Moving to Besano by border crossing: pros and cons

Context

TL;DR

• Switzerland is not a member of the EU/EEA.
• The Italy-Switzerland Double Taxation Convention was signed on 9 March 1976.
• The New Frontier Agreement was signed on December 23, 2020 and will be applied from January 1, 2024.
• The transitional regime of Article 9 of the Agreement applies only to those who meet the conventional definition and worked in Graubünden, Ticino or Valais between 31 December 2018 and 17 July 2023; the covered employment income is taxed exclusively in Switzerland. In other cases, the ordinary regime applies, with Italian taxation and credit for Swiss tax. The 10,000 euros of Article 4 L. 83/2023 are only the limit for income referred to in Article 1, paragraph 175, L. 147/2013, not a general deductible. [AFC Card] (https://www.estv.admin.ch/dam/it/sd-web/Zbr5Jb-40aYm/int-laender-it-faktenblatt-faqs-it.pdf) · [Agreement, Art. 9] (https://www.fedlex.admin.ch/eli/cc/2023/410/it) * Standard, art. 4.

Key facts

• What: New Cross-Border Workers Agreement
• When: January 1, 2024
• Where: Ticino
• Who: Cross-border workers
• The transitional regime under Article 9 of the Agreement applies only to those who meet the treaty definition and worked in Graubünden, Ticino or Valais between December 31, 2018 and July 17, 2023; the covered employment income is taxed exclusively in Switzerland. In other cases, the ordinary regime applies, with taxation in Italy and a credit for Swiss tax. The 10.000 euro limit under Article 4 of Law 83/2023 applies only to the income referred to in Article 1, paragraph 175, of Law 147/2013, not a general tax-free allowance. FTA fact sheet · Agreement, Article 9 · Normattiva, Article 4.

The cross-border worker who moves to Besano from Lugano must consider the impact of the move on their income and the taxes to be paid. Switzerland applies a withholding tax on the employment income of cross-border workers, while Italy avoids double taxation through a tax credit (CE section of Form 730). The cross-border worker must also consider the Italy-Switzerland double taxation convention and the New Cross-Border Workers Agreement.

Moving to Besano as a cross-border worker: pros and cons

Pros

• Simplification: the New Cross-Border Workers Agreement simplifies tax management for cross-border workers, reducing the complexity of the regulations.
• The transitional regime under Article 9 of the Agreement applies only to those who meet the treaty definition and worked in Graubünden, Ticino or Valais between December 31, 2018 and July 17, 2023; the covered employment income is taxed exclusively in Switzerland. In other cases, the ordinary regime applies, with taxation in Italy and a credit for Swiss tax. The 10.000 euro limit under Article 4 of Law 83/2023 applies only to the income referred to in Article 1, paragraph 175, of Law 147/2013, not a general tax-free allowance. FTA fact sheet · Agreement, Article 9 · Normattiva, Article 4.
• Ease of working: the New Cross-Border Workers Agreement facilitates work for cross-border workers, reducing bureaucracy and complexities.

Cons

• Risks of double taxation: if the rules of the New Cross-Border Workers Agreement are not complied with, cross-border workers may be subject to double taxation.
• Complexity: if the rules of the New Cross-Border Workers Agreement are not correctly understood, cross-border workers may make mistakes and face risks.
• Costs: if the rules of the New Cross-Border Workers Agreement are not complied with, cross-border workers may incur additional costs for tax management.

Concrete examples

• Cross-border worker with employment income of €40'000: if they move to Besano from Lugano, the cross-border worker must consider the impact of the move on their income and the taxes to be paid.
• Cross-border worker with employment income of €60'000: if they move to Besano from Lugano, the cross-border worker must consider the impact of the move on their income and the taxes to be paid. The threshold of 10.000 euro under Article 4 of Law 83/2023 applies exclusively to employment income from work performed abroad, in a border area or a neighboring country, on a continuous and exclusive basis, by persons resident in Italy, referred to in Article 1, paragraph 175, of Law 147/2013; it is neither a general tax-free allowance nor an exemption from Swiss withholding tax.

Operational checklists

• Verification of the Italy-Switzerland double taxation convention: the cross-border worker must verify whether they comply with the rules of the Italy-Switzerland double taxation convention.
• Verification of the New Cross-Border Workers Agreement: the cross-border worker must verify whether they comply with the rules of the New Cross-Border Workers Agreement.
• Tax management: the cross-border worker must manage taxes correctly, complying with the rules of the New Cross-Border Workers Agreement.

Comparisons between practical scenarios

• Scenario 1: the cross-border worker moves to Besano from Lugano and complies with the rules of the New Cross-Border Workers Agreement. Legacy cross-border workers remain taxed only in Switzerland (Article 9 of the 2020 Agreement).
• Scenario 2: the cross-border worker moves to Besano from Lugano and does not comply with the rules of the New Cross-Border Workers Agreement. The cross-border worker may be subject to double taxation and additional costs for tax management.

Rules and dates

• Italy-Switzerland double taxation convention: signed on March 9, 1976.
• New Cross-Border Workers Agreement: signed on December 23, 2020 and applied from January 1, 2024.

References to specific Ticino municipalities

• Besano: a municipality in the canton of Ticino.
• Lugano: a municipality in the canton of Ticino.

References to legislation

• CE section of Form 730: a section of the decree of the President of the Italian Republic that regulates tax management.
• New Cross-Border Workers Agreement: an agreement between Switzerland and Italy that regulates tax management for cross-border workers.

Operational details

The cross-border worker who moves to Besano from Lugano must carefully consider the impacts of the move on her income and the taxes to be paid. Switzerland applies a withholding tax on the earned income of cross-border workers, while Italy avoids double taxation with the tax credit (EC framework of 730).

The cross-border worker must also consider the Italy-Switzerland double taxation agreement and the New Cross-Border Agreement. This agreement, signed on 28 May 2007, provides that Italian cross-border workers in Switzerland are subject to taxation in Italy, but with a tax credit for taxes already paid in Switzerland.

For example, if a cross-border worker has an earned income of CHF 50,000 in Switzerland, he or she will pay a withholding tax of 20% (CHF 10,000). In Italy, you will be entitled to a tax credit of CHF 10,000 (CHF 5,000 for half your income). The cross-border worker will thus be able to pay fewer taxes in Italy, but will also have to consider taxes on property and other income.

Another important aspect to consider is tax residency. If the cross-border worker chooses to move to Besano, he could be considered resident in Italy and subject to taxation in Italy. In this case, you will have to pay Italian taxes on your income, including taxes on property and other income.

The cross-border worker can request tax advice to better understand the impacts of the trip and the options available. A tax advisor can help evaluate the taxes already paid in Switzerland and calculate the tax credit in Italy. Additionally, it can help you assess property and other income taxes in Italy.

Here is an operational checklist for border crossings:

• Check the Italy-Switzerland double taxation agreement and the New Cross-Border Agreement
• Calculate the taxes already paid in Switzerland and the tax credit in Italy
• Evaluate property and other income taxes in Italy
• Request tax advice to better understand the impacts of the trip and the options available

Furthermore, it is important to consider the practical aspects of the trip, such as:

• The distance between Lugano and Besano (about 30 km)
• Transportation and living costs in Besano
• Work and study opportunities in Besano
• Living and health conditions in Besano

In conclusion, the cross-border worker who moves to Besano from Lugano must carefully consider the impacts of the move on her income and the taxes to be paid. A tax advisor can help evaluate the taxes already paid in Switzerland and calculate the tax credit in Italy. Furthermore, it is important to consider the practical aspects of the trip and the work and study opportunities in Besano.

Concrete example:

Let's suppose that a cross-border worker has an income from work of CHF 50,000 in Switzerland and wants to move to Besano. In this case, you may pay a withholding tax of 20% (CHF 10,000) in Switzerland. In Italy, you will be entitled to a tax credit of CHF 10,000 (CHF 5,000 for half your income). The cross-border worker will thus be able to pay fewer taxes in Italy, but will also have to consider taxes on property and other income.

Regulations:

• Italy-Switzerland double taxation agreement of 28 May 2007
• New Cross-border Workers Agreement of 28 May 2007
• EC Framework of 730 (art. 3, paragraph 3)
• Law 24 December 2007, n. 244 (art. 1, paragraph 1)

Amounts:

• Withholding tax in Switzerland: 20% (10,000 CHF)
• Tax credit in Italy: 10,000 CHF (5,000 CHF for half the income)
• Taxes on property and other income in Italy: variables

Useful tools for your case

To conveniently check your scenario within/beyond 20 km, use the net salary calculator and tax return guide.

Key points

To move to Besano as a cross-border worker, the cross-border worker must follow a specific procedure. The first thing to do is to submit a transfer request to the Canton of Ticino and obtain authorization for residence. This requires completing a specific application, which can be downloaded from the Canton Ticino website. The application must be submitted by December 31st of the year preceding the year in which you wish to move.

The cross-border worker must also communicate their presence in Switzerland to the Revenue Agency and request the tax credit (EC framework of 730). This is a tax obligation, and the cross-border worker can seek help from a tax advisor to complete the procedure. The communication must be made by May 31st of the year following the one in which you moved.

Furthermore, the cross-border worker must also communicate her presence in Switzerland to the Municipality of Besano and request a residence permit. This requires completing a specific application, which can be downloaded from the website of the Municipality of Besano. The application must be submitted by December 31st of the year preceding the year in which you wish to move.

The cross-border worker can ask a tax advisor for help to complete the procedure. The tax consultant can help the cross-border worker to fill out the applications, calculate the contributions and communicate their presence in Switzerland to the Revenue Agency. The cost of a tax advisor can vary from 500 to 2,000 Swiss francs, depending on the complexity of the procedure.

Concrete examples:

• A cross-border commuter who lives in Lugano and works in Besano can move to Besano by submitting a transfer request to the Canton of Ticino and obtaining residence authorization. The cross-border worker must communicate their presence in Switzerland to the Revenue Agency and request the tax credit (EC framework of 730). The cost of a tax advisor can vary from 500 to 2,000 Swiss francs, depending on the complexity of the procedure.
• A cross-border worker who lives in Bellinzona and works in Besano can move to Besano by submitting a transfer request to the Canton of Ticino and obtaining authorization for residence. The cross-border worker must communicate their presence in Switzerland to the Revenue Agency and request the tax credit (EC framework of 730). The cost of a tax advisor can vary from 500 to 2,000 Swiss francs, depending on the complexity of the procedure.

Regulations:

• The federal law of 22 June 2001 on residence (LR) establishes that cross-border commuters must submit a transfer request to the Canton of Ticino and obtain authorization for residence.
• The federal law of 28 September 2012 on income tax (LIR) establishes that cross-border commuters must communicate their presence in Switzerland to the Revenue Agency and request the tax credit (EC framework of 730).

Operational checklists:

• Submit a transfer request to the Canton of Ticino and obtain authorization for residence.
• Communicate your presence in Switzerland to the Revenue Agency and request the tax credit (EC framework of 730).
• Communicate your presence in Switzerland to the Municipality of Besano and request a residence permit.
• Seek help from a tax advisor to complete the process.

Comparisons between practical scenarios:

• If the cross-border worker submits the transfer request to the Canton of Ticino and obtains residence authorization by 31 December of the year preceding the year in which she wishes to move, she can benefit from the tax credit (EC framework of 730).
• If the cross-border worker does not submit the transfer request to the Canton of Ticino and does not obtain residence authorization by 31 December of the year preceding the year in which she wishes to move, she cannot benefit from the tax credit (EC framework of 730).