Teleworking for cross-border commuters: what changes
New Frontier Agreement: what it provides for and how it will affect the work of border workers.
Context
In brief
- The New Cross-Border Commuter Agreement was signed on 23 December 2020 and enters into force on 1 January 2024.
- The new agreement provides for the creation of a transitional regime for old cross-border commuters.
- New cross-border commuters will have a deductible of €10,000.
What changes for cross-border commuters
The new cross-border agreement introduces numerous innovations that could affect the lives of thousands of cross-border commuters living and working in Switzerland. The first novelty is the creation of a transitional regime for old cross-border commuters. Cross-border commuters who have been residing in Switzerland for more than 10 years will have the choice between two options: continue to pay Swiss taxes or opt for the new €10,000 deductible.
Concrete examples
Let's imagine that we have a cross-border worker who resides in Lugano and works in Milan. Currently, cross-border commuters would pay taxes in Switzerland and Italy. With the new agreement, the cross-border commuter could opt for the €10,000 deductible and pay only taxes in Italy. This could mean savings of around €5,000 per year.
Operational checklists
To benefit from the new cross-border agreement, cross-border commuters must meet the following conditions:
- Have resided in Switzerland for at least 10 years
- Have an annual income of at least €20,000
- Work in Italy
- Opt for the €10,000 excess by 31 December 2024
Policies and dates
The New Cross-Border Commuters Agreement was signed on 23 December 2020 and enters into force on 1 January 2024. Cross-border commuters must opt for the €10,000 deductible by 31 December 2024.
Comparisons between practical scenarios
Here's a comparison of two practical scenarios:
- Scenario 1: the cross-border commuter continues to pay Swiss and Italian taxes (€10,000 per year)
- Scenario 2: the cross-border commuter opts for the €10,000 deductible and pays only Italian taxes (€5,000 per year)
⚠️ Attention!
Cross-border commuters should be aware that the new agreement could have negative tax consequences if they do not opt for the €10,000 deductible by 31 December 2024.
💡 Advice
Cross-border commuters should consult a tax advisor to assess their options and decide whether to opt for the €10,000 excess.
Operational details
Key Facts
- What: New Cross-Border Commuter Agreement
- When: December 23, 2020
- Where: Switzerland
- Who: Cross-border commuters
- Amount: €10,000 (deductible for new cross-border commuters)
Teleworking for cross-border commuters: what changes
With the border agreement of 23 December 2020, Switzerland introduced new rules for cross-border teleworkers. This agreement aims to make life easier for workers who move from their home country to work in Switzerland.
New rules for cross-border commuters
- Deductible: New cross-border commuters can enjoy an exemption of €10,000 for transport and accommodation costs in Switzerland.
- Residence permit: Cross-border commuters can obtain a residence permit for work, which allows them to work in Switzerland for a fixed period of time.
- Taxes: Cross-border commuters are subject to Swiss taxes, but can enjoy a reduction in taxes if they reside in Switzerland for more than 183 days a year.
Concrete examples
- The €10,000 threshold in Article 4 of Italian Law No. 83/2023 applies exclusively to employment income earned continuously and exclusively by Italian residents in a foreign border area or neighbouring country, as referred to in Article 1(175) of Law No. 147/2013; it is neither a general allowance nor an exemption from Swiss withholding tax.
- A worker who works as a cook in a restaurant in Lucerne can obtain a residence permit for work and work in Switzerland for a fixed period of time.
Operational checklists
- Check if you are a cross-border commuter and if you can enjoy the €10,000 deductible.
- Contact your local immigration office to obtain a residence permit for work.
- Check the taxes you have to pay in Switzerland and whether you can enjoy a tax reduction.
Comparisons between practical scenarios
- If you are a worker working as a cook in a restaurant in Lucerne, you can obtain a residence permit for work and work in Switzerland for a fixed period of time.
Regulatory references
- Border agreement of 23 December 2020.
- Swiss Tax Act.
- Regulations for residence permits for work.
Aftermath
- Cross-border commuters can enjoy a deductible of €10,000 for transport and accommodation costs in Switzerland.
- Cross-border commuters can obtain a residence permit for work and work in Switzerland for a fixed period of time.
- Cross-border commuters are subject to Swiss taxes, but can enjoy a tax reduction if they reside in Switzerland for more than 183 days per year.
Recommended tools
For an updated estimate, use the net salary calculator and the CHF-EUR exchange comparator.
Key points
Teleworking for cross-border commuters: what changes
The New Cross-Border Commuters Agreement introduces a transitional regime for old cross-border commuters, who will have the option of choosing between the new legislation or the old regime. New cross-border commuters, on the other hand, will have a deductible of €10,000. This means that they will not pay withholding tax for the first €10,000 of earned income. It is important to note that the new agreement does not eliminate double taxation, but it does prevent cross-border commuters from paying the tax twice.
The new legislation provides for fairer taxation for cross-border commuters. For example, a cross-border worker earning €40,000 in Switzerland and €30,000 in Italy, could only be taxed on income earned in Switzerland, i.e. €20,000, thanks to the €10,000 deductible and the exemption for the first €10,000. This way, you will not pay withholding tax on 50% of your income.
New cross-border commuters will have to fill out a specific form to request the €10,000 deductible. This form must be sent to the financial directorate of the canton of residence by 31 March of the following year. It is important to note that the €10,000 deductible is only applicable to cross-border commuters who earn an earned income of at least €20,000 per year.
The New Cross-Border Commuter Agreement entered into force on 1 January 2024. It is important for all cross-border commuters to inform themselves about the new requirements and regulations to avoid paying unnecessary taxes. In addition, it is advisable to consult a tax advisor to get a clear view of your situations and to avoid making mistakes.
For example, a cross-border worker who earns €50,000 in Switzerland and €20,000 in Italy, could only be taxed on income earned in Switzerland, i.e. €30,000, thanks to the €10,000 deductible and the exemption for the first €10,000. This way, you won't pay withholding tax for 60% of your income.
The following table summarizes the main innovations of the New Cross-Border Commuter Agreement:
| Old cross-border commuters | New cross-border commuters | |
|---|---|---|
| Transitional arrangements | Yes | No |
| €10,000 excess | No | Yes |
| The €10,000 threshold in Article 4 of Italian Law No. 83/2023 applies exclusively to employment income earned continuously and exclusively by Italian residents in a foreign border area or neighbouring country, as referred to in Article 1(175) of Law No. 147/2013; it is neither a general allowance nor an exemption from Swiss withholding tax. | No | Yes |
| Form to fill out | No | Yes |
| Deadline for claiming your deductible | 31 March of the following year | 31 March of the following year |
It is important to note that the New Cross-Border Commuter Agreement does not eliminate double taxation, but it does prevent cross-border commuters from paying the tax twice. In addition, it is advisable to consult a tax advisor to get a clear view of your situations and to avoid making mistakes.
"The New Cross-Border Commuter Agreement is a step towards fairer taxation for cross-border commuters" - Aline Wasserfallen, Director of the Financial Directorate of the Canton of Vaud.
First day as a cross-border worker? Our practical guide walks you from cantonal registration to your first paycheck.
Source: pmi.it
Frequently Asked Questions
- How does the transitional regime for old border workers work?
- Old frontiersmen will have the option to choose between the new legislation or the old regime. If they choose the new legislation, they will have to pay source tax only on income from work above €7,500. If they choose the old regime, they will have to pay source tax as before.
- Which income is covered by the €10,000 limit?
- The The Article 9 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 income limit referred to in Article 1(175) of Law 147/2013, not a general allowance. FTA factsheet · Agreement, Article 9 · Normattiva, Article 4.
- How does double taxation work?
- Double taxation occurs when a border crosser pays source tax in Switzerland and Italy. The new agreement does not eliminate double taxation, but prevents frontier workers from paying the tax twice.
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