Foreign tax credit parameterized to income: case studies (cross-border guide)

Context

In a nutshell

• The foreign income tax credit is a tax benefit available to border workers working in Switzerland.
• This benefit is provided by the New Frontier Agreement, signed on 23 December 2020.

Key facts

• Chi: border workers working in Switzerland.
• When: from 1 January 2024.
• Where: in Switzerland.
• Amount: not specified yet.

Practical examples

The foreign income tax credit is an important novelty for border workers working in Switzerland. Under the New Frontier Agreement, this tax benefit will be available from 1 January 2024.

Case Studies

• Case 1: A frontier worker works in a city like Geneva, with an income of CHF 80,000 per year. Assuming that the foreign income tax credit is 20% of the income, the frontier would be entitled to a credit of CHF 16,000.
• Case 2: Another border worker works in a canton like Ticino, with an income of 120,000CHF per year. Assuming that the foreign tax credit parameterized to income is 20% of income, the border company would be entitled to a credit of CHF 24,000.

Operational Checklists

To access the foreign tax credit parameterized to income, border workers must:

• Reside in a country with which Switzerland has a friendship agreement
• Work in Switzerland for at least 90 days a year
• Paying taxes in Switzerland
• Have no other sources of income in Switzerland

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Operational details

Foreign tax credit parameterized to income: case studies

The foreign income tax credit is a tax benefit that can be requested by border workers working in Switzerland. This benefit is provided by the New Frontier Agreement, signed on 23 December 2020.

According to the New Frontier Agreement, frontier workers working in Switzerland are exempt from taxation in Italy. This means they can claim an income-parameterized foreign tax credit, which is calculated based on their income.

However, it is important to note that the foreign tax credit parameterized to income is not an automatic benefit and must be requested by border crossers within the established deadline. The deadline for requesting the foreign tax credit parameterized to income is usually March 31 of the year following that in which the income was received.

Border workers who wish to apply for the foreign tax credit parameterized to income must submit their tax return within the established deadline. The tax return can be submitted through the AFC/ESTV website.

Here is an example of how the foreign income tax credit works:

• A frontier worker works in Switzerland and earns an income of CHF 50,000 per year.
• The border worker requests the foreign tax credit parameterized to income through the AFC/ESTV website.
• The AFC/ESTV calculates the foreign tax credit

Useful tools to protect your net income

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

Key points

Foreign tax credit parameterized to income: the cases To request the foreign tax credit parameterized to income, border workers must submit their tax return within the established deadline. The tax return can be submitted through the AFC/ESTV website. Border crossers who have already filed their tax return can apply for the foreign income tax credit through the AFC/ESTV website. It is important to note that the foreign tax credit parameterized to income is not an automatic benefit and must be requested by border workers within the established deadline. If the border workers have not submitted their tax return within the established deadline, they will not be able to request the foreign tax credit parameterized to income. It is therefore essential to file the tax return in time to avoid losing the right to the credit. The income-adjusted foreign tax credit is an important benefit for frontier workers who have paid taxes in Switzerland. According to the regulations in force since 1 January 2020, border workers who have paid taxes in Switzerland can apply for a credit of 10,000 Swiss francs per year. However, the credit is not automatic and must be requested within the established deadline. Example: A frontier worker who has paid 15,000 Swiss francs in taxes in Switzerland can claim a credit of 10,000 francs The AFC/ESTV website provides detailed information on the procedure for claiming the foreign income tax credit. Border workers can consult the AFC/ESTV website for detailed information on the procedure to apply for the foreign income tax credit. Consultation: If border crossers have doubts about the procedure to apply for the foreign income tax credit, they can consult the AFC/ESTV website. Border workers can also consult a tax advisor for detailed information on the procedure to apply for the foreign tax credit parameterized to income. Important note: The foreign tax credit set to income is not an automatic benefit and must be requested by border workers within the established deadline. Border workers must submit the tax return within the established deadline to request the foreign tax credit parameterized to income.