Swiss, Italy agree deal on taxing cross-border commuters

ZURICH (Reuters) - Negotiators from Switzerland and neighbour Italy reached agreement on Tuesday on how to tax cross-border commuters, wrapping up months of talks that aimed to help Italy crack down on undeclared foreign wealth.

The accord, which must be approved by both national governments and parliaments, would see workers paying up to 70 percent of the income tax they would accrue as residents to the state in which they work, the two sides said.

A double-taxation agreement means they could deduct this from the income tax they pay at home. It applies to commuters who live within 20 km (12 miles) of the border.

An automatic exchange of information would ensure home countries get tax data.

Until now, cross-border commuters from Italy have been taxed in Switzerland only. The cantons where they work forwarded 38.8 percent of tax revenue collected to commuters’ home towns.

The accord, which replaces a pact from 1974, comes as Switzerland and the European Union remain at loggerheads over how to implement a Swiss referendum last year demanding immigration quotas that would violate treaties upholding the free right of movement for EU workers.

Around 1.3 million EU citizens live in Switzerland and 300,000 cross the border daily to work. In 2014 nearly 111,000 nationals from the EU plus Iceland, Norway and Liechtenstein moved to Switzerland.

Italy said ratifying the cross-border commuter tax deal hinged on Switzerland’s finding a way to respect EU law when it implements the 2014 referendum.

Reporting by Michael Shields; Editing by Keith Weir