Swiss grenzgänger taxes: obligations and new agreement

Context

At a glance

• Withholding tax applied in Switzerland
• New Agreement in force from 1 January 2024
• Double taxation convention signed on 9 March 1976
• Tax credit in Italy through section CE of the 730 form

Key facts

• What: Withholding tax on employment income
• When: Agreement in force from 1 January 2024
• Where: Switzerland and Italy
• Who: Federal Tax Administration and Revenue Agency
• 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.

The panorama of cross-border taxation for workers who operate in Switzerland and reside in Italy is based on precise and consolidated regulations. The withholding tax on employment income provides for a deduction applied in Switzerland, thereby avoiding double taxation through the mechanism of the tax credit managed in Italy through section CE of the 730 form. The administrative management and the application of tax rates fall under the Federal Tax Administration (AFC) and the cantonal tax administrations, operating within the framework of the Double Taxation Convention signed on 9 March 1976 between Italy and Switzerland, bearing in mind that the Swiss Confederation is not part of the European Union or the European Economic Area.

The regulatory framework of reference

The recent evolution of tax rules has introduced the New Cross-Border Workers Agreement, signed on 23 December 2020 and made operational starting from 1 January 2024, with Italian ratification occurring through Law 83 of 13 June 2023. This regulatory framework clearly distinguishes the position of workers based on the starting date of their cross-border employment activity, separating those who acquired worker status before specific cut-off dates from those who started afterwards. The Federal Tax Administration and the relevant bodies regulate the application of withholdings on the basis of the federal and cantonal laws in force, ensuring transparency and the correct application of the deductions provided for each individual professional category active on Swiss territory.

Operational details

The practical analysis of tax and social security deductions requires a careful evaluation of the different components that affect the payslip of the cross-border worker. Swiss rates and contributions include mandatory withholdings for pension and social insurance schemes managed by recognised institutions such as SUVA for workplace accidents, while contributions to the occupational pension LPP range from 7% to 18% depending on age brackets starting from age 25. As regards basic social insurance, AVS, AI and IPG contributions provide for a 5.3% share borne by the employee, while unemployment insurance AD/AC is set at 1.1% up to the maximum ceiling of 148,200 Swiss francs. Accident insurance LAINF coverage ranges between 0.7% and 1.5%.

Differences between old and new 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. There is no general €7,500 allowance; the €10,000 figure in Article 4 of Law No. 83/2023 applies only to 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). 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. On the Italian ordinary taxation front (IRPEF), rates are structured into clearly defined brackets: 23% for income up to 28,000 euros, 33% for the bracket between 28,001 and 50,000 euros, and 43% for the portion of income exceeding 50,000 euros. Healthcare management also provides for the option of LAMal with adult deductibles ranging between 300 and 2,500 Swiss francs, offering targeted coverage for those who cross the border daily through the main border crossings.

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

Dealing correctly with tax and social security obligations requires following detailed procedures and meeting the deadlines imposed by the competent authorities in the two countries. The worker must periodically verify his/her contribution and insurance position, regularly consulting the PAGA prospectuses and coordinating with INPS and the Revenue Agency for the tax return using form 730, correctly entering the data relating to the taxes paid in Switzerland to take advantage of the tax credit and avoid any form of double taxation.

Operations and verification tools

To accurately estimate the impact of withholding taxes and mandatory contributions on your monthly salary, you can use dedicated calculation tools before proceeding with the transmission of the tax return. It is advisable to check your specific situation using the simulation tools available online. For a precise assessment of deductions and net income deriving from work in Swiss territory, you can check the data with the official calcolatore fiscale.