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Switzerland strikes new cross-border worker deal with Italy

Workers in Switzerland who live in Italy will be subject to a new tax arrangement, after the respective governments struck a deal.

The Swiss village of Foroglio, in the southern Italian-speaking canton of Ticino. Image: Pixabay
The Swiss village of Foroglio, in the southern Italian-speaking canton of Ticino. Image: Pixabay

Taxation is a complicated matter for everyone, but even more so for cross-border workers. Normally, you pay Swiss taxes automatically, because your Swiss employer deducts them from your monthly salary.

However cross-border workers are usually under a different arrangement, as the tax burden needs to be shared between the worker’s country of residence and place of employment. 

While the Covid pandemic-related rules are an exception, Switzerland and neighbouring states have put into effect tax rules which often restrict the amount of days a worker can work from home, thereby encouraging workers to actually cross the border into Switzerland. 

What is the rule change for Italy-domiciled workers? 

Under the new arrangement, the Swiss government will retain 80 percent of the withholding taxes on cross-border workers. 

Italy will receive the other 20 percent. 

Under the previous agreement, Switzerland received 100 percent of the taxation, but would transfer 40 percent of it in compensation to border regions in Italy. 

EXPLAINED: What cross-border workers should know about taxation in Switzerland

A transitional deal has been struck whereby those who work in Ticino, Graubünden or Valais from the start of 2019 until the new agreement came into effect will be taxed in the same way as the previous arrangement until 2033. 

The change should not require any significant steps from cross-border workers, as the primary alterations will take place at a governmental level. 

Approximately 350,000 people cross Switzerland’s border to work, according to pre-pandemic estimates. 

An estimated 23 percent of Switzerland’s cross-border workers come from Italy. Around 55 percent live in France and 18 percent live in Germany. A handful of cross-border workers live in Austria. 

This link provides more information about taxation of cross-border commuters.

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Switzerland and France further extend tax benefits for cross-border workers

Switzerland has again extended a set of beneficial tax arrangements for cross-border workers living in France until November, although not everyone is happy.

Switzerland and France further extend tax benefits for cross-border workers

The rules were originally put in place during the Covid pandemic, when various laws and regulations in Switzerland and elsewhere encouraged people to work from home. 

Alongside these rules, the Swiss and French governments changed the underlying tax rules to encourage people to work from home. 

These rules were originally put in place in March 2020, but have been extended several times and will now expire on October 31st. 

What are the rules? 

Under normal circumstances, anyone living in France who works in Switzerland can spend no more than 25 percent of their time working from home. 

READ MORE: Why French cross-border workers choose to work in Switzerland

If they exceed this time limit, they would have to pay social security contributions and tax charges tin France rather than in Switzerland, which would be much higher.

The agreements between France and Switzerland – along with several other countries where people resident in France work like Belgium, Luxembourg and Germany – “provide that days worked at home because of the recommendations and health instructions related to the Covid-19 pandemic may … be considered as days worked in the state where [workers] usually carry out their activity and therefore remain taxable,” according to the statement from the French Employment Ministry.

In June, cross-border worker advocates called for the agreements to be extended. 

Companies in France’s Haute-Savoie region, where most of cross-border workers employed in Geneva come from, are upset, claiming that home-office agreement makes working in Switzerland even more attractive for French workers, at the detriment of local businesses.

According to Christophe Coriou, head of the Haute-Savoie section of French employers, “these agreements accentuate the competitive disadvantage” of French companies compared to Swiss jobs — in terms of salaries, but also lower taxes and other perks.

“By emptying them of their human resources, Geneva penalises companies in Haute-Savoie”,  Coriou  said, adding that “teleworking of cross-border workers, which is perceived as an additional attraction to the salary, accentuates the competitive disadvantage of companies in neighbouring France”.

What about other countries? 

Switzerland is heavily reliant on cross-border workers, with an estimated 340,000 crossing daily from France, Germany and Italy into Switzerland to work. 

About 90,000 workers from France are employed in Geneva, but there is no official data on how many still work from home.

Italy and Switzerland signed an agreement relating to cross-border workers in March.

Germany also has its own agreement with Switzerland. 

More information about the rules in place can be found at the following link. 

EXPLAINED: What cross-border workers should know about taxation in Switzerland