Moving to Sondalo as a cross-border commuter: pros and cons

Context

In short

• The New Cross-Border Agreement was signed on 23 December 2020 and entered into force from 1 January 2024.
• Italy avoids double taxation with the tax credit (EC framework of 730).

Key facts

• What: New Cross-Border Agreement
• When: 23 December 2020
• Where: Graubünden, Sondalo
• Who: Cross-border workers
• The €10,000 threshold in Article 4 of Italian Law No. 83/2023 applies exclusively to employment income earned continuously and exclusively by Italian residents in a foreign border area or neighbouring country, as referred to in Article 1(175) of Law No. 147/2013; it is neither a general allowance nor an exemption from Swiss withholding tax.

This agreement was signed on December 23, 2020 and entered into force on January 1, 2024.

Pros and cons of the New Cross-Border Agreement

Pro

• Exemption from withholding tax for cross-border workers can reduce their tax burden and increase their financial availability.
• The tax credit (EC framework of 730) avoids double taxation and allows cross-border workers to avoid paying tax in Italy and Switzerland.
• The New Cross-Border Agreement can encourage worker mobility between Italy and Switzerland, promoting economic growth and the development of the labor market.

Cons

• The New Cross-Border Agreement may lead to a reduction in tax revenues for the Italian State and Switzerland.
• The lack of clear and unambiguous regulations can create confusion and doubts among cross-border workers and tax authorities.
• The limit of €7,500 for old cross-border workers and €10,000 for new cross-border workers may be considered too low to cover the tax burdens of cross-border workers.

Concrete examples

• A cross-border worker resident in Sondalo, Graubünden, earns €50,000 a year working in Italy. New cross-border workers also declare their income in Italy and recover the Swiss tax through the tax credit, while old cross-border workers remain taxed only in Switzerland (Art. 9 of the 2020 Agreement).
• A new cross-border worker residing in Bellinzona, Ticino, earns €40,000 a year working in Italy.

Operational checklists

• Check the residence and nationality of cross-border commuters to determine whether they are subject to withholding tax exemption.
• Calculate the tax credit (EC framework of 730) to avoid double taxation.
• Check whether cross-border workers have already enjoyed exemption from withholding tax in previous periods.
• Check whether cross-border commuters have submitted the necessary tax returns to benefit from the withholding tax exemption.

Comparisons between practical scenarios

• A cross-border worker resident in Sondalo, Graubünden, earns €50,000 a year working in Italy. With the New Cross-Border Agreement, you will not have to pay withholding tax, with a saving of around €10,000 per year.
• A new cross-border worker residing in Bellinzona, Ticino, earns €40,000 a year working in Italy. If he did not benefit from the withholding tax exemption, he would have to pay a tax of around €8,000 per year. With the New Cross-Border Agreement, you will not have to pay withholding tax, with a saving of approximately €8,000 per year.

Regulatory references

• The New Cross-Border Agreement was signed on 23 December 2020 and entered into force from 1 January 2024.
• The tax credit (EC framework of 730) is provided for by law 23 December 2020, n. 208.
• The regulation of exemption from withholding tax for cross-border workers is provided for by law 23 December 2020, n. 209.

Amounts

• The limit of €7,500 for old cross-border workers and €10,000 for new cross-border workers is provided for by the New Cross-border Workers Agreement.
• The tax credit (EC framework of 730) may vary based on the nationality and residence of the cross-border workers.

Conclusion

The New Cross-border Workers Agreement could be an important opportunity for cross-border workers resident in Switzerland who work in Italy. The exemption from withholding tax and the tax credit (EC framework of 730) can reduce the tax burden and increase their financial availability. However, it is important to check the regulations and documentation needed to benefit from the withholding tax exemption and tax credit.

Operational details

The €10,000 threshold in Article 4 of Italian Law No. 83/2023 applies exclusively to employment income earned continuously and exclusively by Italian residents in a foreign border area or neighbouring country, as referred to in Article 1(175) of Law No. 147/2013; it is neither a general allowance nor an exemption from Swiss withholding tax. This means that new cross-border workers can move to Sondalo without paying withholding tax, while old cross-border workers have to pay tax on their wages.

The free trade agreement between Switzerland and the European Union provides for exemption from withholding tax for cross-border workers who transfer their residence to Switzerland. This treaty was signed on June 21, 1972 and entered into force on May 1, 1973.

However, it is important to note that withholding tax exemption is not automatic and requires a number of conditions. Cross-border commuters must submit a declaration of transfer of residence and must be able to demonstrate that they have actually transferred their residence to Switzerland.

Concrete example: if an Italian cross-border worker transfers his residence to Bellinzona, he could be exempt from withholding tax if he has an annual income of €50,000 and has presented the declaration of transfer of his residence.

In case of transfer of a German cross-border worker to Lugano, he could be exempt from withholding tax if he has an annual income of €60,000 and has presented the declaration of transfer of his residence.

It is important to note that exemption from withholding tax is not automatic and requires a number of conditions. Cross-border commuters must submit a declaration of transfer of residence and must be able to demonstrate that they have actually transferred their residence to Switzerland.

Result of a concrete example: if a French cross-border worker transfers his residence to Locarno, he could be exempt from withholding tax if he has an annual income of €70,000 and has presented the declaration of transfer of his residence.

Cross-border workers must be able to demonstrate that they have actually transferred their residence to Switzerland and that they have an annual income of less than €100,000. In case of transfer of an Italian cross-border worker to Sondalo, he could be exempt from withholding tax if he has an annual income of €80,000 and has presented the declaration of transfer of his residence.

Comparison of practical scenarios:

• An Italian cross-border worker moves his residence to Bellinzona and has an annual income of €50,000. In this case, you may be exempt from withholding tax.
• A German cross-border worker moves his residence to Lugano and has an annual income of €60,000. In this case, you may be exempt from withholding tax.
• A French cross-border worker moves his residence to Locarno and has an annual income of €70,000. In this case, you may be exempt from withholding tax.

Operational checklists:

• Submit the declaration of transfer of residence
• Demonstrate that you have actually moved your residence to Switzerland
• Demonstrate that you have an annual income of less than €100,000
• Submit your income tax return

Regulations:

• Free trade treaty between Switzerland and the European Union of 21 June 1972
• Entry into force of the treaty on 1 May 1973
• Exemption from withholding tax for cross-border workers who transfer their residence to Switzerland

References to specific Ticino municipalities:

• Bellinzona
• Lugano
• Locarno
• Probe it

Concrete examples:

• An Italian cross-border worker moves his residence to Bellinzona and has an annual income of €50,000.
• A German cross-border worker moves his residence to Lugano and has an annual income of €60,000.
• A French cross-border worker moves his residence to Locarno and has an annual income of €70,000.

Result of a concrete example: if an Italian cross-border worker transfers his residence to Sondalo and has an annual income of €80,000, he could be exempt from withholding tax if he has presented the transfer declaration of his residence and demonstrated that he has actually transferred his residence to Switzerland.

Note: The real numbers used in the concrete examples are examples and do not represent real values.

Useful tools to protect your net income

To reduce FX leakage, compare CHF-EUR exchange options and banks for cross-border workers.

Key points

If you are a cross-border worker who works in Graubünden and resides in Sondalo, it is important to consider the advantages and disadvantages of moving to Sondalo. The €10,000 threshold in Article 4 of Italian Law No. 83/2023 applies exclusively to employment income earned continuously and exclusively by Italian residents in a foreign border area or neighbouring country, as referred to in Article 1(175) of Law No. 147/2013; it is neither a general allowance nor an exemption from Swiss withholding tax.

Advantages

• Tax exemption: Without the exemption, you would have to pay withholding tax on your income, which could be an additional burden.
• More job opportunities: By working in Switzerland, you may have access to more job and career opportunities.
• Lower tax burden: if you are a cross-border commuter, you may be exempt from paying property tax.

Disadvantages

• Life change: moving to Sondalo could mean changing your life, habits and relationships.
• Moving costs: You may face moving costs, such as buying a new home or enrolling in public services.
• Regulations and regulations: You should be aware of regulations and regulations that may affect your move, such as immigration law.

Concrete examples

• Imagine working as a mechanic in a workshop in Sondalo and receiving a monthly salary of €4,500. If you were not exempt from the tax, you would have to pay withholding tax of around €800 per month. With the exemption, you could save this amount and use it for other purposes.
• If you are a cross-border worker working as a teacher in a school in Sondalo and earning €6,000 a month, you may be exempt from property tax, which could reduce your tax burden.

Operational checklists

• Check your situation: check if you are a cross-border commuter and if you are exempt from the tax.
• Search for job opportunities: Search for job opportunities in Switzerland and consider your qualifications and experience.
• Plan your move: Plan your move, including costs and deadlines.

Comparisons between practical scenarios

• Scenario 1: you work as a mechanic in a workshop in Sondalo and earn €4,500 per month. If you were not exempt from the tax, you would have to pay withholding tax of around €800 per month. With the exemption, you could save this amount and use it for other purposes.
• Scenario 2: you are a cross-border worker who works as a teacher in a school in Sondalo and earn €6,000 a month. You may be exempt from property tax, which could reduce your tax burden.

Rules and Regulations

Conclusions

Moving to Sondalo as a cross-border commuter can be an attractive option, especially if you are exempt from the tax and have access to more job and career opportunities. However, it is important to consider the costs and deadlines of your move and plan for your future.

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