Living in Cantù and working in Ticino as a border worker

Context

In brief

• New Agreement entered into force on January 1, 2024.
• taxation in Switzerland with a tax credit in Italy.
• For Article 9 of the Agreement, “old frontier workers” are people who met the tax requirements and worked in Graubünden, Ticino or Valais on 17 July 2023 or during the period from 31 December 2018 through 17 July 2023. Article 9 keeps covered employment income taxable exclusively at source in Switzerland; other workers follow the ordinary regime, with ordinary taxation in Italy, a credit for Swiss tax and Swiss withholding at 80% of the ordinary rates. The €10,000 figure in Article 4 of Italian Law No. 83/2023 is only the income limit referred to in Article 1(175) of Law No. 147/2013; it is not a general allowance for new frontier workers. Sources: ESTV factsheet (Italian) · Agreement, Art. 9 · Law No. 83/2023, Art. 4.
• Mandatory LAMal insurance for employees with a G permit.

Key facts

Cross-border Workers Agreement: December 23, 2020 Entry into force: January 1, 2024 The €10,000 limit is not a general allowance: Article 4 of Italian Law No. 83/2023 applies it only to the income referred to in Article 1(175) of Law No. 147/2013. Old cross-border workers remain taxed only in Switzerland (Art. 9 of the 2020 Agreement). AVS/AI/IPG contribution: 5.3% employee share AD/AC contribution: 1.1% (cap 148,200 CHF)

Moving to Cantù for those working in the Canton of Ticino is a choice that requires careful planning, based on the current regulations governing the relationship between Italy and Switzerland. Since January 1, 2024, the new agreement signed on December 23, 2020, has introduced substantial changes for cross-border workers. Income from employment is taxed in Switzerland via withholding tax, managed by the cantonal tax administrations and the Federal Tax Administration (AFC/ESTV). To avoid double taxation, the worker must declare the income in Italy, utilizing the tax credit through the CE section of the 730 tax return form.

Updated tax regulations

The €10,000 threshold in Article 4 of Italian Law No. 83/2023 applies exclusively to employment income earned continuously and exclusively by Italian residents in a foreign border area or neighbouring country, as referred to in Article 1(175) of Law No. 147/2013; it is neither a general allowance nor an exemption from Swiss withholding tax. It is essential to remember that Switzerland is not an EU/EEA member; therefore, the relationship is regulated by the Convention for the avoidance of double taxation signed on March 9, 1976. Swiss social security contributions, such as AVS, AI, and IPG, amount to 5.3% charged to the employee, while unemployment insurance (AD/AC) is 1.1% up to a salary cap of 148,200 francs. The management of these contributions is the responsibility of social security institutions, while tax rates are established by federal and cantonal laws. A cross-border worker residing in Cantù must carefully consider these payroll deductions, which differ significantly from the Italian tax system. Financial planning must also integrate the impact of Italian IRPEF, with brackets at 23%, 33%, and 43% based on total income, applied net of the tax credit recognized for taxes already paid across the border.

Operational details

Practical implications of commuting

Choosing Cantù means dealing daily with the dynamics of cross-border traffic towards the Canton of Ticino. The main road connection involves using the A9 motorway network, which merges towards the Brogeda border crossing, a nerve center for access into Swiss territory. Managing travel time is a critical factor for those residing far from the immediate border. It is advisable to constantly monitor traffic conditions, as unforeseen events or congestion peaks can heavily influence the quality of work life. From a social security perspective, in addition to the mandatory AVS contributions, the worker must assess their position regarding the second pillar (LPP), with rates varying between 7% and 18% based on age, starting from 25 years old. Managing health insurance coverage is equally crucial: cross-border workers holding a G permit have the right of option for LAMal, the mandatory Swiss health insurance, which provides for deductibles between 300 and 2,500 francs. It is essential not to confuse LAMal with a tax, as it is an insurance coverage necessary to access healthcare services. Compared to the past, the regulatory framework requires greater awareness of income tax declaration procedures. The taxpayer must ensure they correctly document every payment made in Switzerland to maximize the benefit of the tax credit in Italy, thus avoiding excessive taxation. The distinction between withholding tax, managed by the FTA, and social contributions managed by social security institutions, must be clear for every worker. Proper maintenance of tax documentation, keeping copies of Swiss payslips and salary certificates, is the first step for a smooth management of one's status as a cross-border worker residing in Cantù. Family budget planning must include not only transport costs but also currency exchange fluctuations, considering that income is received in Swiss francs.

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

Operational procedures and useful tools

For those intending to settle in Cantù and embark on a career path in Ticino, the procedure begins with obtaining the G permit, issued by the competent authorities following a regular employment contract. Subsequently, it is necessary to regularize one's insurance status. The worker must activate LAMal coverage or exercise the right of option, depending on their specific situation, to ensure compliance with current regulations. Regarding social security, it is advisable to monitor one's AVS position and evaluate joining supplementary pension schemes, such as the third pillar, to supplement future income. Managing income requires the use of digital tools to simulate the net salary, considering tax deductions and Swiss social contributions. To effectively compare net income, it is useful to use a tax calculator that allows for estimating the impact of withholding tax and the Italian tax credit. Furthermore, financial planning must take into account commuting costs, including car maintenance expenses and the potential purchase of the Swiss motorway vignette, which is necessary for traveling on Swiss highways. For those wishing to optimize the exchange rate management between CHF and EUR, constant monitoring of exchange rates through a currency comparator is a recommended practice. Finally, for those needing to delve into their health coverage, a health insurance comparator is available to evaluate the various options offered by LAMal. Transparency and constant updates are the keys to managing one's status as a cross-border worker autonomously and in an informed manner. Any change in income or family situation must be promptly communicated to the competent tax authorities, both in Switzerland and in Italy, to avoid discrepancies in annual declarations. By using the simulation and planning tools provided, the worker can obtain a clear and realistic view of their net income, facilitating prudent and long-term oriented financial management.