Living in Dumenza and working in Ticino as a border worker (cross-border guide)

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 December 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 Frontier 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 about and calculate your taxes, check out our tax calculator. This tool will help you understand how the new rules may affect your financial situation.

The New Frontier Agreement entered into force on 1 January 2020, with some significant changes compared to previous legislation. These include the change in the percentage of income tax for frontier workers, which has gone 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 being a frontier worker earning 50,000 Swiss francs a year, with an income of 20,000 Swiss francs from employment in Switzerland and 30,000 Swiss francs from employment in Italy. Under the new rules, your income is subject to tax of 15% for amounts up to CHF 15,000, and 25% for higher amounts.

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