AVS and LPP income tax code: new for frontier workers
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 March 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. 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.
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, 33% for the range between 28,001 and
Useful planning tools
To estimate your pension strategy, use the pension planner and the pillar 3 simulator.
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.
For taxpayers who present the UNICO PF model, the procedure is similar but with different calculation methods. In this case, it is necessary to manually calculate the tax credit, verifying that it does not exceed the gross Italian tax calculated on foreign income.
Deadlines and obligations
The declaration of income from foreign sources must be submitted within the ordinary deadline, which typically runs until 30 September of the following year to that of income receipt. It is essential to consider that any delays in receiving the Swiss certification do not justify the failure to submit the declaration, for which it is possible to rely on supplementary declarations.
In the case of sums received in one year but related to previous periods, it is necessary to verify in which period of taxation these income must be subject to taxation, according to the applicable cash or accrual rules.
Support tools
To facilitate the management of these obligations, it is possible to use dedicated calculation tools that allow verifying the fiscal incidence of Swiss pensions and planning the amounts to be paid or recovered. The salary calculator of Frontaliere Ticino allows simulating different situations and evaluating the impact of withholding taxes at source on the overall income.
For further information on the fiscal management of foreign income, it is recommended to consult the dedicated guide to the tax return, which provides detailed instructions on the obligations to be followed and the documentation to be kept. Correct fiscal planning allows optimizing the tax burden and avoiding sanctions for omitted or insufficient payments.
Document retention
It is essential to retain all documentation related to the pensions received from Switzerland, including the certifications of withholding taxes, correspondence with pension institutions, and any decisions by the tax authority. This documentation may be requested in case of checks and constitutes proof of the correctness of the obligations fulfilled. Retention must be maintained for the period prescribed by law, typically ten years from the submission of the declaration.
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.
- 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 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.