Decision of the Council of State dated March 22, 2024
In a ruling issued last Friday, the Tax Chamber of the Council of State refused to extend its precedent holding that deliberate accounting irregularities that do not affect a company’s net profit cannot serve as grounds for an assessment.
It considers that, in this case, the fact that the company recorded a loan as having been granted by a corporation—when in fact it had been provided by its managing partner“via a transfer from an undeclared account held by the partner in Switzerland”—“has no bearing on the validity of the tax assessments.”
The decision states that "since the company [...] deliberately failed to include the corresponding debt in the liabilities section of its balance sheet, it could not request that this omission be corrected."
Furthermore, the Council of State clarifies, with regard to penalties, that the breach is deemed to be deliberate because "the company’s manager could not have been unaware of the true origin of the sum credited to the partner’s current account of the [fictitious lending] company and [that] the continued inclusion on the liability side of the balance sheet for several consecutive fiscal years of an unjustified debt of a significant amount could not be regarded as a mere error committed in good faith."