2026 tax credit for border workers with children

Context

In brief

• Withholding tax deducted only in Switzerland
• 2026 IRPEF: 23% up to €28,000, 33% up to €50,000, 43% above
• Tax credit managed via section CE of the 730 form
• New Cross-Border Agreement in effect since January 1, 2024

Key Facts

• Cross-Border Agreement: in effect 01/01/2024
• IT Ratification: Law 83 of 13/06/2023
• 2026 IRPEF (brackets): 23% / 33% / 43%
• Double Taxation Convention: 09/03/1976
• Allowance for new cross-border workers: €10,000
• Exemption for old cross-border workers: €7,500

The withholding tax on employment income for cross-border workers is deducted exclusively in Switzerland. To prevent the same income from being taxed twice, Italy applies the tax credit mechanism, which is technically managed through section CE of the tax return (730 form). This system allows for the recovery of the tax paid abroad against the tax due in Italy.

The Regulatory Framework and the Cross-Border Agreement

The current regime is governed by the New Cross-Border Agreement, signed on December 23, 2020, and entered into force on January 1, 2024, following the Italian ratification via Law 83 of June 13, 2023. In parallel, the Convention for the elimination of double taxation between Italy and Switzerland, dating back to March 9, 1976, remains valid. It is important to remember that Switzerland is not a member of the European Union nor of the European Economic Area (EEA).

The distinction between worker categories is clear. Old cross-border workers, namely those who had already acquired this status before July 17, 2023, benefit from an exemption of €7,500 and a transitional regime that will extend from 2024 to 2033. Conversely, new cross-border workers are entitled to an allowance of €10,000. Both categories must correctly manage the tax credit to optimize the overall tax burden, especially in the presence of family dependents that influence the determination of taxable income in Italy.

Operational details

Tax Impact Analysis for Families

The management of tax credits for a cross-border worker with children requires a careful analysis of the IRPEF rates planned for 2026. According to Law 199/2025 (art. 1 c. 3), IRPEF for the year 2026 will be structured with a rate of 23% for income up to €28,000, 33% for the bracket between €28,001 and €50,000, and 43% for income exceeding €50,000. This differs from the 2024-2025 income regime, where the rates were set at 23%, 35%, and 43%.

Hypothetical Calculation Scenarios

To understand how the tax credit operates, two hypothetical scenarios can be considered. In the first case, a cross-border worker with an average income and dependent children might find that the tax paid at source in Switzerland is higher or lower than the Italian IRPEF calculated on the same income. If the Swiss tax is higher, the tax credit cancels the tax due in Italy, but it does not generate a cash refund from the Agenzia delle Entrate for the exceeding amount.

In a second scenario, a cross-border worker with a high income (over €50,000) will be subject to the IRPEF rate of 43%. In this case, it is more likely that the tax due in Italy will exceed that withheld at source in Switzerland. The family will therefore have to pay the difference to the Italian treasury, despite the tax credit applied in the CE framework.

The final calculation is also influenced by the contributions paid in Switzerland, which include AVS/AI/IPG at 5.3% borne by the employee, unemployment insurance (AD/AC) at 1.1% (with a cap of 148,200 CHF), and LPP professional providence, which varies between 7% and 18% based on the age bracket starting from 25 years. To these is added the LAINF between 0.7% and 1.5%.

Key points

Operating procedure for declaration

To properly obtain the tax credit, the border worker must follow a strict procedure when filling in the Italian tax return. The main transaction takes place in the EC framework of the model 730, where the income produced in Switzerland and the taxes paid at source must be indicated.

Compilation checklist

• Recovery of Swiss salary certificates for the reference year.
• Calculation of taxable income net of deductibles (€7,500 for old border workers, €10,000 for new ones).
• Indication of the source tax paid to the cantonal tax administrations or to the AFC/ESTV.
• Inclusion of data in the EC framework for the application of the tax credit.
• Verification of deductions for dependent children provided for by Italian legislation.

It is essential that tax data is managed by the competent authorities: the AFC/ESTV at the federal level and the cantonal administrations at the local level. Bodies such as the FOPH/BAG or the Federal Statistical Office (BFS) have no competence in setting tax rates.

For those who also have to manage health insurance, border workers with a G permit have the right of option for LAMal, with deductibles for adults ranging between CHF 300 and CHF 2,500. Proper management of these costs, along with AVS and LPP contributions, is essential for sound family financial planning.

To simulate the impact of the new IRPEF 2026 rates on your net salary, you can use the calcolatore FISCALE.