Cross-border commuters and remote work: the tax aspects
Remote work for cross-border commuters has ceased to be a pandemic exception and has become a structural question: how many days can an Italian cross-border commuter work from home without changing the tax regime or the social insurance of the employment relationship? For the Swiss employer this is not a peripheral HR topic: it affects withholding tax, contributions and liability. It is worth understanding the mechanisms, without relying on percentages heard by word of mouth.
The general principle: taxed where the work is done
The basic rule in double taxation conventions is simple: income from employment is taxable in the State where the activity is physically carried out. A cross-border commuter working in an office in Switzerland produces income taxable in Switzerland; the days worked from home in Italy are, in principle, activity carried out in Italy.
Hence the problem of remote work: the more days are worked across the border, the greater the risk of shifting part of the taxation and calling into question the cross-border commuter status.
The agreed teleworking thresholds
Italy and Switzerland have defined a framework for cross-border commuter work that includes a cap on teleworking days within which the activity carried out from home continues to be treated, for tax purposes, as if it were performed in the employer’s State (Switzerland). The idea is to allow a reasonable share of remote work without triggering complications.
The operative concept for the employer is this:
- within the agreed teleworking threshold, the regime remains the ordinary one for the cross-border commuter and the taxation of the salary does not shift;
- above the threshold, the portion of work carried out in Italy may become taxable in Italy, with reporting obligations and possible consequences for the status.
The exact thresholds and arrangements are defined by specific agreements and may evolve: before authorising a structured remote-work plan, the percentage must be verified in its version in force, not estimated from memory.
New and old cross-border commuters: two regimes
Beware of a point that is often ignored: the taxation of Italy-Switzerland cross-border commuters distinguishes between those who fall under the new regime and those who retain the previous one, with differences as to where and how income is taxed. The two categories must not be treated in the same way, and this also affects how the teleworking days weigh. The employer must know which category each collaborator falls into.
Withholding tax remains an employer obligation
Whatever the configuration, for the employee subject to it the Swiss employer must correctly manage the withholding tax: withhold it from the salary and pay it to the cantonal authority. Remote work does not eliminate this obligation; if anything it complicates it, because it becomes necessary to determine what portion of income remains taxable in Switzerland. An inaccurate calculation is a risk for the employer, not the employee.
The separate issue of social contributions
Taxation is not everything. There is a second track, entirely distinct: the social insurances. For those who work in two States, the coordination rules establish which pension system the person remains subject to, and here too teleworking above a certain share can change the competent State, with effects on AHV/IV/EO (old-age, disability and loss-of-earnings insurance), ALV (unemployment insurance), BVG (occupational pension) and affiliations. It is entirely possible for a cross-border commuter to remain “Swiss” for tax purposes but require attention on the contributions front, or vice versa. The two levels must be assessed together.
What the employer must concretely do
To avoid being caught out:
- map the cross-border commuters and their category (new or previous regime);
- set in writing a cap on teleworking days consistent with the thresholds in force;
- track the days actually worked from home, with a verifiable system;
- coordinate the withholding-tax calculation and the social affiliations;
- review the picture periodically, because agreements and thresholds can change.
The mistake to avoid
The most common mistake is granting “free” remote work to cross-border commuters as a benefit, with no cap and no tracking. It works until an audit arrives or until the share of work in Italy silently exceeds the threshold. At that point the clean-up is retroactive and costly. A clear cap and a register of days cost little and protect both company and collaborator.
How we help you
The Payroll division of SIH ONE sets up the management of cross-border commuters working remotely: withholding tax, monitoring of days and tax-contribution coordination, taking into account the regime applicable to each. Entrust your payroll to us.