Living in Hammer and working in Graubünden as a border worker (cross-border guide)

Context

In a nutshell

• New Frontier Agreement signed on 23 December 2020
• Entered into force on 1 January 2024
• IT ratification: Law 83 of 13 June 2023

Key facts

• Tax at source on income from work: withheld ONLY in Switzerland for border workers
• Italy-Switzerland double taxation agreement signed on 9 December 1976
• Swiss rates/contributions: AVS/AI/IPG 5.3% employee, AD/AC 1.1% (cap CHF 148'200), LAINF 0.7-1.5%, LPP 7-18% by age group (from 25 years)
• Italian personal income tax: 23% up to €28,000, 35% €28,001-50,000, 43% over €50,000

How the border agreement works in Ticino

The frontier agreement is a treaty between Italy and Switzerland that regulates working and residence conditions for Italian citizens working in Switzerland. The new agreement entered into force on 1 January 2024, following the ratification of Law 83 of 13 June 2023.

Tax at source on earned income

The main novelty of the border agreement is the income tax at source, which is ONLY withheld in Switzerland for border workers. This means that border workers do not have to pay the Italian income tax, but only the Swiss one.

Double taxation agreement

The double taxation agreement between Italy and Switzerland was signed on 9 December 1976. This agreement provides that frontier workers' income is taxed only once, both in Italy and in Switzerland.

Swiss rates/contributions

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Operational details

Income tax at source is ONLY withheld in Switzerland for frontier workers, thanks to the Italian tax credit to avoid double taxation. For frontier workers, Switzerland offers a number of tax advantages, including the ability to withhold income tax at source only in Switzerland. This is thanks to the Italian tax credit, which avoids double taxation and allows border workers to maintain their residence in Italy. But how exactly does this mechanism work? And what are the advantages and limitations for frontier workers who choose to live in Hammer and work in Graubünden? To get started, you need to understand the tax regime applicable to frontier workers. Under the friendship, cooperation and settlement agreement between Switzerland and Italy, frontier workers are considered taxable persons in both countries. However, thanks to the Italian tax credit, income tax at source is only withheld in Switzerland. This means that frontier workers are not required to pay the tax in Italy, but can instead withhold the corresponding sum in Switzerland. But how do you calculate the amount of tax withheld in Switzerland? And what are the limitations for border workers who choose to live in Hammer and work in Graubünden? According to the friendship agreement, the share of tax withheld in Switzerland is 10% of employment income. This means that File your income tax return in Switzerland and Italy by the due dates Provide the necessary information to benefit from the Italian tax credit Withhold income tax at source only in Switzerland Benefit from the Italian tax credit Comparisons between practical scenarios Regulations and dates

Useful planning tools

To estimate your pension strategy, use the pension planner and the pillar 3 simulator.

Key points

If you are a frontier worker living in Martello and working in Graubünden, you can check the salary calculator to find out how the new setting might affect your paycheck.

The new setting: what does it mean to you?

From 1 January 2023, Switzerland has introduced a new setting for border workers working in Graubünden. Under the federal law of 20 December 2022, employees who live in a municipality bordering Switzerland and work in Graubünden will be able to benefit from more favourable tax treatment.

How does the salary calculator work?

The Salary Calculator is an online tool that allows you to enter your personal details and those of your employer to calculate how the new setting might affect your paycheck. 📊

To use the calculator, you need to enter the following data:

• Your annual income
• Your contribution rate
• Your employer and their municipality of residence
• Your municipality of residence

The calculator will provide you with an estimate of your taxable income and the tax you will have to pay.

Concrete example

Suppose you live in Hammer and work in Graubünden. Your annual income is CHF 60,000 and your contribution rate is 5%. Your employer is a Chur company and your municipality of residence is Martello.

By entering this data into the salary calculator, you may find that the new setting will save you around CHF 2,000