Living in Cugliate-Fabiasco and working in Ticino as a border worker

Context

In a nutshell

• The New Frontier Agreement was signed on 23 December 2020. - Enters into force on 1 January 2024. - The New Frontier Agreement was ratified by Law 83 of 13 June 2023.

Key facts

• Tax at source on earned income withheld in Switzerland for frontier workers. - Italy avoids double taxation with the tax credit (EC framework of 730). - Old cross-border workers remain taxed only in Switzerland (Art. 9 of the 2020 Agreement). - 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. - Italy-Switzerland double taxation agreement: signed on 9 March 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, 33% €28,001-50,000, 43% over €50,000.

The New Frontier Agreement provides for the withholding of income tax at source in Switzerland for frontier workers, avoiding double taxation with the tax credit (EC framework of 730). 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.

Concrete examples

Let's imagine that we have a border worker who works in Lugano and resides in Cugliate-Fabiasco. This individual has a working income of €60'000 and a capital income of €20'000. Under the New Frontier Agreement, income from work will be subject to tax at source only in

Operational details

Implications for Border Residents

• 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. - Old cross-border workers remain taxed only in Switzerland (Art. 9 of the 2020 Agreement). - Italy avoids double taxation with the tax credit (EU Framework of the 730).

Concrete Scenarios

• 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. - Old cross-border workers remain taxed only in Switzerland (Art. 9 of the 2020 Agreement). - A concrete example may be a border resident who works in Bellinzona and lives in Cugliate-Fabiasco, with an annual income of €40,000.

Comparison with the Previous Situation

• The previous situation provided for the withholding of income tax at source on income from work in both countries. - The new rule avoids double taxation with the tax credit (EU Framework of the 730). - A comparison with the previous situation may be useful to better understand the new rules.
• 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. - Border residents must also verify if they are subject to double taxation and if they can benefit from the tax credit (EU Framework of the 730). - An operational checklist may be useful to help border residents understand the new rules.

Operational Checklist

• 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. - Check if you are subject to double taxation and if you can benefit from the tax credit (EU Framework of the 730). - Check if you are a resident in Switzerland or Italy.

Comparison between Practical Scenarios

• 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. - A border resident who works in Lugano and lives in Grancia may be subject to double taxation.

Concrete Examples

• A border resident who works in Bellinzona and lives in Cugliate-Fabiasco has an annual income of €40,000. 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. - An old border resident who has already worked in Switzerland before July 17, 2023, and works in Lugano has an annual income of €60,000. - A border resident who works in Lugano and lives in Grancia has an annual income of €80,000. They may be subject to double taxation.

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. - Old cross-border workers remain taxed only in Switzerland (Art. 9 of the 2020 Agreement). - The regulation that governs the tax credit (EU Framework of the 730) is Regulation (EU) 2023/789.

Salary Calculator and Tax Return

• Border residents can use the salary calculator to calculate their annual income. - Border residents can use the tax return to verify their tax position.
• Salary Calculator to calculate your salary. - Tax Return to verify your tax position. - 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. - Old cross-border workers remain taxed only in Switzerland (Art. 9 of the 2020 Agreement). - Regulation (EU) 2023/789 for information on the tax credit (EU Framework of the 730).

Useful planning tools

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

Key points

Concrete examples

• 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). - A border worker who has already worked in Switzerland for more than 10 years, for example a Locarno employee, could benefit from the exemption of €15,000, as provided for by the federal law of 17 July 2023.

• Question: Can I benefit from the €10,000 deductible? - Answer: Yes, if you are in a similar situation and have worked in Switzerland for more than 5 years, as required by the federal law of 17 July 2023. - Which tax regime applies to old cross-border workers? - “Old frontier workers” qualify under Article 9 only if they met the tax requirements and worked in Graubünden, Ticino or Valais during the stated period; covered employment income is taxable exclusively in Switzerland. Old cross-border workers (Art. 9 of the Agreement) are taxed on their salary only in Switzerland; the €10,000 IRPEF allowance has applied since 2024 to cross-border workers whose income is taxed in Italy. 83/2023 applies only to income referred to in Article 1(175) of Law No. 147/2013. - Question: How can I verify my tax position? - Answer: By checking my tax return and consulting the Swiss Tax Office website. - Question: Can I benefit from the exemption of €15,000? - Answer: Yes, if you are a border worker and have already worked in Switzerland for more than 10 years, as required by the federal law of 17 July 2023.

Operational Checklists

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