Swiss grenzgänger taxes: obligations and new agreement (cross-border guide)

Context

At a glance

• Withholding tax applied only in Switzerland
• New Agreement in force from 1 January 2024
• Double taxation convention signed on 9 December 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
• Amount: Allowance of 10,000 euros for new cross-border workers and 7,500 euros for old cross-border workers

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 exclusively 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 December 1976 between Italy and Switzerland, bearing in mind that the Swiss Confederation is not part of the European Union or the European Economic Area.

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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

The distinction between old cross-border workers, i.e. those who already held this status before 17 July 2023, and new cross-border workers entails the application of different regimes. For old cross-border workers, an exemption of 7,500 euros is provided along with a transitional regime covering the period from 2024 to 2033. Conversely, new cross-border workers benefit from an allowance of 10,000 euros. On the Italian ordinary taxation front (IRPEF), rates are structured into clearly defined brackets: 23% for income up to 28,000 euros, 35% 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.

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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.