Italy-Switzerland cross-border commuters: the new tax agreement

The new agreement on cross-border commuters between Italy and Switzerland has changed the taxation rules for those who live in Italy and work in the border cantons. For a Swiss employer that hires staff resident in Italy, understanding the new framework is not optional: it affects how withholding tax is deducted and what is reported to the authorities. Here are the points that count, without going into figures that depend on the individual case.

Who is a cross-border commuter for tax purposes

In general terms, the cross-border commuter is the person who is tax resident in Italy, works as an employee for a Swiss employer in a border area and, as a rule, returns to their home. The new agreement defines the border zone and the return condition with greater precision. Cross-border commuter status is what triggers the special regime: without it, the ordinary rules of the double-taxation convention apply.

The key principle: new and existing commuters

The central element of the new agreement is the distinction between two groups, based on when the relationship began relative to the entry into force of the new rules:

• the “historic” commuters, already active under the previous regime, retain a treatment in continuity with the past;
• the new commuters fall under the regime introduced by the agreement, which provides for concurrent taxation: tax withheld in Switzerland where the work is carried out, and subsequent taxation in Italy, with a mechanism to avoid double taxation.

For the Swiss employer, the practical point is the same in both cases: a withholding at source is applied to the salary. What changes are the applicable percentages and the tax follow-up on the worker in Italy.

The Swiss employer’s role

Regardless of the group, the employer that employs a cross-border commuter must:

• verify the collaborator’s tax residence and cross-border commuter status;
• correctly apply the cantonal withholding tax;
• pay the withheld tax to the competent tax authority;
• handle the reporting and the data required under the agreements between the two countries;
• issue the salary documentation the worker needs for their Italian tax return.

Responsibility for the correct deduction and payment remains with the employer: an error in classifying the collaborator or in the rate translates into adjustments and corrections.

The remote-work question

The most delicate issue in the new framework 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. Italy and Switzerland have set a tolerance threshold for remote work within which the status is not compromised, but exceeding it has tax effects. For the employer, this means having to monitor where the collaborator actually works, not just where they are hired.

What an employer needs to put in order

To avoid being caught out, it is advisable to:

• map the collaborators resident in Italy and classify them as historic or new;
• align the withholding rates applied to the correct regime;
• define a remote-work policy that takes the agreed threshold into account;
• keep a record of the days worked in Switzerland and remotely;
• coordinate payslips and certificates with the worker’s declaration needs.

Why it is worth sorting out now

The commuter regime touches payroll, taxation and work organisation at the same time. A wrong set-up does not surface immediately: it accumulates month after month and comes to light during an audit or a reconciliation, when correcting it costs more. Establishing the correct classification, the right rates and a consistent remote-work policy from the outset is the approach that reduces the risk.

How we help you

SIH ONE’s Payroll division manages cross-border commuters’ withholding tax, the correct classification of collaborators and the related reporting, coordinating payslips, payments and remote-work policy. Entrust us with your payroll.