New Rules for Frontier Workers from July 2023
After years of negotiations, Italy and Switzerland signed a landmark Taxation of Frontier Workers agreement, a Tax Agreement replacing the outdated one in 1974.
Consequently, on July 19, 2023, the new Tax agreement officially came into force. This impacts both “new frontier workers” and “old frontier workers.”
- Taxation Mechanism for “New Frontier Workers”: “new frontier workers” in Switzerland will benefit from a competitive taxation mechanism. They will pay tax at source in the canton of employment.
- Transitional Rules for “New Cross-Border Commuters” : During 2023, “new cross-border commuters” follow the old taxation rules. If they reside in border municipalities and daily return, they continue paying taxes only in Switzerland. From January 1, 2024 the first taxation in Italy in 2025 for income earned in 2024.
- Safeguard for “Old Frontier Workers”: “Old frontier workers” with years of work in Switzerland are protected by the new Tax Agreement. Subsequently, they’ll be taxed exclusively in Switzerland until retirement, even if they change jobs or experience unemployment.
- Improved Conditions for “Out-of-Band” Border Workers: Frontier workers working in Switzerland without having a tax residency in border municipalities will declare income in Italy.
- Union’s Achievements: The Italian Ratification Law No. 83/2023 includes concessions to support cross-border commuters. These comprise: €10,000 tax-free allowance, deductibility of contributions for early retirement. Deducting Swiss family allowances. Specific financial support measures for border municipalities.
- New Unemployment Benefits: A new unemployment benefit for border workers, effective from January 1, 2024, guarantees higher support for the first three months of unemployment, thanks to the union’s advocacy.
- Removal of Switzerland from the Italian Black List: The ratification law officially removed Switzerland from Italy’s black list, indicating improved financial relations between the two countries.
The Italy-Switzerland Tax Agreement marks a significant milestone for cross-border employment relations. Furthermore, with clear tax mechanisms for both “new frontier workers” and “old frontier workers,” Unions secures additional benefits. Lastly, The agreement aims to provide fair treatment and support for cross-border commuters.
If you have any doubts or want to learn more, please visit our tax advice page and don’t hesitate to contact our HTLC Network team.