The Swiss-Italian Tax Treaty: What Expats Need to Know

For expats, entrepreneurs, and high-net-worth individuals (HNWIs) considering a move between Switzerland and Italy, understanding the Swiss-Italian tax treaty is crucial. This treaty, signed between the two countries, helps prevent double taxation, ensures fair treatment of cross-border income, and provides key benefits for those with assets, businesses, or tax residency in either country.

But how does it work in practice, and what does it mean for those relocating to or investing in Ticino or Milan? Let’s break down the essentials.

What Is the Swiss-Italian Tax Treaty?

The Switzerland-Italy double taxation treaty (DTT) is a bilateral agreement designed to eliminate the risk of being taxed twice on the same income in both countries. This is especially relevant for:

Swiss residents with income or assets in Italy
Italian residents with financial interests in Switzerland
Cross-border workers living in Italy but working in Switzerland
Entrepreneurs and HNWIs managing investments across both countries

The treaty allocates taxation rights between the two nations, ensuring fair taxation on income, dividends, interest, royalties, pensions, real estate, and inheritances.

Tax Residency: Italy vs. Switzerland

How Is Tax Residency Defined?

Under the treaty, an individual is considered tax-resident in a country if they:

Spend more than 183 days per year there
Have their main home (habitual abode) in that country
Have their center of vital interests (family, business, assets) there

If a person meets the criteria for both Italy and Switzerland, the treaty applies tie-breaker rules based on personal and economic connections.

Swiss residents benefit from lower personal income tax rates and a more predictable fiscal environment.
Italian tax residents can take advantage of Italy’s €100,000 flat tax regime for new residents, which applies to foreign income.

This distinction is key for HNWI expats and entrepreneurs structuring their relocation strategy.

Key Tax Provisions Under the Treaty

1. Employment & Business Income

If you work in one country but live in the other, your income is usually taxed in the country where the work is performed.
Swiss cross-border workers residing in Italy are taxed at a special rate—with Switzerland deducting a withholding tax and Italy granting a tax credit to avoid double taxation.
Entrepreneurs operating businesses in both countries need to consider permanent establishment rules, as profits are taxed where the business has a physical presence.

2. Dividends, Interest, and Capital Gains

For investors and business owners, the treaty regulates taxation on dividends, interest, and capital gains:

Dividends paid by a Swiss company to an Italian resident are taxed in both countries, but Switzerland applies a reduced withholding tax (usually 15%) instead of the normal 35%.
Interest income is typically taxed only in the country of residence.
Capital gains from selling stocks, bonds, or businesses are taxed in the country of residence—except for real estate, which is taxed where the property is located.

3. Real Estate Investments in Switzerland & Italy

If you own property in Switzerland but live in Italy (or vice versa), the treaty determines:

Rental income is taxed where the property is located, but residents get tax credits in their country of residence.
Capital gains from real estate sales are also taxed in the property’s country, meaning a Swiss property sale is subject to Swiss real estate capital gains tax.
Wealth tax applies in Switzerland but not in Italy, making Swiss property attractive for tax optimization.

4. Pensions & Social Security

For retirees and expats receiving pensions, taxation depends on where the pension originates from:

Swiss state pensions (AVS/AI) are taxed in Switzerland but might also be partially taxed in Italy for Italian residents.
Italian pensions paid to Swiss residents may be taxed in both countries, but a tax credit applies to avoid double taxation.
Private pensions are typically taxed only in the country of residence, making Switzerland’s lower tax rates beneficial for pensioners moving there.

What About Wealth Tax?

Switzerland has a wealth tax, levied annually on worldwide assets for Swiss tax residents. Italy, on the other hand, does not tax wealth but applies an IVAFE (0.2% tax) on foreign financial assets and an IVIE (0.76% tax) on foreign real estate.

This makes Switzerland attractive for HNWI looking to optimize wealth taxation, as Swiss cantons offer different wealth tax rates, with Ticino having one of the most favorable tax regimes in the country.

Tax Optimization Strategies for Expats & Entrepreneurs

1. Choosing the Right Tax Residency

For individuals with flexible international income, deciding whether to reside in Switzerland or Italy is a strategic move. Switzerland’s lower tax rates, no capital gains tax, and wealth tax structure appeal to investors and entrepreneurs. Italy’s flat tax for new residents is ideal for HNWI with high foreign income.

2. Structuring Business & Investments Properly

For those operating across both countries, using Swiss holding structures can reduce tax burdens, while careful tax planning ensures minimum double taxation on dividends and capital gains.

3. Estate Planning & Wealth Protection

Swiss asset protection strategies, trusts, and private wealth structures offer stronger confidentiality and legal security than Italian frameworks. The treaty ensures cross-border estate and inheritance tax planning remains efficient and compliant.

Who Benefits Most from the Swiss-Italian Tax Treaty?

The treaty provides major advantages for:

Entrepreneurs setting up businesses in Ticino or Milan
HNWI looking to optimize tax residency between Switzerland and Italy
Real estate investors managing properties in both countries
Expats moving for work or retirement between Switzerland and Italy

If you are considering relocating, proper planning is essential to maximize tax efficiency and ensure compliance.

Thinking of Moving to Switzerland or Italy? Let’s Talk

Whether you're an entrepreneur, investor, or expat, navigating the Swiss-Italian tax landscape requires expert guidance. We help optimize tax residency, structure businesses, and invest strategically in both countries.

📩 Contact us for a personalized consultation:

For Italy tax residency, expat services, and investment planning: info@knotted.it | WhatsApp: +41 76 771 30 22
For Switzerland tax planning, relocation, and asset management: Knotted.ch