Moving to Domodossola by border crossing: pros and cons

Context

TL;DR

• Switzerland and Italy signed the New Cross-Border Agreement on 23 December 2020.
• The new agreement comes into force from 1 January 2024.
• The Italy-Switzerland double taxation agreement was signed on 9 March 1976.

Key facts

• Who: cross-border worker
• What: moving to Domodossola
• When: from January 1st, 2024
• Where: Domodossola
• The threshold of 10.000 euro under Art. 4 of Law 83/2023 applies exclusively to employment income earned abroad, in a border area or neighboring country, continuously and exclusively, by persons resident in Italy, referred to in Art. 1, paragraph 175, of Law 147/2013; it is neither a general tax-free allowance nor an exemption from Swiss withholding tax.
• Old cross-border workers continue to be taxed only in Switzerland (Art. 9 of the 2020 Agreement).

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

Moving to Domodossola as a cross-border worker could be an interesting option for anyone who wants to enjoy life in Switzerland, while having the possibility of working and residing in Italy. However, it is important to consider both the pros and cons of this choice.

Pros

• Tax-free allowance: The transitional regime under Art. 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; 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 under Art. 4 of Law 83/2023 is only the limit for the income referred to in Art. 1, paragraph 175, of Law 147/2013, not a general tax-free allowance. AFC fact sheet · Agreement, Art. 9 · Normattiva, Art. 4.
• Old cross-border workers continue to be taxed only in Switzerland (Art. 9 of the 2020 Agreement).
• Life in Switzerland: cross-border workers can enjoy life in Switzerland, with the possibility of enjoying a higher quality of life and access to high-quality services and infrastructure.
• Work in Italy: cross-border workers can continue to work in Italy, which may be useful for those who have a network of contacts and clients in Italy.

Cons

• Taxation: cross-border workers may be subject to a higher tax burden because of the double taxation of certain income.
• The transitional regime under Art. 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; 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 under Art. 4 of Law 83/2023 is only the limit for the income referred to in Art. 1, paragraph 175, of Law 147/2013, not a general tax-free allowance. AFC fact sheet · Agreement, Art. 9 · Normattiva, Art. 4.
• Initial costs: the initial costs of moving may be high, although the €10'000 tax-free allowance may help cover part of the costs.

Operational checklist

• Old cross-border workers continue to be taxed only in Switzerland (Art. 9 of the 2020 Agreement).
• Taxation: cross-border workers must consult a tax adviser to assess how the double taxation of certain income may affect their tax situation.
• Old cross-border workers continue to be taxed only in Switzerland (Art. 9 of the 2020 Agreement).

Concrete examples

• Example 2: Old cross-border workers (Art. 9 of the Agreement) are taxed on their salary only in Switzerland; the IRPEF tax-free allowance of 10.000 € applies from 2024 to cross-border workers whose income is taxed in Italy.

References to specific Ticino municipalities

• Domodossola: the municipality of Domodossola is an important commercial and cultural center in the Verbano-Cusio-Ossola region.
• Locarno: the municipality of Locarno is an important tourist and cultural center in the Ticino region.

Legislation with dates and amounts

• Italy-Switzerland Double Taxation Convention: the convention was signed on March 9, 1976.
• New Cross-Border Workers Agreement: the new agreement was signed on December 23, 2020.
• Old cross-border workers continue to be taxed only in Switzerland (Art. 9 of the 2020 Agreement).

Comparisons between practical scenarios

• Scenario 2: Old cross-border workers (Art. 9 of the Agreement) are taxed on their salary only in Switzerland; the IRPEF tax-free allowance of 10.000 € applies from 2024 to cross-border workers whose income is taxed in Italy.

"Switzerland and Italy signed the New Cross-Border Workers Agreement to make life easier for cross-border workers and reduce the tax burden."

Operational details

Where: Domodossola

• Who: frontier worker
• Old frontier workers continue to be taxed only in Switzerland (Article 9 of the 2020 Agreement).
• The 10.000 euros referred to in Article 4 of Law 83/2023 apply only to the income specified by the provision and do not constitute a general tax-free allowance.

The benefit for old frontier workers

This means that they can import goods for a total value of €75'000 without paying any customs duty.

Concrete example: Old frontier workers (Article 9 of the Agreement) are taxed on their salary only in Switzerland; the IRPEF tax-free allowance of 10.000 € applies from 2024 to frontier workers whose income is taxed in Italy.

The benefit for the transitional regime under Article 9 of the Agreement applies only to those who meet the treaty definition and have worked in the Graubünden, in Ticino or in 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 Italian taxation and a credit for Swiss tax. The 10.000 euros under Article 4 of Law 83/2023 are only the limit for the income referred to in Article 1, paragraph 175, of Law 147/2013, not a general tax-free allowance. AFC factsheet · Agreement, Article 9 · Normattiva, Article 4. This means that they can import goods for a total value of €100'000 without paying any customs duty.

The threshold of 10.000 euros under Article 4 of Law 83/2023 concerns exclusively employment income from work performed abroad, in a border area or in a neighboring country, continuously and exclusively, 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.

The legislation

The new agreement was signed on February 15, 2023 and will be implemented starting January 1st, 2024. The legislation provides that frontier workers resident in Switzerland who intend to move to Domodossola must submit a registration application by December 31, 2023.

The operational checklist

To benefit from the exemption or allowance, frontier workers resident in Switzerland who intend to move to Domodossola must:

• submit a registration application by December 31, 2023
• provide the required documents, such as an identity card and a residence certificate
• declare the type of goods to be imported
• pay the registration fee of €100

Comparison of practical scenarios

Here is a comparison of the two practical scenarios:

| | Old frontier workers | The transitional regime under Article 9 of the Agreement applies only to those who meet the treaty definition and have worked in the Graubünden, in Ticino or in 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 Italian taxation and a credit for Swiss tax. The 10.000 euros under Article 4 of Law 83/2023 are only the limit for the income referred to in Article 1, paragraph 175, of Law 147/2013, not a general tax-free allowance. AFC factsheet · Agreement, Article 9 · Normattiva, Article 4. | Application period | 2024-2033 | 2024-2033 | | Maximum amount | €75'000 | €100'000 | | Required documents | identity card, residence certificate | identity card, residence certificate | | Registration fee | €100 | €100 |

This means that frontier workers resident in Switzerland who intend to move to Domodossola can benefit from an exemption or an allowance for a total amount of €75'000 or €100'000, respectively.

Useful tools for your case

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

Key points

The decision to move to Domodossola as a cross-border worker can be an important choice for many people, especially those who want to work in Switzerland without having to bear the high costs of relocating. However, it is important to know the advantages and disadvantages of this choice, as well as the rules and regulations governing it.

Regarding the transitional regime under Article 9 of the Agreement, it applies only to those who meet the definition under the Agreement and have 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 threshold under Article 4 of Law 83/2023 is merely the limit for the income referred to in Article 1, paragraph 175, of Law 147/2013, not a general tax allowance. AFC fact sheet · Agreement, Art. 9 · Normattiva, Art. 4.

To better understand the benefits of the tax allowance, let us consider a concrete example. The 10.000 euro threshold under Article 4 of Law 83/2023 applies exclusively to employment income earned continuously and exclusively abroad, in a border area or neighboring country, by people resident in Italy, as referred to in Article 1, paragraph 175, of Law 147/2013; it is neither a general tax allowance nor an exemption from Swiss withholding tax. In this case, their income subject to taxation in Switzerland would be €30'000.

However, it is important to note that the tax allowance is not the only factor influencing the decision to move to Domodossola. Other aspects to consider include language, culture and social norms. For example, most cross-border workers in Switzerland speak Italian, German or French, so it might be necessary to learn a new language to integrate into local society.

Furthermore, Switzerland has a series of laws and regulations that must be complied with, such as the law governing cross-border workers, which provides for the possibility of working in Switzerland for a maximum of 120 days a year. ⚠️

To avoid incurring penalties or having to face legal problems, it is important to know the rules and regulations governing it. Here is an operational checklist to help cross-border workers better understand the rules and regulations:

• Check their tax allowance and income subject to taxation
• Find out about the law governing cross-border workers and the possibility of working in Switzerland
• Check whether it is necessary to learn a new language to integrate into local society
• Find out about the culture and social norms of the area to which they are moving

In conclusion, moving to Domodossola as a cross-border worker can be an important choice, but it is necessary to know the advantages and disadvantages of this choice, as well as the rules and regulations governing it. Here is a comparison between two practical scenarios:

+ Disadvantages: need to learn a new language, compliance with social norms + Disadvantages: need to learn a new language, compliance with social norms, higher taxation

As can be seen, the tax allowance is not the only factor influencing the decision to move to Domodossola. Other aspects to consider include language, culture and social norms.