Italy, Switzerland DTA Talks Proceeding, Despite Problems

Switzerland and Italy may agree amendments to their existing double tax agreement by spring 2015, Vieri Ceriani, Italy’s chief negotiator, has said.

With the appointment of a new Government in Italy, Ceriani said that the provisions being sought by Italy, in particular on the division of taxes collected from Italian workers with jobs across the border in Ticino, remained unchanged, with talks being held “in a consistent fashion” by successive Italian Governments. He said the new Government is “not beating around the bush” in its search for a new treaty with Switzerland as soon as possible.

He suggested, however, that new proposals from Switzerland had added “new points of friction.” These have included proposals to negotiate a bilateral automatic information exchange agreement. Italy, however, has always insisted that information exchange should be negotiated at European Union-level.

Italy has also taken a tough line in that the DTA should not offer provisions that would establish a tax amnesty. Italy is seeking payment of any unpaid taxes on Italian taxpayers’ assets in Switzerland and transparency about account-holders’ identities, Ceriani said.

Another sticking point is the division of taxes collected from cross-borders workers. Under the existing agreement, cross-border Italian workers employed in Switzerland are exempt from taxation in Italy but Switzerland is required to transfer 38.8 percent of the fiscal revenue collected to Italy.

The cantonal Government in Ticino has won support from the federal Government in its challenge against “wage dumping,” involving the supply of less than market rate labor from Italy, and is seeking a revision to this percentage. Italy is keen to keep the revenue split consistent under a new deal, but Ceriani is convinced that a deal can be negotiated.

Ceriani said the discussions on the cross-border taxation of workers are progressing. He said the two sides are looking at a change that would see “a reciprocity and division of taxation rights. A part of wages would be taxed in Switzerland, and the rest in Italy.” He said this would eliminate issues concerning the transfer of taxes, but practicalities – including the functioning of tax rates and deductions – need to still be agreed.