Cross-border commuters: tax return and taxes between Italy and Switzerland

Anyone who lives in Italy and works in Switzerland faces the same question every year: where do I pay taxes, how much does the Swiss employer withhold and what do I still have to declare in Italy? The topic is technical, and the new agreement on cross-border commuters has made the distinction between those who pay only in Switzerland and those who pay in both countries decisive. Let’s see how to put your position in order, without going into figures that depend on the individual case.

The starting point: where you are tax resident

The first thing to clarify is not where you work, but where you are tax resident. The cross-border commuter, by definition, keeps their residence in Italy and works as an employee for a Swiss employer in a border area, returning as a rule to their home. It is this combination — Italian residence, employment in Switzerland, the condition of returning home — that triggers the special regime provided for by the agreements between the two countries.

Anyone who instead transfers their residence to Switzerland (B or C permit, actual domicile) leaves the logic of the cross-border commuter: they become a Swiss taxpayer to all intents and purposes and no longer file the Italian return on employment income. It is a distinction to check before anything else, because it radically changes the obligations.

The withholding tax deducted in Switzerland

The cross-border commuter’s salary is subject to withholding tax (Quellensteuer) deducted directly by the Swiss employer and paid to the cantonal authority. You do not receive the gross salary and then pay the taxes: you find them already deducted on the payslip, at a rate that depends on the canton, the level of income and the family situation.

This deduction at source is the mechanism that assigns to Switzerland — the country where the work is carried out — a share of the tax take. The point where many get confused is that, for part of the cross-border commuters, the matter does not end here.

Old and new commuters: two different regimes

The new agreement distinguishes two groups based on the moment the employment relationship began:

• the “historic” commuters, already active under the previous regime, retain on a continuity basis a treatment in which, in general terms, taxation stays concentrated in Switzerland according to the established rules;
• the new commuters fall under a regime of concurrent taxation: Switzerland withholds the tax at source, but the income must then be declared in Italy as well, which applies its own taxation while granting a credit for what has already been paid in Switzerland.

The practical difference is enormous. The new commuter cannot consider the matter closed with the Swiss withholding: they must bring that income into the Italian return.

The Italian tax return and the tax credit

For the new commuter, the mechanism that avoids double taxation is the credit for taxes paid abroad. In essence: you declare the Swiss income in Italy, Italy calculates the tax due and offsets what has already been withheld in Switzerland, so as not to pay twice on the same income.

To do this you need the right documents:

• the Swiss salary certificate (Lohnausweis), which summarises income and deductions;
• the evidence of the withholding tax actually paid;
• the correct indication of the cross-border commuter status and the canton of work.

Without orderly documentation, the risk is being unable to claim the credit and, in effect, paying a heavier tax burden than is due.

The remote-work question

The most delicate issue is remote working. The cross-border commuter, by definition, works on Swiss territory: significant days worked from home in Italy can affect the status and the place of taxation. The two countries have set a tolerance threshold for remote work within which the status is not compromised. Exceeding it has tax effects, so it is advisable to keep track of the days actually worked in Switzerland and from home.

Mistakes to avoid

• Treating the withholding at source as “all paid” when you are a new commuter required to declare in Italy.
• Not keeping the Lohnausweis and proof of payments, indispensable for the tax credit.
• Ignoring the remote-work threshold and, in effect, losing cross-border commuter status.
• Confusing cross-border commuting with a transfer of residence, which follow opposite rules.

How we help you

We help cross-border commuters to correctly frame their own regime, to read the Swiss withholding and to set up the Italian return with the right tax credit, avoiding double taxation and surprises during an audit. Do you want to put your position between Italy and Switzerland in order? Discover the services of our tax area.