Ruling by the Court of Cassation on the material element of tax fraud
Last week, the Court of Cassation issued a ruling regarding the material element of tax fraud in connection with payments made to the general manager of a soccer club upon the termination of his employment contract.
The taxpayer had been prosecuted for failing to report this compensation. The Conseil d'Etat the assessment in a decision dated June 21, 2021 (Council of State, 3rd and 8th Chambers, June 21, 2021, No. 438532, Cited in the tables).
In this decision, the Conseil d'Etat noted that severance pay received as part of a mutual termination agreement is not considered compensation for dismissal without just cause and therefore does not qualify for the exemption.
It also noted that the taxpayer had not contested the claim by asserting that he had not received a copy of the termination agreement. The Conseil d'Etat that failure to receive this copy would have rendered the termination agreement null and void. Such nullification would have resulted in the dismissal being deemed without real and serious cause and would have led to the exemption of the severance pay.
The Court of Appeals, which had convicted the taxpayer of tax fraud following the decision of Conseil d'Etat, had ruled, in particular, that since the tax assessment had been upheld by the tax judge, the material element of the tax fraud offense had been established.
However, the Court of Cassation overturned the ruling, stating that the Court of Appeals should have verified whether the taxpayer had received a copy of the agreement and, consequently, determined whether or not the compensation was exempt.