Facts
In this judgment, the Federal Supreme Court addresses the question of whether fines and other financial sanctions with a penal character imposed on legal entities are tax-deductible as business expenses.
The facts concern a fine of 348,000 euros imposed by the European Commission on X AG for participation in cartel agreements. The Zurich cantonal tax authority refused to deduct this fine from the taxable profit, which X AG unsuccessfully challenged up to the Federal Supreme Court.
Considerations
The Federal Supreme Court concludes that fines and other financial administrative sanctions with a penal character imposed on legal entities due to their own responsibility are generally not considered as business-related expenses and are therefore not tax-deductible.
This results from a grammatical-historical interpretation of the law, according to which the legislator intended to generally exclude fines from business-related expenses. A systematic interpretation taking into account the principle of the unity of the legal system and the tax treatment of bribery payments also leads to the conclusion of non-deductibility.
Furthermore, the deductibility of fines would not be compatible with the principle of equal treatment, as fines on…