The agreement of 1974 and the ristorni

Exclusive taxation at the place of work

For almost half a century the taxation of Italian cross-border commuters in Ticino was governed by a short agreement of six articles: the Agreement between Switzerland and Italy on the taxation of cross-border workers and on the financial compensation in favour of the Italian border municipalities of 3 October 1974.¹ It was negotiated in parallel with the double taxation convention of 9 March 1976 and entered into force on 27 March 1979, with retroactive effect from 1 January 1974.² Its central rule is in Art. 1: the salaries, wages and other similar remuneration that a cross-border worker receives for employment are taxable only in the State in which the employment is exercised. The Swiss cantons thus received the exclusive right to tax the employment income of the Italian commuters, which they levied as a tax at source deducted by the employer. Italy renounced taxing this income, even though the workers were Italian residents and would otherwise have been taxed on their worldwide income. In exchange, Art. 2 obliged the three cantons concerned, Graubünden, Ticino and Valais, to pay each year to the Italian border municipalities a financial compensation equal to a percentage of the gross amount of the federal, cantonal and communal taxes levied on the remuneration of Italian cross-border workers. The percentage was 20 per cent for 1974, 30 per cent for 1975 and 40 per cent for the following years. The payment was to be made in a single instalment in the first half of the following year (Art. 3), through the cantonal finance offices to an account of the Italian Treasury, which distributed the money to the municipalities with a sufficient number of resident crossborder workers (Art. 4). Representatives of both States were to meet each year to examine the application of the agreement and to verify the use of the funds (Art. 5). The agreement was concluded for five years and was renewed tacitly thereafter (Art. 6).³

The compensation rate was reduced in 1985. By an exchange of minutes signed in Rome and Lugano, the two governments fixed it at 38.8 per cent of the gross tax revenue, the figure that became synonymous with the agreement in Ticinese politics.⁴ The Italian word for these payments, ristorni (refunds), is slightly misleading, because the money was neither a refund to the workers nor a payment to the Italian State as a whole. It flowed to the municipalities in which the commuters lived and was intended to compensate them for the public infrastructure and services that their residents used while paying their income tax in Switzerland. The agreement states this purpose itself: the compensation is to contribute to the expenditure on public works and services that certain Italian border municipalities bear because of their residents who work as crossborder commuters. Italian authorities then transferred the sums received to the municipalities.⁵

Notes

1. Accordo tra la Svizzera e l'Italia relativo all'imposizione dei lavoratori frontalieri ed alla compensazione finanziaria a favore dei Comuni italiani di confine, concluded on 3 October 1974, SR 0.642.045.43, Italian text published by the Canton of Graubünden at https://www.gr.ch/IT/istituzioni/amministrazione/dfg/stv/steuererklaerung/quellensteuer/ Documents/Grenzg%c3%a4ngerabkommen%20CH-IT%201974%20IT.pdf. ↩
2. Ibid. (entry into force on 27 March 1979; Art. 6: effective from 1 January 1974). Art. 6 of the agreement provides that it "farà parte integrante" of the convention for the avoidance of double taxation to be concluded between the two States, Italian text published by the Canton of Graubünden (above). See Chapter H.III. ↩
3. Ibid., Art. 1–6. ↩
4. Vorpe (above), referring to the processo verbale signed in Rome and Lugano in 1985. ↩
5. Agreement of 3 October 1974 (above), preamble and Art. 2 ("spese per opere e servizi pubblici che alcuni Comuni italiani di confine sostengono a causa dei loro residenti che lavorano come frontalieri"); Vorpe (above) ("È compito poi delle autorità italiane provvedere a trasferire le somme ricevute ai Comuni"). ↩

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.