Facts
A.X., born in 1942, worked until the age of 70 for the company C. SA. Upon reaching the ordinary retirement age (65 years), he decided to continue his professional activity within this company, after realizing that his first and second pillar pensions would not exceed 5,000 CHF per month. He therefore agreed with his employer that his salary would be reduced by an amount equivalent to the second pillar pension he would receive, but that a lump-sum amount, corresponding to the loss of earnings resulting from this salary reduction, would be paid to him at the end of the employment relationship.
In March 2013, the company C. SA paid an amount of 168,500 CHF to A.X. after his retirement. The Cantonal Tax Authority of the Canton of Valais considered that this amount should be taxed as "other income", and not as a lump-sum pension benefit within the meaning of Art. 17 para. 2 LIFD.
Considerations
The Federal Supreme Court ruled that the severance payment agreed between A.X. and his employer as part of the extension of the employment relationship, in exchange for a salary reduction, did not have a close link with occupational pension provision. In reality, it was a deferred salary, the admissibility of which is questionable under labor law.
Consequently, this severance payment cannot be assimilated to a payment…