Federal Supreme Court, 17.12.2025, 9C_513/2025
Facts
A limited company (the appellant) was subject to a tax audit that led to tax reassessment and tax evasion proceedings for the 2010 to 2017 tax periods. The Geneva cantonal tax administration refused the deduction of certain expenses, notably costs related to hunting trips organized abroad and 344 other expense items (restaurants, travel, gifts), on the grounds that they were not justified by business usage. Consequently, it made adjustments to the taxable profit and imposed a fine for tax evasion. The Court of Justice of the Canton of Geneva upheld the tax administration's position, overturning a first-instance decision that had allowed the deductibility of the hunting expenses. The company then appealed to the Federal Supreme Court.
Legal Analysis
According toArt. 58 para. 1 let. b DBIT, expenses justified by business usage are deductible from net profit. Case law defines these charges as expenses having an objective causal link with the economic purpose of the company. It is not for the tax authorities to judge the appropriateness of an expense, but to verify its connection to business activity. Expenses serving the personal pleasure of a shareholder or executive are not deductible. The burden of proof regarding the business justification of an expense lies with the taxpayer. Tax evasion (Art. 175 and 181 DBIT) occurs when an irregularity in the accounting, such as the booking of unjustified expenses, leads to insufficient taxation. The legal entity is then punished with a fine, the amount of which is determined based on the fault of its governing bodies. The Federal Supreme Court only reviews the amount of the fine in cases of abuse of discretion.
Application to the case
The Federal Supreme Court confirms the analysis of the Court of Justice. Regarding the hunting expenses, the Court finds that the appellant failed to prove their business justification. Several factors were deemed decisive: the preponderance of a personal component and a close relationship between the participants, the lack of concrete evidence linking these hunts to the conclusion of new contracts (a simple spreadsheet and an email being insufficient), and the clear disproportion between the amount of expenses incurred (nearly 50% of the profit over the period) and the company's income. The Court reiterates that it is the company's responsibility to prove the objective link between the expense and its activity, which it failed to do.
Regarding the 344 other expense items, the Federal Supreme Court also finds that the appellant did not meet its burden of proof. The supporting documents provided were vague, often without mention of the clients concerned, or were provided after the fact. Furthermore, certain expenses, such as a fitness membership for the CEO, clearly had no connection to business activity.
Finally, the fine for tax evasion is upheld. As the conditions for tax evasion were met due to the booking of non-deductible expenses, the fine is justified. Its amount, set at 3/5 of the evaded tax, is not considered disproportionate, as the cantonal authority took into account the appellant's cooperation and the duration of the proceedings.
Since the same principles apply to cantonal and communal taxes under tax harmonization, the reasoning is identical for both federal and cantonal/communal income tax.
Outcome
The Federal Supreme Court dismisses the company's appeal, both regarding federal direct tax and cantonal and communal taxes. The decision of the Court of Justice is upheld. The hunting expenses and other disputed costs are not deductible, and the fine for tax evasion is maintained.
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