TF, 21.10.2025, 9C_185/2025
Facts
A wine trading company, A.________ Sàrl (hereinafter: the Company), was subject to a tax audit for the years 2011 and 2012. The Valais Cantonal Tax Administration made several adjustments to the Company's taxable profit. The main contested adjustments concerned:
- A 2011 wine sale to related companies at a price significantly below the purchase price, classified as a constructive dividend (adjustment of CHF 1,824,002).
- Marketing expenses invoiced in 2011 by a related company, deemed unsubstantiated (adjustment of CHF 60,000).
- The acquisition of a Porsche in 2012, considered a commercially unjustified expense (adjustment of CHF 132,000).
- An invoice for a "special filtration" service for wine in 2012, the price of which was deemed exorbitant and not in line with market rates (adjustment of CHF 136,269).
The Company contested these adjustments, arguing in particular that the sale of wine at a loss was due to its poor quality and that the other expenses were justified. Its claims and appeals were largely rejected by the cantonal authorities. The Company then appealed to the Federal Supreme Court, also invoking a violation of its right to be heard and requesting a stay of proceedings pending the outcome of related criminal proceedings against its manager.
Legal Analysis
The Federal Supreme Court reiterates the principles governing the determination of the net taxable profit of legal entities under Art. 58 para. 1 of the Federal Act on Direct Federal Tax (LIFD). Taxable profit includes withdrawals that do not serve to cover expenses justified by business usage, as well as income not recorded in the accounts.
A constructive dividend is recognized if four conditions are met:
1) the company provides a benefit without an equivalent counter-performance;
2) this benefit is granted to a shareholder or a related party;
3) it would not have been granted under the same conditions to a third party (violation of the arm's length principle);
4) the disproportion is manifest and recognizable by the company's governing bodies.
Expenses not justified by business usage are expenditures that have no direct link to the income earned or that primarily serve to satisfy the private interests of the shareholder. The burden of proof regarding the commercially justified nature of an expense lies with the taxpayer.
The right to be heard (Art. 29 para. 2 of the Constitution) does not include an absolute right to call witnesses. An authority may forgo an investigative measure through an anticipatory assessment of evidence if it concludes, without arbitrariness, that such a measure would not be likely to alter its conviction.
Application to the present case
The Federal Supreme Court has rejected all of the Company's claims.
- Procedural claims: The refusal to stay tax proceedings pending the outcome of criminal proceedings is not arbitrary. Similarly, the refusal to hear witnesses is justified by a non-arbitrary anticipatory assessment of evidence, as the court already had sufficient information (notably a hearing transcript).
- Adjustment for wine sales to a related party: Selling wine to companies owned by a related party at a price significantly below the acquisition cost, while similar wine was sold to a third party at a much higher price, constitutes a hidden profit distribution. The Company failed to prove that this transaction complied with the arm's length principle. The potentially illicit nature of certain operations is irrelevant under the principle of tax neutrality.
- Adjustment for marketing expenses: The Company provided no proof that the invoiced marketing services actually took place. The adjustment is therefore upheld, not because the expense was ill-advised, but because its reality was not established.
- Adjustment for filtration costs: As the price charged for filtration (CHF 1.50/liter) was more than 180 times higher than the standard market price (CHF 0.80/hectoliter), the Company failed to demonstrate that the expense was commercially justified.
- Adjustment for the purchase of a Porsche: The purchase of a luxury vehicle of this type does not correspond to the commercial usage of a wine trading company and was intended to satisfy the personal taste of its manager. This is a commercially unjustified expense.
As the same principles apply to cantonal and communal taxes (Art. 24 para. 1 let. a LHID), the appeal is also rejected on this point.
Outcome
The Federal Supreme Court rejects the Company's appeal regarding both direct federal tax and cantonal and communal taxes. The adjustments made by the tax authority are upheld. Court costs are to be borne by the appellant.
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