Taxation: constructive dividends, the right to be heard, and attempted tax evasion in the context of complex structures

TF, 17.02.2026, 9C_647/2025

Facts 

A couple of taxpayers domiciled in Geneva are the subject of an investigation by the Criminal Affairs and Investigations Division (DAPE) of the Federal Tax Administration (FTA). The husband, A.A., is an independent wealth manager involved in several entities: he is a shareholder and director of F. SA (a Swiss company), a director and shareholder of I.________ INC. (an offshore company), and a board member of the L.________ foundation, established by his father.

The DAPE report concludes that the taxpayer concealed significant income for the 2010 to 2015 tax periods. He is accused of having received taxable benefits in kind from I.________ INC. and the L. foundation, which he attempted to justify as current account advances. The DAPE also established that the taxpayer remained the beneficial owner of I. INC., despite his claims of having sold it. Furthermore, complex transactions involving F.________ SA were classified as taxable benefits in kind for the taxpayer, notably the transfer of 2,325 shares of F.________ SA to the L.________ foundation without consideration (valued at CHF 2,325,000) and the repayment by F.________ SA of a third-party company's debt directly to I.________ INC.

On this basis, the Geneva Cantonal Tax Administration (AFC-GE) issued tax adjustments for the years 2010 to 2015 and imposed a fine on A.A.________ for attempted tax evasion, set at the amount of the evaded tax. The decisions were upheld upon appeal, and subsequently confirmed in essence by the Administrative Court of First Instance (TAPI) and the Court of Justice of the Republic and Canton of Geneva. The taxpayers then appealed to the Federal Supreme Court.

Law

The Federal Supreme Court reiterates the applicable legal principles:

1. Statute of limitations for tax assessment: The right to proceed with a tax assessment is subject to a statute of limitations. The Federal Supreme Court examines this substantive legal issue ex officio (art. 120 para. 4 DBG ; art. 47 para. 1 StHG).
2. Statute of limitations for criminal prosecution for attempted tax evasion: For the offense of attempted tax evasion (art. 176 DBG ; art. 58 StHG), the limitation period only begins to run from the final conclusion of the tax assessment procedure during which the attempt was committed. This moment corresponds to the date the final tax assessment decision becomes legally binding, which in this case is the date of the Federal Supreme Court's judgment.

1. Right to be heard (Art. 29 para. 2 of the Federal Constitution.): This right includes the authority's obligation to provide reasons for its decision and to act upon relevant offers of evidence. However, an authority does not violate this right by conducting an anticipatory assessment of evidence and declining an investigative measure (e.g., hearing a witness) if it is convinced, without acting arbitrarily, that such a measure would not alter its opinion. Furthermore, a legal opinion submitted by a party is not considered evidence but merely a party allegation, which the court is not required to discuss in detail.

1. Constructive dividend (Art. 20 para. 1 let. c of the Federal Direct Tax Act (LIFD)): This refers to a benefit granted by a company to its shareholder or a related party without an equivalent counter-performance, which it would not have granted to a third party under the same conditions (the "arm's length" principle). A loan granted to a shareholder without a written contract, interest, or clear repayment terms may constitute such a benefit.

1. Attempted tax evasion (Art. 176 LIFD): This offense occurs when a taxpayer intentionally provides inaccurate or incomplete information in their tax return, but the tax authority discovers the irregularity before the tax assessment becomes final. The determination of the fine is at the authority's discretion, which the Federal Supreme Court reviews only with restraint (in cases of abuse or excess).

Application to the specific case

The Federal Supreme Court applies these principles to the facts of the case:

1. Statute of limitations on the right to tax: The Federal Supreme Court notes of its own motion that, as of the date of its judgment, the right to tax for the 2010 tax period has expired. The appeal is therefore upheld on this point. Conversely, the statute of limitations for criminal prosecution regarding the attempted evasion has not expired, as the limitation period only began to run with this judgment.

1. Violation of the right to be heard: The Federal Supreme Court rejects the appellants' claims.
   1. Regarding the submitted legal opinion, the Court of Justice did not violate the right to be heard by treating it as a mere party allegation and not discussing it in detail, as it had already substantiated its own conviction based on other elements in the file.
   2. Regarding the refusal to hear witnesses, the Federal Supreme Court finds that the lower court's anticipatory assessment of evidence was not arbitrary. The requested hearings were unlikely to provide new or decisive information, as the witnesses' written statements were already in the file and the relevant facts (notably A.A.________'s status as a shareholder) were established by numerous consistent written documents (share certificates, trust agreement, draft will).

1. Classification of benefits (on the merits): The Federal Supreme Court confirms the analysis of the cantonal authorities.
   1. Shareholder status of I.________ INC.: The conclusion that A.A.________ was the true shareholder is not arbitrary. It is based on a multitude of probative documents that outweigh the appellants' contrary allegations. The fact that a third party used the company's accounts for their own business is not sufficient to overturn this conclusion.
   2. Financial flows with I.________ INC. and the L.________ Foundation: The classification of these flows as constructive dividends is confirmed. The appellants failed to prove the existence of genuine current account relationships. On the contrary, the evidence in the file (a balance systematically in the taxpayer's favor, absence of debt declarations, abnormal loan conditions [no contract, no interest, no repayment plan], and witness statements indicating that these "facilities" compensated for a lack of salary) justified taxing them as income.
   3. Benefits from F.________ SA: The tax adjustments are also confirmed. The allocation of F.________ SA shares to the L.________ Foundation constitutes a benefit to the taxpayer, as the latter is a "related party" to the foundation due to his total control over it. Similarly, the payment by F.________ SA to I.________ INC. is considered a hidden benefit, as the appellants failed to provide proof of a valid economic justification for this transaction.

1. Fine for attempted tax evasion: The Federal Supreme Court confirms the fine. The objective conditions (incomplete declaration) and subjective conditions (intent) are met. A.A.________'s intent is inferred from his advanced degree in economics, his extensive professional experience as a wealth manager, and his central role in setting up the disputed schemes. The amount of the fine (equal to the evaded tax) is not deemed excessive given the aggravating circumstances (significant amounts, use of opaque structures over several years, the taxpayer's professional expertise), which outweigh the long duration of the proceedings.

Outcome

The Federal Supreme Court has partially upheld the appeal. The judgment of the Geneva Court of Justice is set aside insofar as it concerns federal direct tax (IFD) and cantonal and communal tax (ICC) for the 2010 tax period, as the right to assess tax is time-barred. The corresponding tax is cancelled. For the remainder, namely the 2011 to 2015 tax periods and the fine imposed, the appeal is dismissed. The majority of the legal costs are to be borne by the appellants, who only partially succeeded on a procedural point (statute of limitations) and failed on all substantive aspects of the dispute.

Silex tax newsletter published in collaboration with Anna Vladau, Attorney at Law