Swiss Finance Minister has pledged to re-negotiate the bilateral cross-border tax agreements with Italy, to ensure that the provisions are more favorable to the Swiss canton of Ticino in future. The agreement is important because of the number of cross-border workers between Switzerland and Italy.
The Finance Minister’s announcement followed talks with the Ticino cantonal government, which focused on ways to resolve the dispute over the taxation of cross-border Italian workers. Ticino submitted a cantonal initiative on February 2, 2014, urging the Federal Assembly to annul the existing agreement to allow the commencement of negotiations on a fresh agreement.
Fiscal relations between Italy and Switzerland are governed by a double tax convention covering taxes on income and wealth, which was negotiated in 1976, and finally entered into force in 1979, and also a double tax agreement for cross-border workers, which became effective on January 1, 1974.
The latter provides that cross-border Italian workers employed in Switzerland are exempt from taxation in Italy. In return, Switzerland is required to transfer 38.8 percent of the fiscal revenue collected from these cross-border workers to the Italian Government. Problems have however been caused by the additional supply of Italian workers bringing down wage levels in Ticino.
Terminating the cross-border agreement with Italy will, however, mean that the other double taxation agreement, on income and wealth, will also be rescinded, under article 6 of the agreement.
