Starting January 1, 2024, cross-border workers commuting between Italy and Switzerland can + without tax or status implications. The new policy expands on interim flexible remote work allowances.

Key Provisions and Guidelines for Remote Workers

Here are the key provisions and guidelines for remote workers under the new agreement between Italy and Switzerland:

• Italy-Switzerland commuters are now permitted to work remotely one or more days per week. This means that they can work from home or from any other location outside of their country of employment for up to 25% of their working time.

• Existing border zone definitions will be maintained. This means that commuters must still live in one country and work in the other to qualify for the remote work arrangement. The border zones are defined as areas within 30 kilometres (19 miles) of the border between the two countries.

• The 25% threshold for remote work provides leeway for hybrid arrangements. This means that commuters can work some days from home and some days from the office. For example, a commuter could work from home two days per week and from the office three days per week.

Criteria and Considerations of Determining Tax Residency

According to the agreement, the taxation of remote work days will be determined by the commuter's residency status, not the location of their employer. 

This means that Italian residents will pay Italian taxes for the days they work remotely from Italy, regardless of where their employer is located. This also applies to the Swiss.

The principle of taxation based on residency has several implications for remote workers:

• Italian residents will have a clear understanding of their tax obligations when working remotely from Italy. They will only need to file a tax return in Italy and will not be subject to Swiss taxes.

• Swiss residents working remotely from Switzerland will similarly be subject only to Swiss taxes. They will not need to file a tax return in Italy or pay Italian taxes on their remote work income.

• Commuters who split their time between Italy and Switzerland will need to determine how to allocate their income between the two countries. This may involve maintaining separate records of their remote work days for each country.

Impact on Cross-Border Taxation and Social Security

Below are the impact of the new agreement between Italy and Switzerland on cross-border taxation and social security:

• Taxation of Remote Earnings

The agreement provides certainty on the taxation of remote earnings by applying the principle of taxation based on residency. This means that commuters' income from remote work will be taxed in the country where they reside, regardless of the location of their employer. 

• Social Security Contributions

In general, social security contributions continue to be made based on the employer's location, not the commuter's residency status. This means that Italian residents working remotely for a Swiss employer will continue to be subject to Swiss social security contributions, even if they work from Italy. 

• Specific Circumstances

The specific details of social security contributions for remote workers will depend on the individual's circumstances. Commuters should consult with their employers and social security authorities to determine their specific obligations.

• Impact on Cross-Border Commuting

The new agreement is expected to have a positive impact on cross-border commuting between Italy and Switzerland. By providing certainty on taxation and social security, the agreement will make it easier for individuals to work remotely from either country. This could lead to increased economic activity in border regions and a more flexible and dynamic workforce.

Effective Date and Implementation Details

The remote work agreement between Italy and Switzerland will take effect on January 1, 2024. This means that commuters will be able to start working remotely under the new arrangements from that date onwards.

Implementation Details

The specific procedures, documentation, and implementation mechanisms for the remote work agreement are still being finalised by the Italian and Swiss authorities. This process is expected to be completed in late 2022 or early 2023.

Some of the key considerations that the authorities are addressing include:

• Verification of residency: The authorities will need to establish procedures for verifying that commuters meet the residency requirements for remote work. This may involve the use of residency certificates or other documentation.

• Taxation procedures: The authorities will need to clarify the specific tax procedures for remote workers. This may include requirements for filing tax returns and making tax payments.

• Social security arrangements: The authorities will need to finalise the social security arrangements for remote workers, including the determination of contributions and eligibility for benefits.

FAQS

What is the Swiss-Italian Remote Work Tax Deal?

The Swiss-Italian Remote Work Tax Deal is a bilateral agreement between Switzerland and Italy aimed at clarifying the tax implications for individuals engaged in remote work across both countries.

How does this tax deal address remote work challenges?

The agreement provides a framework for determining the tax jurisdiction for remote workers, ensuring clarity on issues related to income taxation and avoiding potential double taxation scenarios.

Who does the tax deal apply to?

The tax deal applies to individuals who work remotely between Switzerland and Italy, providing guidelines for determining their tax liabilities based on the nature of their employment and the duration of their remote work.

What key considerations are addressed in the agreement?

The agreement addresses crucial aspects such as the determination of tax residency, the allocation of taxing rights between the two countries, and provisions to prevent double taxation, ensuring a fair and transparent tax framework for remote workers.

How does the tax deal impact cross-border remote workers' taxation?

The deal establishes clear rules for taxing income derived from remote work, offering remote workers certainty about their tax obligations and preventing potential conflicts between Swiss and Italian tax authorities.

Are there specific criteria for determining tax residency under this agreement?

Yes, the agreement outlines criteria for establishing tax residency, taking into account factors such as the individual's physical presence, habitual abode, and centre of vital interests, providing a comprehensive framework for tax jurisdiction.