Short of cash? My company can give you a loan...

Taxpayers receive a loan of CHF 800k from the company of which they are shareholders and directors. The tax authorities reclassify part of the loan as a hidden dividend (benefit in kind).

The cantonal judges consider that the loan was granted on terms that would never have been granted to third parties and that the loan was a sham: «the company granted a total loan of CHF 800k to the taxpayer, even though he was the sole managing partner, without formalising this loan by a written contract, nor requiring security, nor even providing for a repayment plan. However, the taxpayer had a difficult financial situation at the time. Therefore, it is not clear from reading the appeal how the company – whose corporate purpose is not to grant loans – could have considered granting a loan of this magnitude to a third party without carrying out a prior assessment of solvency or requiring solid guarantees. Furthermore, the taxpayer has not established that he has shown any intention to repay his debt. He has not proposed any repayment plan to the company, nor has any deadline been set. The interest expenses of the loan were also borne by the company.»

Federal judges adopt the arguments of cantonal judges.

The ruling is in French. This is a Vaudois case.

Federal Tribunal, judgment 9C_462/2024, of 9 May 2025