Foreign income, checks on the way: how to avoid double taxation (cross-border guide)

Context

In brief

• New rules for cross-border commuters that came into force on 1 January 2024
• Exemptions and deductibles for old and new cross-border commuters
• Italy-Switzerland double taxation convention signed on 9 December 1976

Key Facts

• What: New rules for cross-border commuters
• When: From 1 January 2024
• Where: Switzerland and Italy
• Who: Cross-border commuters
• Amount: Exemptions and deductibles

On 1 January 2024, the new rules for cross-border commuters, signed on 23 December 2020 and ratified by Italy with Law 83 of 13 June 2023, came into force. These new provisions aim to avoid double taxation of income produced abroad. Cross-border commuters who were already working in Switzerland before 17 July 2023 will benefit from an exemption of €7,500, with a transitional regime extending until 2033. New cross-border commuters, on the other hand, will have a deductible of €10,000.

Exemptions and deductibles

The new rules introduce exemptions and exemptions for cross-border commuters, in order to avoid double taxation. Old cross-border commuters, i.e. those who worked in Switzerland before 17 July 2023, will benefit from an exemption of €7,500. This exemption will apply until 2033, with a transitional regime that allows them to benefit from this benefit for a longer period. New cross-border commuters, on the other hand, will have a deductible of €10,000.

Double taxation agreement

The Italy-Switzerland double taxation convention, signed on 9 December 1976, was fundamental in regulating the taxation of income produced abroad. This convention establishes that withholding tax on earned income is withheld only in Switzerland for cross-border commuters, while Italy avoids double taxation with the tax credit (EC framework of 730).

Operational details

Practical Implications

The new rules for border workers have important practical implications for those who work in Switzerland and reside in Italy. It is essential to understand how these provisions affect the taxation of income produced abroad and how to avoid double taxation.

Rates and contributions

Swiss rates and contributions are set by federal and cantonal laws and administered by the Federal Tax Administration (AFC/ESTV) at the federal level and by cantonal tax administrations. Social security contributions include AVS/AI/IPG (5.3% for the employee), AD/AC (1.1% with a ceiling of CHF 148,200), LAINF (0.7-1.5%) and LPP (7–18% by age group from 25 years). In Italy, the IRPEF varies from 23% up to €28,000, to 35% from €28,001 to €50,000 and to 43% over €50,000.

Procedure to avoid double taxation

To avoid double taxation, frontier workers must follow a specific procedure. In Switzerland, income tax at source is withheld only in Switzerland, while Italy avoids double taxation with the tax credit (EC framework of 730). It is important that frontier workers are aware of these provisions and follow the correct procedures to avoid tax problems.

Concrete scenarios

Consider a border worker who works in Switzerland and resides in Italy. If the frontier worker is an old frontier worker, he will benefit from an exemption of

Useful tools for your case

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

Key points

Concrete actions

To avoid double taxation, cross-border commuters need to take some concrete action. It is important to consult tax guides and use tools such as the tax calculator to better understand the implications of the new rules.

Step-by-step procedure

1. Consult the tax guides: Cross-border commuters should consult the tax guides provided by the Federal Tax Administration (FTA/ESTV) and the cantonal tax administrations to better understand the new rules. 2. Use the tax calculator: Cross-border commuters can use the tax calculator to better understand the implications of the new rules and calculate the taxes due. 3. Follow the correct procedures: It is important for cross-border commuters to follow the correct procedures to avoid tax problems and benefit from the exemptions and deductibles provided for by the new rules.

Useful tools

Cross-border commuters can use tools such as the tax calculator and tax guides to better understand the implications of the new rules and avoid double taxation. These tools are available on the Frontaliere Ticino website and can be used to calculate the taxes due and follow the correct procedures.

Final CTA

For more information and to use the tax calculator, visit calcolatore delle imposte.