Swiss Federal Supreme Court, 19.05.2026, 9C_325/2025
Facts
A married couple, both taxpayers in Geneva, operate sole proprietorships in the real estate sector. In 2011, they began trading on financial markets (Forex trading), which resulted in an undeclared loss. For the 2012 tax year, they declared a profit of CHF 659,373 from this activity. The Cantonal Tax Administration (AFC) refused to classify them as professional securities dealers, deeming this gain a tax-exempt private capital gain, a decision that was not contested. (let. A.a, A.b)
For the 2013 to 2019 tax years, the taxpayers declared themselves as securities dealers and requested the deduction of massive losses resulting from their trading activity. Apart from a gain in 2017 (CHF 169,843), this activity generated substantial losses each year, including a loss of over CHF 9.5 million in 2013. Over the entire 2012-2021 period, the declared losses exceeded CHF 12 million against total gains of approximately CHF 829,000 (let. A.c, B.a, 7.2.3)
The AFC refused to allow the deduction of these losses, arguing that trading does not constitute a self-employed gainful activity. This position was confirmed successively by the Court of First Instance for Administrative Matters (TAPI) and then by the Court of Justice of the Canton of Geneva. The taxpayers then appealed to the Federal Supreme Court, requesting recognition of their status as professional securities dealers and the deduction of losses for the years 2013 to 2019. (let. B, C)
Legal Analysis
For a loss to be deductible from taxable income for the purposes of direct federal tax (art. 27 para. 2 let. b DBTA) and cantonal and communal tax (art. 10 para. 1 let. c HTA), it must arise from a self-employed gainful activity and have been properly accounted for. (consid. 6, 9)
According to established case law, a self-employed gainful activity (art. 18 para. 1 DBTA) is an activity carried out on one's own account, at one's own risk, within a freely chosen organization, and with the intent to make a profit. To classify an activity as professional securities trading, several indicators are examined, such as the systematic nature of the operations, the frequency of transactions, the use of borrowed funds, or the application of specialized knowledge. (consid. 7, 7.1)
An essential and unavoidable criterion is the profit motive, which must be examined from both a subjective perspective (the intention to make a profit) and an objective perspective (the activity's capacity to generate a profit over time). While the intention to make a profit is generally presumed in securities trading (subjective criterion), the objective criterion requires that the activity be profitable in the long term. Start-up losses or temporary difficulties are permissible, but if the activity is durably and structurally loss-making, it cannot be classified as a self-employed gainful activity because it lacks economic justification. The lack of profitability is sufficient in itself to rule out the classification of a self-employed gainful activity, regardless of other indicators. (consid. 7.2, 7.2.1, 7.2.2)
The burden of proof for facts supporting a tax deduction, such as the existence of a self-employed gainful activity and the correct accounting of losses, lies with the taxpayer. (consid. 5)
Application to the Case
The Federal Supreme Court first declared the appeal inadmissible for the 2015 to 2019 tax years. The Court of Justice had based its decision on two grounds: the lack of compliant accounting and the non-profitable nature of the activity. As the appellants did not validly contest the first ground (accounting) for those years, their appeal is inadmissible on this point. The dispute is therefore limited to the years 2013 and 2014. (consid. 1.3.2, 4)
The Federal Supreme Court then examined the objective criterion of profitability. It noted that the appellants' trading activity was massively and almost continuously loss-making between 2011 and 2021. Cumulative losses of over CHF 12 million stood in stark contrast to sporadic and much smaller gains. This situation cannot be equated to a difficult start-up phase or a temporary setback. The structurally and persistently loss-making nature of the activity demonstrates a lack of economic justification. (consid. 7.2.3)
As the objective criterion of profitability was not met, the appellants' trading activity cannot be classified as a self-employed gainful activity. This conclusion alone is sufficient to deny the deduction of the alleged losses. Consequently, it is unnecessary to examine the other indicators of professional securities trading (frequency of transactions, financing, etc.) or to verify whether the losses were correctly accounted for in the 2013 and 2014 tax years. (consid. 7.3)
Since the principles are identical for harmonized cantonal and communal taxes (LHID), the reasoning also applies to this part of the appeal. (consid. 9)
Outcome
The Federal Supreme Court dismissed the appeal to the extent that it was admissible (i.e., for the 2013 and 2014 tax periods). It upheld the decision of the Court of Justice, refusing to classify the appellants' trading activity as a self-employed gainful activity due to its persistently loss-making nature. Consequently, the losses incurred are not deductible from their taxable income. The court costs, amounting to CHF 22,000, are to be borne by the appellants. (consid. 1, 2, 3, 10)
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