Switzerland and Italy have signed a new agreement on the taxation of cross-border commuters and a protocol amending the double taxation agreement. The agreement settles a legal issue that had been unresolved for several years, said Foreign Minister Ignazio Cassis.

Cassis said the wait for the signing of the agreement, which had been initialled in December 2015, had caused a “profound malaise”. Its signing in Rome on Wednesday “reaffirmed the vitality of relations” between the two countries. The agreement replaces one agreed in 1974.

For “new” cross-border commuters – those who start working in Switzerland after the agreement enters into force – the withholding tax rate will be 80% in favour of Switzerland, instead of the 70% provided for in the agreement initialled in 2015. These people will be taxed in Italy in the normal way. Rome will eliminate double taxation if necessary.

People who work or have worked in cantons Ticino, Graubünden or Valais between December 31, 2018, and the entry into force of the new agreement are considered “current cross-border workers”. They will be taxed only in Switzerland.

Until the end of the 2033 tax year, the cantons will continue to pay 40% of their withholding tax revenues to the municipalities in which they reside. After this date, Switzerland will no longer pay any compensation and will retain the entire tax revenue generated.

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