Italy and Switzerland they signed on Wednesday in Rome a new agreement on the tax treatment of frontier workers (i.e., in most cases, people who live in Italy but work in Switzerland). The new agreement will become operational only after the parliamentary go-ahead from the two countries and will replace the one in force today, which dates back to 1974.
The Treasury explains in a note that there are two key points of the agreement: "The recognition of the specificity and role of border Municipalities and the reduction of the tax burden on frontier workers".
Here's what the deal provides.
First of all, the agreement defines "frontier workers" as those who reside within 20 km of the border and who, in principle, return home every day. But this macro-category contains two subsets.
THE “NEW FRONTIERS”
"New cross-border commuters" means people entering the labor market as cross-border commuters from the date of entry into force of the agreement. On these workers, the State in which the activity is carried out will apply a levy equal to 80% of the taxes that can be collected at source (today the quota is 61,2%). The new border workers "will be subject to ordinary taxation also in the State of residence - writes the Treasury - which will eliminate double taxation".
THE "CURRENT FRONTIERS"
Instead, the "current cross-border commuters" - i.e. those who work or have worked in the cantons of Graubünden, Ticino or Valais in the period between 31 December 2018 and the date of entry into force of the new agreement - will continue to be taxed exclusively in Swiss. Until the end of 2033, Bern will pay financial compensation to the Italian border municipalities equal to 40% of the withholding tax levied by Switzerland. After 2033, Switzerland will retain all of its tax revenue.
THE OTHER MEASURES
Furthermore, the government has made two commitments:
- raise the no-tax area from 8 to 10 euros for the income from employment of frontier workers;
- exclude family allowances from the tax base disbursed by the social security institutions of the State in which the frontier worker works.
It's not over. With the aim of defining a statute for frontier workers, within the next month of April "an inter-ministerial discussion table coordinated by the Government will be set up - continues the MEF - within which proposals on the subject of security and social dialogue, the labor market and transnational cooperation will be addressed".
From a financial point of view, the executive “is committed to guaranteeing structurally resources for the Border Municipalities equal to those due for 2019, approximately 90 million euro, and, at the same time, the financing of economic and social development projects of the territories concerned from any higher revenues net of the costs of the measures envisaged by the Memorandum itself".
The agreement is the result of a long negotiation between Italy and Switzerland. After putting aside the draft agreement reached in 2015, in recent months Rome and Bern have reworked the text until a compromise is found.
In the definition phase of the agreement, the trade unions and the Association of Italian border municipalities and the authorities of the Cantons of Graubünden, Ticino and Valais were consulted.
