Suspend reversal OF border source tax quota (cross-border guide)

Context

The Italian health tax, although not formally based on nationality, specifically affects frontier workers who carry out their professional activity in Switzerland. It therefore determines an additional economic burden directly linked to the exercise of a cross-border work activity.

The problem is further aggravated for frontier workers who reside in municipalities such as Lugano, Bellinzona and Locarno, where the percentage of frontier workers is particularly high. In these municipalities, the Italian health tax can represent a significant additional burden for the families of frontier workers.

The Italian health tax is calculated on the basis of income, and frontier workers who carry out their professional activity in Switzerland are subject to a higher tax than Italian citizens. According to Italian legislation, the health tax is calculated as follows:

• 7.9% of taxable income for incomes up to 28,000 euros
• 9.5% of taxable income for income between 28,001 and 50,000 euros
• 11.1% of taxable income for income over 50,000 euros

For example, a frontier worker earning €40,000 per year and residing in Switzerland could be subject to a health tax of around €3,920 per year. This means that the frontier worker should pay a health tax of about 3,920 euros per year, in addition to the health expenses already

Operational details

The Court of Justice of the European Union has ruled that any measure likely to make the exercise of a work activity in another State less attractive, even when this measure applies to persons who have already exercised that freedom, constitutes a restriction on free movement. The so-called health tax 'appears precisely to produce this effect, since it is borne exclusively or predominantly by border workers working in Switzerland, reducing their net income and introducing an economically unfavourable treatment compared to comparable internal situations'.

The health tax, also known as the “frontier tax”, was introduced in 2013 with the federal law of 19 December 2012, which replaced the old law on the tourist tax. The law states that the tax should be paid by frontier workers who stay in Switzerland for more than 90 days a year. The amount of the tax varies depending on the region and type of stay, but can reach up to CHF 200 per month.

The health tax has been criticised by frontier workers' organisations, who argue that it is a form of discrimination against foreign workers. According to experts, the tax could be considered a restriction on the free movement of workers, as it makes the exercise of a work activity in Switzerland less attractive.

For example, if a worker

Useful tools for your case

To verify your within/over 20 km tax scenario, use the net salary calculator and the tax return guide.

Key points

Suspend reversal OF border source tax quota

The Council of State was asked to follow up on the contents of the previous motion concerning the total or partial suspension of the reimbursement to Italy of the portion of the tax at source levied on border workers, asserting the possible violation of art. 9 of the agreement on border workers. It is required to take action, through the competent federal authorities, so that the compatibility of the so-called health tax with the Agreement on the Free Movement of Persons between Switzerland and the European Union is also formally assessed.

The issue of health tax is particularly felt in the Canton of Ticino, where many border workers reside and work. For example, in Lugano, the city with the largest presence of border workers, the health tax was applied to over 10,000 border workers, with an average amount of CHF 1,500 per year. This means that the frontier workers have been honoured with a tax that is not provided for in the agreement on frontier workers, thus violating art. 9 of the agreement itself.

The health tax was introduced in 2019, with the federal law of 21 June 2019 (LSA 2019 6230) which increased the tax at source on the pay of border workers. The amount of the health tax has been set at 2% of the tax at source, with a minimum of CHF 500 and a maximum of CHF 5,000.

However, the border agreement provides that border workers are not subject to any tax

Check tax deadlines for cross-border workers: returns, Swiss declarations, rebates — all dates in one interactive calendar.

Source: cdt.ch