Employment income, directors' fees and pensions

Employment income outside the frontier regime

Article 15 paragraph 1 allocates salaries, wages and similar remuneration to the state of residence of the employee unless the employment is exercised in the other state. If it is exercised there, the remuneration may be taxed in the state of work. Paragraph 2 contains the 183-day exception: remuneration for work in the other state remains taxable only in the state of residence if the employee is present in the state of work for not more than 183 days in the calendar year, the remuneration is paid by an employer that is not resident in the state of work, and it is not borne by a permanent establishment that the employer has there.¹ Paragraph 4 reserves the taxation of frontier workers to the special agreement, which since 1 January 2024 is the agreement of 23 December 2020. Chapter H.I describes that agreement, its definition of frontier workers as residents of municipalities within 20 kilometres of the border who return in principle daily to their home, and the transitional regime for persons who were already working in Ticino before 17 July 2023.

Outside the frontier regime the general rules apply. An Italian resident who works in Lugano but does not qualify as a frontier worker, for instance because he lives in Milan more than 20 kilometres from the border or returns home only at weekends, is subject to Swiss source tax on his salary under Article 91 DBG, which applies the source tax rules of Articles 84 and 85 DBG to employees resident abroad, and the corresponding Ticino rules. Italy taxes him on his worldwide income and grants a credit for the Swiss tax under Article 24 paragraph 2 of the convention and Article 165 TUIR.² An Italian national who moves his residence to Ticino and works there is taxable only in Switzerland, subject to the Italian residence rules described in Chapter H.II. The reverse case is that of a Ticino resident who works in Italy: Italy taxes the salary at source if the work is physically performed there, and Switzerland exempts it with progression under Article 24 paragraph 3.³

The place of work is the place where the employee is physically present when he works. For the many employees of Lugano companies who live in Italy and work partly from home, each day worked in Italy is in principle taxable in Italy under Article 15 paragraph 1 unless the 183-day exception applies. For employees of a Swiss employer without an Italian permanent establishment, that exception will usually apply if the employee spends less than 183 days a year working in Italy. For frontier workers, the special agreement and the mutual agreements on telework provide different rules, which Chapter H.I describes. The employer must monitor the working days of its employees in each country, because the allocation of the salary determines its own withholding obligations in Switzerland and, if a taxable presence in Italy results, in Italy.

Notes

1. Convention, Art. 15 paras. 1 and 2, text (above). ↩
2. DBG, Art. 91 (source tax on employees resident abroad under Arts. 84 and 85), https://www.droit-bilingue.ch/de-it/6/64/642.11-91-97.html (Arts. 83 to 86 concern foreign employees resident in Switzerland, https://www.droit-bilingue.ch/de-it/6/64/642.11-83-89.html); Convention, Art. 24 para. 2, text (above); TUIR, Art. 165, Brocardi.it (above). ↩
3. Convention, Art. 24 para. 3, text (above): Switzerland "esenta da imposta detti redditi o detto patrimonio" but may apply the rate applicable to the whole income. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.