Facts
The public limited company Hôtel X. SA (the Company) operates a hotel in Geneva. It is 50% owned by the company Y. (Switzerland) SA. In 2009, the Company granted a loan of CHF 653,478 to Y. (Switzerland) SA, its shareholder company, applying an interest rate of 2.5%. The Geneva Cantonal Tax Administration considered that this rate was lower than the market rate and made an upward adjustment of CHF 5,850 to the Company's taxable profit for the year 2009. The Company unsuccessfully contested this decision before the cantonal authorities. It then appealed to the Federal Supreme Court.Considerations
The Federal Supreme Court upheld the decision of the Tax Administration. It ruled that when a company grants a loan to its shareholder at an interest rate lower than the market rate, there is a hidden distribution of profits. The monetary benefit is then measured by the difference between the interest rate in accordance with the arm's length principle and the rate actually applied. The Federal Tax Administration issues directives each year on the relevant interest rates for the calculation of monetary benefits, published in the form of circular letters. Circular Letter 2009, applicable to the period in question, provides for minimum interest rates in the case of loans granted to shareholders or partners. When the loan is financed with borrowed capital, the minimum interest rate is calculated by reference to the interest expense borne by the lending company, plus a margin of 0.5% or 0.25%…