AVS and LPP income tax code: new for frontier workers (cross-border guide)

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Introduced a specific tax code for withholdings on AVS and LPP annuities from Switzerland: what changes for frontier workers.

Context

In a nutshell

  • New tax code dedicated to withholdings on AVS and LPP ANNUITIES
  • Relevance for taxpayers with Swiss pension income
  • Tax at source applied according to the Italian-Swiss Convention of 9 December 1976

Key facts

  • What: Introduction specific tax code for withholdings on Swiss pension pensions
  • When: Recent news in the tax system
  • Where: Switzerland, with application for border workers residing in Italy
  • Who: Contributing recipients of AVS and LPP ANNUITIES
  • Amount: Withholdings according to current rates

The introduction of an ad hoc tax code for withholdings on AVS and LPP annuities represents a significant innovation in the Italian tax system in relation to income from Swiss sources. The measure responds to the need for greater clarity in the management of withholdings made on pension income from the Swiss social security system.

The Swiss pension tax system

In Switzerland, withholding taxes are the main instrument of taxation for retirement income. Border workers who receive AVS (Old Age and Survivors' Insurance) and LPP (Occupational Pensions Act) pensions are subject to this tax regime, with rates that vary according to the income bracket and the canton of tax residence.

The AVS/AHV system constitutes the first pillar of Swiss social security, while the LPP/BVG represents the second

Operational details

In a nutshell

  • The new code simplifies the tax management of Swiss pensions
  • Relevance for old and new frontier workers with AVS/LPP ANNUITIES
  • Need to verify the correct application of withholding taxes

Key facts

  • What: Procedural simplification in the management of pension withholdings
  • When: Regime applicable from the current tax period
  • Where: Italian tax return
  • Who: Perceivers of AVS and LPP annuities with tax residence in Italy
  • Amount: Withholdings according to Swiss cantonal rates

Differences between old and new frontier workers

The tax regime for frontier workers presents significant distinctions between those who already worked in Switzerland before 17 July 2023 and those who started thereafter. Old frontier workers benefit from an exemption of 7,500 euros and a transitional regime that extends until 2033, while new frontier workers can count on a deductible of 10,000 euros.

These differences apply to employment income, but it is important to understand how they intersect with the treatment of retirement annuities. AVS and LPP pensions, received as a result of work carried out in Switzerland, maintain their own fiscal autonomy, distinct from the active work income regime.

The applicable Italian personal income tax rates

In Italy, pensions from foreign sources are subject to personal income tax at the following rates: 23% for income up to 28,000 euros, 35% for the range between 28,001 and

Useful planning tools

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Key points

In brief

  • Verify the Swiss withholding taxes on the pension
  • Use the CE box of the 730 to declare foreign income
  • Request the tax credit for taxes paid in Switzerland

Key points

  • What: Tax obligations for the correct fiscal management of Swiss pensions
  • When: Declaration to be submitted within the legal deadline
  • Where: Model 730 or UNICO PF
  • Who: Frontier beneficiaries of AVS and LPP income
  • Amount: Withholding taxes to be verified according to individual situation

Step-by-step: how to manage the declaration

The fiscal management of AVS and LPP income received from Switzerland requires a sequential sequence of obligations. First, it is necessary to obtain from the Swiss pension institution the certification of the withholding taxes applied, which clearly indicates the gross amount of the pension and the withheld taxes. This document constitutes the basis for the compilation of the Italian declaration.

Next, it is necessary to verify that the new tax code has been correctly applied by the Swiss counterparty. In case of anomalies or failure to apply the code, it is advisable to contact the paying institution to request the necessary corrections. The correct identification of income through the dedicated tax code facilitates subsequent checks by the Revenue Agency.

Filling in the CE box

In the Model 730, pension income from Swiss sources must be indicated in the CE box, dedicated to dependent and assimilated work income received abroad. Income must be entered at gross value, indicating separately the tax paid in Switzerland. The system automatically calculates the tax credit due, within the limits of the corresponding Italian tax.

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Frequently Asked Questions
What does the new tax code provide for AVS and LPP annuities from Switzerland?
The new tax code allows a more precise identification of the withholdings made on Swiss pension annuities in the Italian tax return, facilitating the application of the tax credit for taxes paid in Switzerland and the correct management of the relationship with the Revenue Agency.
How are AVS and LPP pensions taxed for border workers residing in Italy?
Swiss-source pensions are subject to withholding tax in Switzerland according to the cantonal rates in force. In Italy, they are subject to personal income tax with progressive rates from 23% to 43% depending on the income bracket. The tax credit mechanism avoids double taxation.
What is the difference in tax treatment between old and new frontier pensioners?
For employment income, old frontier workers (active before 17 July 2023) benefit from an exemption of 7,500 euros and a transitional regime until 2033, while new frontier workers have a deductible of 10,000 euros. Pension annuities follow specific rules, distinct from the active labour income scheme.
How do I fill out my Swiss pension tax return?
In form 730, pension income from Swiss sources must be indicated in the EC Framework before withholding taxes, with a separate indication of the tax paid in Switzerland. The system automatically calculates the tax credit due. For the SINGLE PF model, the calculation is done manually.
Who to contact for assistance on Swiss pension taxation?
For questions relating to the taxation of Swiss pensions, you can contact the Revenue Agency, affiliated CAFs or tax professionals. Frontier Ticino also offers calculation tools and practical guides for managing compliance.

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