Lite Lombardy and Switzerland: the tax hub for border workers (cross-border guide)

Context

In a nutshell

• New Frontier Agreement in force from 1 January 2024
• Transitional regime for old frontier workers until 2033
• Exemption of 7,500 euros for those who were border workers before 17/07/2023
• Withholding tax at source made exclusively in Switzerland

Key facts

• What: Tax dispute between Lombardy and Switzerland
• When: New agreement in force from 1 January 2024
• Where: Canton of Ticino and Lombardy Region
• Who: Old and new frontier workers, MEF, Revenue Agency
• Amount: Exemption 7,500 euros for old border workers

The tax management of cross-border workers between Italy and Switzerland has entered a new phase with the implementation of the New Frontier Agreement, signed on 23 December 2020 and ratified in Italy with Law 83 of 13 June 2023. This agreement is fully operational from 1 January 2024, redefining the taxation relations between the two States.

The structure of taxation

A key point, often subject to confusion, concerns the tax at source on income from work. This deduction is made exclusively in Switzerland for frontier workers. Italy, in order to avoid the worker being taxed twice on the same income, applies the tax credit mechanism, which is technically managed through the CE framework of the tax return 730. This system ensures that the tax paid in Switzerland is recognised in the calculation of taxes due in Italy.

The frame

Operational details

Transitional Regime and Differences

The implementation of the new agreement has created a clear distinction between two categories of workers based on the date of July 17, 2023. This date serves as a dividing line to determine which fiscal regime to apply, introducing a transitional period aimed at mitigating the impact of the change for those already active in the Ticino labor market.

Old vs New Frontalieri

The so-called old frontalieri, i.e., those who had already acquired the status of frontaliere before July 17, 2023, benefit from a transitional regime that will last from 2024 to 2033. For this category, an exemption of 7,500 euros is foreseen. Conversely, the new frontalieri, who started their activity after this date, are subject to a franchise of 10,000 euros.

To understand the practical impact, it is useful to observe how costs and deductions vary. While the source tax remains Swiss, the mandatory contributions follow precise rules. For example, the AVS/AI/IPG contributions are 5.3% of the employee's salary, while the unemployment insurance (AD/AC) is 1.1% up to a ceiling of 148,200 CHF. The professional pension (LPP) varies between 7% and 18% depending on the age bracket, starting from 25 years old.

| Elemento | Old Frontalieri (pre 17/07/23) | New Frontalieri (post 17/07/23) | | :--- | :--- | :--- | | Regime | Transitional 2024-2033 | Ordinary | | Exemption/Franchise | 7,500 euros | 10,000 euros | | Source Tax | Only in Switzerland | Only in Switzerland |

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Key points

Practical Guide to Tax Management 2024-2033

For workers operating between Italy and Ticino, accurate documentation management is the only way to avoid penalties or incorrect tax application. The declaration process must be precise, especially for those under the transitional regime for old frontier workers.

Step-by-Step Declaration Procedure

1. Collect documents: Obtain the Swiss salary certificate that confirms the tax withheld at source and the pension contributions (AVS, LPP). 2. Verify status: Check if your start date of activity precedes or follows July 17, 2023, to apply the correct exemption (7.500 euro or 10.000 euro franchise). 3. Compile 730: Enter the income earned in Switzerland in the CE box of the Italian income tax declaration. 4. Calculate tax credit: Verify that the tax paid in Switzerland has been correctly deducted from Italian taxes to avoid double taxation. 5. LAMal Control: If you have a G permit, verify the option chosen for the illness insurance, remembering that the franchises for adults vary between 300 and 2.500 CHF.

Pension and Insurance Obligations

It is essential to monitor contributions to LPP and AVS. While AVS is a mandatory pillar, the accident insurance (LAINF) has deductions that oscillate between 0.7% and 1.5%. Regarding health, the LAMal insurance is not a tax but an insurance system where the frontier worker with a G permit can exercise a right of option.

For those with doubts about their fiscal position or who want to understand how the Italian IRPEF (with brackets from 23% to 43%) affects their net salary after the Swiss source tax, it is advisable to use simulation tools. For a precise calculation of the pay slip and taxes, it is possible to access the calculator of Frontaliere Ticino.

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