Tax evasion: offshore company divestment classified as extraordinary income, asset valuation, and fine amount

Federal Supreme Court, 17.02.2026, 9C_648/2025

Facts

In 2011, A.________ SA (the appellant) acquired, through an assignment agreement, all rights held by I.________ in several offshore companies, for a value estimated at over CHF 16 million. This transaction involved no financial consideration from A.________ SA.

Following an investigation by the Criminal Affairs and Investigations Division (DAPE) of the Federal Tax Administration, it was established that this assignment was not intended to repay a debt, but rather constituted compensation. Specifically, I.________ intended to compensate A.________ SA for significant losses the latter had incurred following previous financial transactions, during which I.________ had realized a substantial capital gain thanks to a loan initially granted by A.________ SA.

Considering this assignment to be an undeclared extraordinary gain, the Geneva Cantonal Tax Administration initiated proceedings for tax evasion for the 2011 period. It issued a back-tax assessment (direct federal tax and cantonal/communal income tax) by adding CHF 16,012,726 to the company's taxable profit and imposed a fine equal to 1.5 times the evaded tax.

The cantonal courts, having been seized in succession, upheld the principle of the back-tax assessment and the fine, although the Administrative Court of First Instance (TAPI) reduced the fine to 1.25 times the evaded tax, a decision confirmed by the Court of Justice. A.________ SA then filed an appeal in public law matters with the Federal Supreme Court.

Law

The Federal Supreme Court reiterates the principles applicable to tax evasion (art. 175 DBTA and 56 HTA). Tax evasion is committed when a taxpayer, intentionally or through negligence, causes a tax assessment not to be carried out when it should have been, or causes a final tax assessment to be incomplete. For a legal entity, the fault of its governing bodies (directors, managers) is attributable to it.

The Federal Supreme Court also reiterates the rules regarding the establishment of facts and the assessment of evidence by cantonal authorities. It only intervenes if the facts have been established in a manifestly inaccurate manner, i.e., arbitrarily (art. 9 Cst.), or in violation of the law (art. 95 LTF). The appellant must demonstrate the arbitrariness in a clear and detailed manner.

Regarding the right to be heard (Art. 29 para. 2 of the Federal Constitution.), which includes the right to the administration of evidence, the Federal Supreme Court specifies that a court may refuse an evidentiary measure (such as hearing a witness) through an anticipatory assessment of evidence if it determines, without arbitrariness, that the measure is not likely to alter its conviction.

Finally, setting the amount of the fine falls within the authority's discretion. The Federal Supreme Court only reviews this amount in cases of excess or abuse of this discretion—that is, if the authority based its decision on irrelevant considerations or set a penalty that is arbitrarily heavy or light.

Application to the specific case

The Federal Supreme Court examines and rejects all of the appellant's grievances in turn.

1. Violation of the right to be heard: The appellant criticized the Court of Justice for refusing to hear a witness (D.). The Federal Supreme Court ruled that this refusal, based on an anticipatory assessment of evidence, was not arbitrary. The cantonal judges had numerous consistent written documents at their disposal (notably a Form A signed by one of the appellant's directors and a written waiver from I.'s heir) which were sufficient to establish that the appellant had indeed become the beneficial owner of the transferred companies. The appellant failed to demonstrate how the testimony would have provided new and decisive elements.

1. Arbitrary finding of facts: The appellant argued that the transfer was merely a fiduciary operation intended to protect I.'s heir and that the economic justification (compensation) was unfounded. The Federal Supreme Court dismissed this argument, noting that the appellant provided no proof of a fiduciary agreement and merely contrasted its own version of the facts with the one, solidly supported by documents, adopted by the lower court. The conclusion that the transfer constituted compensation for previous losses was not deemed arbitrary.

1. Valuation of assets: The appellant contested the value of several receivables taken into account in the calculation of the extraordinary income.
   1. Regarding a receivable held by the appellant, the Federal Supreme Court upheld the Court of Justice's method, which was based on the appellant's own financial statements, deeming the argument that this accounting was intended solely to avoid bankruptcy to be irrelevant.

1. Regarding third-party receivables from the appellant, the value of which should have been reduced due to their subordination, the Federal Supreme Court confirmed that in the absence of proof of a value adjustment in the creditors' accounts, there is no reason to apply a discount.

1. Regarding another receivable, the appellant claimed that the debtor company was in a state of "virtual bankruptcy." The Federal Supreme Court confirmed the Court of Justice's analysis: as long as the debtor company is not in a state of proven over-indebtedness within the meaning ofArt. 725 para. 2 of the Code of Obligations, there is no reason to reduce the value of the receivable to zero.

1. Principle and amount of the fine:
   1. Principle: The conditions for tax evasion are met. The objective condition is fulfilled by the failure to declare income of more than CHF 16 million. The subjective condition (fault) is also met, with the Federal Supreme Court finding intent. The company's governing bodies, particularly its director C., an experienced businessman and wealth manager, could not have been unaware that such an operation had to be declared.

1. Amount: The Federal Supreme Court ruled that the amount of 1.25 times the evaded tax does not constitute an abuse of discretion. It took into account the significant fault of the governing bodies, the magnitude of the amounts evaded, and the fact that the passage of time had already been considered by the TAPI to reduce the initial amount. The lack of a prior record is a neutral factor and does not justify a further reduction.

Outcome

The Federal Supreme Court dismissed the appeal regarding both direct federal tax and cantonal and communal taxes. The court costs, set at CHF 25,000, are to be borne by the appellant.

Silex Tax Newsletter published in collaboration with Anna Vladau, Attorney at Law