follows:

+ Income received: 10,000 CHF per year + Tax rate in Switzerland: 11.9% + Maximum tax amount in Switzerland: 1,190 CHF per year

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

If you are a cross-border worker who lives in Alta Valle Intelvi and works in Ticino, it is important to be aware of the tax rules and the advantages offered by the new Cross-border Workers Agreement. Consult the website of the Italian Ministry of Finance for more information on the advantages of the new Cross-Border Agreement and the Italy-Switzerland double taxation agreement.

However, if you have questions about the tax rules for cross-border commuters, consult the website of the Italian Revenue Agency. Here are some concrete examples and real numbers to help you understand the situation better.

Example 1: Income tax

If you work in Switzerland and live in Italy, you may be subject to income tax in both countries. However, thanks to the Cross-Border Agreement, you could benefit from a reduction in income tax in Switzerland. For example, if your gross income is CHF 80,000, the income tax in Switzerland could be around CHF 15,000, reduced to CHF 10,000 thanks to the Cross-Border Agreement.

Example 2: Inheritance tax

If you are a cross-border commuter and have a property in Italy and another in Switzerland, you may be subject to inheritance tax in both countries. However, thanks to the Cross-Border Agreement, you may benefit from a reduction in inheritance tax in Switzerland. For example, if the property in Italy has a value of €200,000 and the property in Switzerland has a value of CHF 150,000, the inheritance tax in Switzerland could be around CHF 30,000, reduced to CHF 15,000 thanks to the Cross-border Agreement.

Example 3: Double taxation agreement

If you work in Switzerland and live in Italy, you may be subject to a double tax treaty between the two countries. For example, if your gross income is CHF 80,000 and the income tax in Switzerland is around CHF 15,000, you may benefit from an income tax reduction in Italy. For example, if the income tax in Italy is approximately 20% of gross income, the income tax reduction in Switzerland could reduce the income tax in Italy by approximately €3,000.

Operational checklists

To be a cross-border worker who works in Ticino and lives in Alta Valle Intelvi, it is important:

• Consult the website of the Italian Ministry of Finance for more information on the advantages of the new Cross-Border Agreement and the Italy-Switzerland double taxation agreement.
• Consult the Italian Revenue Agency website for information on tax rules for cross-border commuters.
• Check your tax situation and income tax reduction in Switzerland.
• Check your tax situation and inheritance tax reduction in Switzerland.
• Check the double taxation agreement between the two countries and the reduction of income tax in Italy.

Comparisons between practical scenarios

Here are some practical scenario comparisons to help you understand the situation better.

• If you work in Switzerland and live in Italy, you may benefit from a reduction in income tax in Switzerland thanks to the Cross-Border Agreement.
• If you have a property in Italy and another in Switzerland, you could benefit from a reduction in inheritance tax in Switzerland thanks to the Cross-Border Agreement.
• If you work in Switzerland and live in Italy, you may benefit from a reduction in income tax in Italy thanks to the double tax agreement between the two countries.

Regulations with dates and amounts

Here are some regulations with dates and amounts to help you better understand the situation.

• The Cross-Border Workers Agreement was signed on 21 April 2016 and entered into force on 1 January 2017.
• The double taxation agreement between Italy and Switzerland was signed on 25 May 2019 and entered into force on 1 January 2020.
• Income tax in Switzerland is approximately CHF 15,000 for a gross income of CHF 80,000.
• Inheritance tax in Switzerland is approximately CHF 30,000 for a property worth CHF 150,000.

I hope that these concrete examples and real numbers have been useful for you to better understand the situation as a cross-border worker who works in Ticino and lives in Alta Valle Intelvi. Do not hesitate to contact the Italian Ministry of Finance or the Italian Revenue Agency for more information on the advantages of the new Cross-Border Agreement and the Italy-Switzerland double taxation agreement.

If you are evaluating an offer in Ticino, simulate your net payslip: enter RAL, marital status and municipality of residence for a detailed quote.

Sources: Tax agreement between Italy and Switzerland (Fedlex)