Italy-Switzerland tax agreement what will change for the new frontier workers

22 Feb , 2023 - Fiduciaria Lago

Given that the final vote of the Italian Chamber is still missing (the Senate approved it on Wednesday 1 February 2023), the new tax agreement between Italy and Switzerland should enter into force starting from 1 January 2024.

What will happen with the entry into force of this new agreement?

First, it must be said that the new agreement will only apply to new cross-border commuters. Those who, on the other hand, have carried out an employee activity in Switzerland in the previous 5 years, i.e. between 31 December 2018 and 31 December 2023, will continue to take advantage of the current concessions.

What the new Italy-Switzerland tax agreement provides for future cross-border commuters

With the new bilateral agreement, cross-border workers employed in Switzerland will be subject, after 1 January 2024, to a competitive taxation mechanism between Italy and Switzerland. Let's see an explanatory example.

Currently, with an income of CHF 60,000, you have to pay CHF 12,000 in withholding tax. Starting from 1 January 2024, with an income of CHF 60,000, you will have to pay CHF 9,600 in withholding tax, destined entirely to the Swiss treasury. While in Italy the frontier worker will have to pay an IRPEF calculated on the entire income (CHF 60,000) less the deductible of € 10,000, plus deductions and deductions.

Once the tax to be paid in Italy has been determined, the frontier commuter will be able to deduct the amount already paid in Switzerland, in our example CHF 9,600.

Opportunities and future scenarios

In conclusion, with this agreement, the new cross-border commuters will also be required to pay the additional IRPEF to the Italian government, as set out above.

The entry into force of this new agreement will also involve the approximately 600 citizens who live in Switzerland and work in Italy. For them, however, there will be a significant improvement in tax conditions, as deductions at source will be reduced by 25%.

It is legitimate to think that as the established date approaches, there will be a sort of "race" for the stagecoach by the end of the year. Those who already plan to start a work project in Switzerland have all the advantages of formalizing it before the entry into force of the new agreement. In this way they will be able to take advantage of the tax breaks currently available to cross-border commuters.

What the consequences will be in the medium and long term for the world of work in Ticino, after the entry into force of the new agreement, will be revealed by time.

If you want to receive personalized advice or receive more information regarding the changes to the new agreement, contact us by filling out the form below.