Switzerland and Italy initial a frontier workers agreement

Bern, 22.12.2015 - Today, Switzerland and Italy initialled an agreement regarding the taxation of frontier workers, together with a protocol of amendment to the double taxation convention. The text on frontier workers sets out in concrete terms one of the main commitments made by the two States in the roadmap signed in February 2015. The new agreement, which will replace the one from 1974, still has to be signed by both governments and approved by the respective parliaments.

The agreement was initialled by both states' negotiators in Bern and Rome. It will be published at the time of signing. This agreement constitutes a positive and constructive development, as it sets out in concrete terms one of the most important commitments made by Switzerland and Italy on 23 February 2015, when both countries signed a roadmap for cooperation and the continuation of their dialogue on financial and tax matters. The agreement is based on the key features of that roadmap and will enable both countries to improve the current mechanism for the taxation of frontier workers.

The agreement essentially includes the following elements:

  • it is based on the principle of reciprocity;
  • it provides a definition of frontier areas, which in the case of Switzerland are the cantons of Graubünden, Ticino and Valais, and, in the case of Italy, the regions of Lombardy, Piedmont, Valle d'Aosta and Provincia Autonoma di Bolzano;
  • it provides a definition of frontier workers for the application of the agreement and will cover frontier workers living in a commune whose territory falls totally or partially in a 20 km zone from the border and who, in principle, return on a daily basis to their State of residence;
  • as for taxation, the State in which the work is performed will tax the employment income up to 70% of the tax resulting from the application of ordinary personal income taxes; the State of residence will apply its personal income taxes and avoid double taxation;
  • an electronic exchange of information on the employment income of frontier workers will be provided;
  • the agreement will be reviewed every five years.

With regard to Campione d'Italia, Italy and Switzerland have agreed to set up a joint committee in order to negotiate a comprehensive solution for fiscal and non-fiscal issues. The two parties have also explored a number of possible pragmatic solutions for indirect tax issues. With the aim of finding a solution by summer 2016, negotiations will continue in the next few months on two possible solutions: a lump-sum refund and a limited traceable ad valorem quota of goods not subject to indirect taxation (VAT, excises and duties collected by customs).

In addition, Italy has made two unilateral declarations of which Switzerland has taken note. The press release of the Italian Ministry of Finance can be consulted using the link below.

Address for enquiries

Anne Césard, Communications, State Secretariat for International Financial Matters SFI
Tel. +41 58 462 62 91, anne.cesard@sif.admin.ch


Federal Department of Finance