Historically, cross-border work between Italy and Switzerland has been regulated by the Agreement signed in Rome in 1974 (‘1974 Rome Agreement’)and, also, by the Convention against double taxation of 1976 (the ‘1976 Convention’), still in force between the two countries.
These agreements establish that the wages, salaries and other elements forming part of the remuneration that a cross-border worker receives as consideration for an employed activity are taxable only in the State in which such activity is carried out. For these purposes cross-border worker is generally understood as an employed or self-employed worker who carries out his or her activity in a State other than the one in which he or she resides, and who returns to the State of residence, in principle, daily or at least once a week.
However, technological development and, above all, the Covid emergency have changed the traditional scenarios, requiring both Italy and Switzerland to deal with widespread remote work which, unlike in the past, it is no longer necessarily carried out at the company premises and, in as far as is relevant for these purposes, no longer involves daily cross-border travel.
On 1 January 2024, following the entry into force of Italian Law no. 83/2023 implementing the agreement of 23 December 2020, important changes were introduced to the relationship between Italy and Switzerland relating to the tax legislation applicable to cross-border workers, and to the guidelines relating to remote working as well.
With the entry into force of Italian Law no. 83/2023, the process of reviewing the agreements between Italy and Switzerland concerning the cross-border work regime, started by the aforementioned protocol of 23 December 2020, was concluded. The new agreement, formalised by the aforementioned law, amends the 1974 Rome Agreement and the 1976 Convention to reflect the new terms reached between the two countries.
The new provisions agreed between Italy and Switzerland – which entered into force on 17 July 2023, but took effect from 1 January 2024 – concern the definition of cross-border work and the tax regime applicable to the work income earned by the persons concerned. The two countries have agreed that the agreement provisions are subject to review on a five-yearly basis.
In detail, the definition of cross-border worker has been revised by the new agreement and covers any worker resident in a contracting state who is domiciled for tax purposes in a municipality which is totally or partially in the 20 km area from the border with the other contracting State. The border areas covered by the agreement are, for Switzerland, the cantons of Grisons, Ticino and Valais, and, for Italy, the Lombardy, Piedmont and Valle d’Aosta regions and the autonomous province of Bolzano.
To be considered a cross-border worker, the worker must work in the above-mentioned border areas of the other State and return, in principle, to his or her main domicile in the State of residence on a daily basis. The worker retains this statusif he or she does not return to his or her home, for professional reasons, for a maximum of 45 days in a calendar year, excluding holidays and sick days.
For tax purposes, the new agreement provides a distinction between “old” and “new” cross-border workers. A worker is an “old” cross border worker if he or she was a cross-border worker on 17 July 2023 or carried out work in the border area in the period between 31 December 2018 and 17 July 2023. The rules of the previous version of the agreement, which provide for exclusive taxation in the country in which the work is carried out if the worker resides within 20 km of the border between the two States, continue to apply to “old” cross-border workers.
With respect to “new” cross-border workers (i.e. workers who are classified as cross-border workers starting from 17 July 2023), the shared taxation criterion applies.
Therefore, the State where the work is carried out will deduct withholding tax on the income earned by the individual, up to a maximum of 80% of the amount due based on the provisions on personal income taxes, including local taxes.
The worker’s State of residence will also subject the same income to taxation, guaranteeing the elimination of double taxation according to the rules established by the tax convention in force between the two countries (specifically, recognising a credit equal to the taxes paid in the State where the work is carried out or guaranteeing an exemption with respect to the income subject thereto).
As a result of the provisions which came into force on 1 January 2024, cross-border workers between Italy and Switzerland may carry out their work remotely at their home and up to the threshold of 25% of the working hours, without this having any impact on the relevant tax regime.
Read the full version in Norme e Tributi Plus Diritto of Il Sole 24 Ore.
The Court of Trieste, Employment Section, with order of 21 December 2023, no. 525/2023 has held that so-called “vulnerable” workers’ rights to work remotely cannot be “absolute” but must be balanced with the company’s organisational and production needs as envisaged by the employer.
In the present case, a “vulnerable” employee worked remotely five days a week, under an individual fixed-term agreement. At the end of the agreed term, the employer informed the employee that, due to changed business and organisational needs, she would have to work for three days a week in person and, for the remaining two days, remotely.
In the face of this, the worker complained about the incompatibility of her state of health with in-person work, arguing the the tasks assigned to her were absolutely compatible with remote working – also taking into account that in the last three years she had carried them out entirely remotely – and highlighting the unlawfulness of the employer’s conduct for breach of Article 2087 of the Italian Civil Code.
The employer challenged the application and claimed that it was unfounded for alleged breach of the company’s freedom of organisation, protected by Article 41 of the Italian Constitution. The employer justified the refusal to allow the employee to work entirely remotely on the basis of proven organisational reasons and reiterated the need for her presence in the workplace for at least three days a week.
The Court highlighted that the right to remote working granted to “vulnerable” workers (see Article 90, paragraph 1, of Italian Decree-Law no. 34/2020) is not an absolute right but a right expressly subordinated to the compatibility of the worker’s tasks being carried out remotely.
The Court also acknowledged that the ways in which the employer exercised its power to organise the company appeared real and appropriate and that the possibility of working remotely, albeit partially, was never denied but rather partially granted following a balancing and re-evaluation of the parties’ mutual needs.
◊◊◊◊
In conclusion, it can be said that the assessment of the compatibility of remote working by vulnerable workers must be carried out on the basis of the organisational and production needs of the concerned organisation, involving, where necessary, an inevitable need to alternate between days in which the worker must work in-person and days when he/she can work remotely. This reading, among others, is consistent with the provisions of Article 18 of Italian Law no. 81/2017 which, in defining remote working, provides for that work should be provided “partly inside company premises and partly outside”.
Other related insights:
In its recent order No. 19023 of 5 July 2023, the Italian Court of Cassation has ruled on geographical jurisdiction under Article 413 of the Italian Code of Civil Procedure. The Court ruled that the worker’s home, from which he performed his work through remote working, could not be classified as a company dependence in the absence of any objective or subjective connection of the place of performance of the service with the company.
The facts of the case
The case originates from a payment order issued by the Court of Rome in favour of a temporary worker. The employer had been ordered to pay the worker compensation arising from the nullity of the temporary employment contract and for the continuation of the activity beyond the expiry of the time-limit, with the consequent transformation of the temporary employment contract into a permanent employment contract.
The company challenged the payment order, asking for a preliminary determination that the Court of Rome did not have geographical jurisdiction over the matter and that, in the alternative, jurisdiction rested with the Court of Genoa, as the worker’s location of operational and effective activity, or the Court of Udine, as the place where the company had its registered office.
In this application the Court of Rome declared its lack of geographical jurisdiction, holding that jurisdiction rested, alternatively, with the Court of Genoa or Udine, as well as the Court of Civitavecchia, as the worker was resident in Civitavecchia and performed his work through remote working from his home.
The appeal to the Italian Court of Cassation and the decision taken by the Court
The company appealed against that judgment by way of a single legal ground, in which it objected to the erroneous interpretation of the law and of the established case-law regarding the determination by the Court of Rome of the jurisdiction of the Court of Civitavecchia.
The company pointed out, in fact, that there was no basis for establishing jurisdiction in the Court of Civitavecchia, since there was no nucleus of assets organised for the exercise of the business at the employee’s home, thus excluding jurisdiction at the place where remote working was carried out.
The order issued by the Italian Court of Cassation starts from an analysis of Article 413 of the Italian Code of Civil Procedure, which states that the employment judge has geographical jurisdiction alternatively in the place where the relationship was established in the place where the company is located, or, finally, in the place where the company dependence to which the employee is attached is located.
According to the ruling of the Italian Court of Cassation under comment, with specific reference to ‘company dependence’, reference must be made to the place where the employer has located a nucleus, albeit modest, of assets organised for the exercise of the business (Italian Court of Cassation No. 14449/2019; Italian Court of Cassation No. 4767/2017).
Where, on the other hand, as in the case in question, the remote working takes the form, according to the employee, solely of the place where the service is carried out, without any other related aspect that in any way characterises the home as a company dependence, then this criterion cannot be taken into consideration for the purposes of identifying geographical jurisdiction. Consequently, the only criteria which remain applicable are represented by the place where the contract was concluded or the place where the employee was employed.
As a result, the Italian Court of Cassation upheld the Company’s application on the question of jurisdiction, declaring the alternative geographical jurisdiction to be exclusively the courts of Udine and Genoa but not the court of Civitavecchia.
Other related insights:
The ‘Employment Decree’ (Italian Decree Law No. 48/2023) was converted into Italian Law No. 85 of 3 July 2023, which introduced important innovations for employers.
Below is an analysis of the main changes introduced in the field of: (i) forward contracts; (ii) staff-leasing contracts; (iii) the right to ‘remote’ working.
As regards fixed-term contracts, the converting law confirms the new grounds that employers shall be required to use in the event that the duration of a fixed-term contract exceeds 12 months (also as a result of extensions or renewals). The new grounds concern:
The converting law also provides for more flexibility regarding renewals. In particular, without prejudice to the maximum time limit for fixed-term contracts (i.e., 24 months), a fixed-term contract can be renewed ‘freely’ within the first 12 months of the relationship’s duration (thus, de facto equating the rules on renewals with those on extensions).
Lastly, it is clarified that only contracts entered into after 5 May 2023 are to be taken into account for the purpose of calculating the twelve months.
Other new features concern the regulation of open-ended staff leasing, for which the converting law of the ‘Employment Decree’ provides for workers hired by the staff-leasing agency with apprenticeship contracts and ‘disadvantaged’ jobs to be excluded from the 20% quantitative limit.
Finally, on the subject of ‘remote working’, the converting law further extends the right to ‘remote working’ for certain categories of workers and, in particular:
Other related insights:
DID YOU KNOW THAT… On 5 May 2023 the so-called ‘Employment Decree’ came into force?
Italian Law of 24 February 2023, No 14 converted into law, with some modifications, Italian Decree-law of 29 December 2022, No 198, containing ‘urgent provisions regarding legislative deadlines. Extension of deadlines for the exercise of legislative powers’ (the so-called Milleproroghe Decree) published in the Italian Official Gazette No 49 of 27 February 2023:
Public and private employees are considered ‘vulnerable’ if they are affected by sicknesses and conditions identified by the decree of the Minister of Health referred to in Article 17, paragraph 2, of Italian Decree-law of 24 December 2021, No 221, converted into law, with amendments, by Italian Law of 18 February 2022, No 11. This right must be guaranteed including, if necessary, through assignment to a different job without any reduction of the salary and without prejudice to the application of any more favourable provisions set out in the relevant national collective bargaining agreement (contratto collettivo nazionale di lavoro, ‘CCNL’).
Finally, with the above-mentioned conversion Law, the right to remote working is renewed for parents who are private sector employees with at least one child under the age of 14, a protection that had last been extended until 31 December 2022.
In the latter case, said right to remote working arises where the following conditions are met:
Other related insights:
