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Switzerland, Italy Agree Tax Deal For Frontier Workers

Friday, January 1, 2021

On December 23, 2020, Switzerland and Italy signed a new agreement on the taxation of cross-border commuters and an amendment to their existing double taxation agreement.

The Swiss Department of Finance said that the new agreement improves the current taxation regime for cross-border commuters and contributes to the maintenance of good bilateral relations between Switzerland and Italy. It will assign the majority of the taxing rights to the country where the worker undertakes his employment, benefitting Switzerland.

The Department of Finance said that it had not been possible to sign an agreement that was originally reached in 2015. Talks between Switzerland and Italy resumed this year and resulted in changes to the original draft agreement.

The new agreement contains a definition of the concept of cross-border commuters, which includes employees who live less than 20 kilometres from the border and who, in principle, return home every day. From the entry into force of the agreement, this definition will apply to all new cross-border commuters and to those under the current regulations. Transitional rules will apply for workers in the cantons of Graubunden, Ticino, or Valais.