On 23 December 2020, Switzerland and Italy signed a new agreement on cross-border commuters, which replaces the current agreement of 1974 and now applies reciprocally.
The most important changes are that the two states have agreed on a definition of frontier worker, which is gratifying for reasons of legal certainty.
In addition, a distinction is made between new and existing cross-border commuters. In the case of new cross-border commuters, the country of employment may levy a withholding tax of 80% and they are subject to ordinary taxation in the country of residence, which must eliminate any double taxation.
In order to ensure taxation in the state of residence, the income of a new cross-border commuter is subject to an electronic exchange of information. In the case of existing cross-border commuters, the previous rule will continue to apply until the end of the 2033 tax year. After that, Switzerland no longer has to make any compensation payments and can retain the entire tax substrate.
The entry into force of the agreement is still pending. Further information is available here.
