With everyone focusing on Brexit and the introduction of the EU VAT Quick Fixes, it was hardly noticed that Campione d’Italia as from 1 January 2020 is no longer part of the Swiss Customs Territory and was added to the Customs Territory of the EU.
It was back in 2016 that Italy stated its intentions to exercise tax jurisdiction over the tiny Italian enclave located in the region of Ticino, Switzerland. Following an official request to the EU and an agreement with Switzerland, Campione d’Italia and the Italian waters of Lake Lugano are since 1 January 2020 officially included in the customs territory of the EU (and within scope of excise duties).
Although the enclave remains outside the territorial scope of the EU VAT regulations, it was also decided to introduce a local consumption tax in Campione d’Italia, making an end to its “no VAT regime”. In order to avoid any potential distortions of competition with the surrounding Swiss border region however, the local VAT rate was aligned with the standard Swiss VAT rate at 7.7% (i.e. much lower than Italy’s 22%).
Changing the customs status of Campione d’Italia also means that a new customs border was created between Switzerland and Italy. In this respect both countries will set up a joint national control office at the Bissone/Campione d’Italia border crossing.
Whether the enclave of 2.68 km2 will bring in much tax revenue for the Italian/EU Treasury remains to be seen…