Foreign income, checks on the way: how to avoid double taxation
New rules for frontier workers: exemptions, deductibles and how to avoid double taxation.
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 March 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. Old cross-border workers remain taxed only in Switzerland (Art. 9 of the 2020 Agreement). For Article 9 of the Agreement, “old frontier workers” are people who met the tax requirements and worked in Graubünden, Ticino or Valais on 17 July 2023 or during the period from 31 December 2018 through 17 July 2023. Article 9 keeps covered employment income taxable exclusively at source in Switzerland; other workers follow the ordinary regime, with ordinary taxation in Italy, a credit for Swiss tax and Swiss withholding at 80% of the ordinary rates. The €10,000 figure in Article 4 of Italian Law No. 83/2023 is only the income limit referred to in Article 1(175) of Law No. 147/2013; it is not a general allowance for new frontier workers. Sources: ESTV factsheet (Italian) · Agreement, Art. 9 · Law No. 83/2023, Art. 4.
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. The €10,000 limit is not a general allowance: Article 4 of Italian Law No. 83/2023 applies it only to the income referred to in Article 1(175) of Law No. 147/2013.
Double taxation agreement
The Italy-Switzerland double taxation convention, signed on 9 March 1976, was fundamental in regulating the taxation of income produced abroad. This convention establishes that withholding tax on earned income is withheld 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 33% 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 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.
Frequently Asked Questions
- What are the new rules for border workers?
- The new rules for frontier workers came into force on 1 January 2024 and provide for exemptions and deductibles to avoid double taxation of income produced abroad.
- Which income does the €10,000 limit apply to?
- Article 9’s transitional regime applies only to workers who meet the Agreement’s definition and worked in Graubünden, Ticino or Valais between 31 December 2018 and 17 July 2023; covered employment income is taxable exclusively in Switzerland. The ordinary regime applies in other cases, with Italian taxation and credit for Swiss tax where applicable. The €10,000 in Article 4 of Law 83/2023 is only the limit for income referred to in Article 1(175) of Law 147/2013, not a general allowance. FTA factsheet · Agreement, Article 9 · Normattiva, Article 4.
- How to avoid double taxation?
- To avoid double taxation, border workers must follow the correct procedures and consult the tax guides provided by the Federal Tax Administration (AFC/ESTV) and the cantonal tax administrations.