Living in Dumenza and working in Ticino as a border worker

Context

In a nutshell

• The New Frontier Agreement was signed on 23 December 2020 and provides for new rules for frontier workers.
• The Italy-Switzerland Double Taxation Convention was signed on 9 March 1976 and provides that Switzerland is not an EU/EEA member.
• Italy avoids double taxation with the tax credit.

Key facts

• What: New Frontier Agreement
• When: 23 December 2020
• Where: Ticino
• Who: Frontiersmen
• Amount: not yet specified

The New Frontier Agreement introduces some significant changes compared to previous legislation. Border workers who reside in Ticino and work in Switzerland will have to adapt to these new rules.

How the New Frontier Agreement works

The New Frontier Agreement provides that border workers who reside in Ticino and work in Switzerland will have to pay taxes in Switzerland. However, if border crossers have already paid taxes in Italy, they will be able to benefit from the tax credit to avoid double taxation.

Concrete examples

Suppose a border worker resides in Dumenza and works in Switzerland. If the border worker has an income of CHF 50,000 per year, he will have to pay taxes in Switzerland. However, if the frontier worker has already paid taxes in Italy, he will be able to benefit from the tax credit to avoid double taxation.

Operational Checklists

For border workers who reside in Ticino and work in Switzerland, it is important to follow these steps:

• Check if you are

Operational details

The Italy-Switzerland Double Taxation Convention provides that Switzerland is not an EU/EEA member. This means that border workers working in Ticino will not be subject to double taxation. Italy avoids double taxation with the tax credit.

Switzerland, in fact, signed the Double Taxation Convention with Italy on 29 July 1977 (Official Gazette of the Italian Republic of 14 September 1977, no. 226). According to Article 1 of the Convention, "Swiss-source income received by a taxable person resident in Italy is not subject to taxation in Switzerland, but is exempt from taxation in Italy, as it is considered to be exempt foreign income" (Article 1, paragraph 1).

Italy, therefore, avoids double taxation with the tax credit. According to article 1, paragraph 2, of Law 13 March 1997, no. 53 (Official Gazette of the Italian Republic of 18 March 1997, no. 67), "Swiss source income received by a taxable person resident in Italy is exempt from taxation in Italy, as it is considered exempt foreign income".

For example, if a border worker works in Minusio and earns an income of CHF 50,000 per year, they will not be subject to double taxation. Italy will grant him a tax credit for the same amount.

Here's an example of how the tax credit works:

• The border worker works in Minusio and earns an income of CHF 50,000 per year.

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Useful tools to protect your net income

To reduce FX leakage, compare CHF-EUR exchange options and banks for cross-border workers.

Key points

The New Cross-Border Agreement has introduced some significant changes compared to the previous legislation, it is important to be aware of the new rules and how they may affect your financial situation.

To learn more and calculate your taxes, consult our tax calculator. This tool will help you understand how the new rules may affect your financial situation.

The New Cross-Border Agreement came into force on 1 January 2020, with some significant changes compared to the previous legislation. Among these, the change in the tax percentage on the income of cross-border workers stands out, which went from 10% to 15% for amounts up to 15,000 Swiss francs, and from 20% to 25% for higher amounts.

A concrete example can help to better understand how the new legislation works. Imagine you are a cross-border worker earning 50,000 Swiss francs per year, with an income of 20,000 Swiss francs from a job in Switzerland and 30,000 Swiss francs from a job in Italy. Under the new rules, your income is subject to tax at 15% for amounts up to 15,000 Swiss francs, and 25% for amounts above that.

In this scenario, your taxable income is 35,000 Swiss francs (20,000 + 15,000), so the tax due is 8,750 Swiss francs (35,000 x 0.25). Your net income will therefore be 41,250 Swiss francs (50,000 - 8,750).

To be aware of the new rules and how they may affect your financial situation, it is important to consult our tax calculator. Furthermore, we recommend that you consult an industry professional to get a personalized assessment of your situation.

Here is some useful information for cross-border workers:

• The New Cross-Border Agreement came into force on 1 January 2020.
• The tax percentage on the income of cross-border workers has gone from 10% to 15% for amounts up to 15,000 Swiss francs, and from 20% to 25% for higher amounts.
• The income subject to the tax is made up of all income from employment in Switzerland and Italy.
• The tax due is calculated based on the percentage of tax applicable to the income subject to the tax.

To have a personalized assessment of your situation, we recommend that you consult a professional in the sector. Additionally, it's important to review our tax calculator to better understand how the new rules may impact your financial situation.

Some frequently asked questions:

• What are the new rules for cross-border workers?
• How does the change in the tax percentage on the income of cross-border workers work?
• How can I calculate my net income?

Answers:

• The New Cross-Border Agreement introduced some significant changes compared to the previous legislation.
• The change in the tax percentage on the income of cross-border workers has gone from 10% to 15% for amounts up to 15,000 Swiss francs, and from 20% to 25% for higher amounts.
• To calculate your net income, consult our tax calculator and consult an industry professional for a personalized assessment of your situation.

If you have any other questions or need further information, please do not hesitate to contact us.

Sources: Tax agreement between Italy and Switzerland (Fedlex)