Border welder in Ticino: practical guide and requirements (cross-border guide)

Context

In a nutshell

• The New Frontier Agreement is in force from 1 January 2024.
• Frontier workers pay the tax at source in Switzerland.
• Italy avoids double taxation via tax credit.

Key facts

• What: Border work in Ticino
• When: Effective January 1, 2024
• Where: Canton of Ticino
• Who: Federal Tax Administration (FTA)
• Amount: Tax exemption of 10,000 euros for new frontier workers

Welding in Ticino, as in other technical professions, requires an understanding of the regulatory framework governing the employment relationship between Switzerland and Italy. From 1 January 2024, the new Agreement between the Italian Republic and the Swiss Confederation on the taxation of frontier workers, signed on 23 December 2020 and ratified by Law 83 of 13 June 2023, regulates the methods of taxation. This agreement establishes that employee income produced in Switzerland is subject to taxation at source in the canton of activity.

The new tax regime

The legislation provides that the frontier worker is taxed exclusively in Switzerland, while Italy recognizes a tax credit to avoid double taxation, an operation that takes place at the time of tax declaration through the EC framework of the model 730. For those defined as "new frontier workers", i.e. those who started working in Switzerland after 17 July 2023, an exemption is provided

Operational details

Contributory and Pensions Aspects

The salary of a welder in Switzerland, like that of every employee, is subject to mandatory deductions for social security. These include contributions to the AVS (Old Age and Survivors Insurance), AI (Invalidity Insurance), and IPG (Loss of Income Compensation), which total 5.3% at the expense of the employee. In addition to this, there is a contribution for unemployment insurance (AD/AC) of 1.1%, calculated on an annual maximum salary of 148,200 francs. The coverage of insurance against accidents (LAINF) represents another item, with a variable rate between 0.7% and 1.5%.

Regarding professional pensions (LPP/BVG), contributions vary between 7% and 18% depending on the age group of the worker, with an obligation to join from the age of 25. It is essential to distinguish between different types of taxes: tax rates are set by federal and cantonal laws and managed by the Federal Administration of Contributions (AFC) or cantonal administrations, while entities such as UFAS are only responsible for managing the AVS/AI pillars. As for health insurance, cross-border workers have the right to opt for LAMal coverage, with deductibles ranging from 300 to 2,500 francs. We recommend using the salary calculator for an estimate of the deductions. Compared to the Italian system, where IRPEF tax rates are progressive (23% up to 28,000 euros, 35% up to 50,000 euros, 43% above), the Swiss system applies a withholding tax that reflects the specific situation of the worker. The management of cost of living and the planning of the third pillar are essential elements for those who intend to establish a solid professional path in Swiss territory, considering also the structural differences in the labor market between the two countries.

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Key points

Procedures and Documentation for Frontier Workers

To engage in a salary work in Ticino, the worker must first obtain a job contract with a Swiss company. Once employed, the procedure for issuing the G permit (permit for frontier workers) is initiated by the employer at the competent cantonal authorities. A valid identity document and proof of residence within the frontier zone, defined as the territory within 20 km of the Swiss border, as per the Convention against Double Taxation signed on December 9, 1976, must be presented.

Each worker should regularly check their pay envelope to verify the accuracy of the deductions, including the contributions for the sickness insurance (LAMal). The choice of the sick fund is crucial for every frontier worker, as the health coverage is mandatory and must be activated within the prescribed terms. In terms of financial management, it is advisable to open an account at Swiss banks to facilitate the management of the salary in Swiss francs and any currency exchange operations. The declaration of income in Italy remains necessary to regularize one's fiscal position, using the tax credit to avoid double taxation on the income earned in Switzerland.

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