Fine for negligent tax evasion imposed on a corporation

Facts

X. SA, a corporation, wrongly included commissions paid to third parties abroad in its operating expenses. The Tax Administration of the Canton of Geneva made a direct federal tax reassessment for the years 1998 and 1999 and imposed two fines on X. SA for negligent tax evasion amounting to half the evaded taxes, i.e. CHF 39,350 for the 1998 and 1999 direct federal tax and CHF 20,047 for the 1999 cantonal and municipal tax.

X. SA appealed against these decisions to the Administrative Court of the Canton of Geneva and then to the Federal Supreme Court.

Considerations

The Federal Supreme Court upheld the appeal of X. SA. It considered that the Administrative Court had violated Articles 175 and 181 of the Federal Act on Direct Federal Taxation (LIFD) by directly imputing negligence to the company without examining the culpability of its governing bodies.

According to the Federal Supreme Court, Article 181 LIFD does not provide for strict criminal liability of the legal person, but presupposes a fault of its governing bodies. The notion of negligence under Article 175 LIFD must be assessed in light of the personal situation of the governing bodies, in…