Border taxation: distance clarifications (cross-border guide)

Context

In a nutshell - The New Agreement is effective January 1, 2024. - The definition of frontier does not depend on the distance of 20 km. - Taxation follows criteria defined by the 2020 Agreement. - Tax residence remains at the heart of the legislation. ## Key facts - What: New Agreement between Italy and Switzerland - When: In force from 1 January 2024 - Where: Border between Italy and Switzerland - Who: Frontier workers - State: Current legislation The tax regime applicable to frontier workers working in Switzerland has been subject to a thorough review with the entry into force of the new Agreement, which officially took place on 1 January 2024. This regulatory framework, signed on 23 December 2020, defines the ways in which employee income is taxed between the two jurisdictions. It is essential to clarify that the current legislation does not provide for tax treatment distinctions based specifically on the distance of 20 kilometers from the border. The definition of frontier worker for tax purposes dispenses with this geographical parameter, focusing instead on tax residence and the frequency of daily return to one's State of residence. ### The current regulatory framework The application of the new provisions requires a precise understanding of the residency criteria. The current legislation establishes that the frontier worker is the one who resides in an Italian municipality whose territory is located, entirely or

Operational details

The practical analysis of the tax situation requires particular attention to income tax declaration procedures. For workers managing their tax position, it is necessary to consider the overall impact of the tax withholding, which occurs in Switzerland through source taxation. Subsequently, in Italy, the taxpayer must declare the income received in the Individual Income Tax Return form, calculating the gross IRPEF tax due and subtracting the tax credit for amounts already paid in Switzerland. This procedure does not vary based on the distance from the border but depends solely on the status of a cross-border worker as recognized under the Agreement.

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Key points

To properly manage their position, workers must follow a strict procedure. First and foremost, it is necessary to verify the correct payment of withholding tax in Switzerland. This payment is certified by the employer through the salary certificate. In Italy, the income tax return must include the gross income earned, converted into euros according to the average annual exchange rate, to determine the IRPEF taxable amount. The regulations do not provide shortcuts or simplified regimes based on distance, so every taxpayer is required to follow the ordinary rules set for cross-border workers. Monitoring the exchange rate is a crucial step, as fluctuations between CHF and EUR can affect the taxable base declared in Italy. For an accurate currency comparison, it is possible to use the online currency comparator.

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