Fiduciary relationships: Why the contract alone is not enough
A recent Federal Supreme Court ruling makes clear: even with a fiduciary agreement in place, tax authorities may disregard a fiduciary arrangement – if the agreement, balance sheet, and accounting records do not properly reflect the six criteria established by the Federal Tax Administration (FTA). The case illustrates where fiduciaries most commonly fail in practice.
When a company conducts a transaction in its own name, the default presumption under corporate and income tax law is that the transaction is attributable to that company – meaning it bears both the entire profit and the full risk arising from that transaction. Where a company acts only as an indirect agent – that is, in its own name but for the account and risk of a third party – it must demonstrate the existence of a fiduciary arrangement. The practice of tax authorities and the Federal Supreme Court is based on the six cumulative criteria set out in the Federal Tax Administration’s guidance note on ‘fiduciary arrangements’.
What was it about?
A recent Federal Supreme Court ruling from December 11, 2025(9C_455/2025) shows once again that even a written fiduciary agreement is not sufficient if the balance sheet and accounts do not correctly reflect the fiduciary structure – although in this case there was not even a written fiduciary agreement. Fiduciary relationships in Switzerland must meet the six criteria of the Federal Tax Administration (FTA).
The taxable corporation was active in precious metals trading. After the sole shareholder died, the corporation filed a voluntary disclosure with the tax office of the Canton of Zurich. The reason for this was the incomplete booking and declaration of business transactions. The taxpayer announced that it was highly probable that payments of monetary value had been made to the sole shareholder. As a result, the tax office opened subsequent tax assessment proceedings (Nachsteuerverfahren) under Art. 151 et seq. of the Federal Direct Tax Act (DBG).
In a subsequent letter, however, the taxpayer AG informed the tax office that the facts of the case were different from those assumed in the voluntary disclosure. In particular, the business model operated by the AG did not consist of proprietary trading but of commission business. Although the AG conducted its business in its own name, it did so for the account of a third party. Specifically, it had merely acted as a commission agent for Company E, based in France, in which the sole shareholder held a stake of around 40 percent. As the precious metals remained the property of this company until they were sold, the AG did not bear any economic risk. Although the declared accounts were in the name of the taxpayer, they were economically attributable to the E company. The taxable AG would therefore not have received the entire gross profit (sales price less purchase price of the gold), but would only have been entitled to a commission as compensation for its activities.
However, the tax office maintained its position that there was insufficient bookkeeping. In accordance with the threat, it proceeded with the assessment at its own discretion and offset the difference between the dutifully calculated gross profit and the booked commission income.
In the proceedings before the Federal Supreme Court, the taxpayer AG did not succeed in demonstrating that it did not carry out the precious metal trading transactions in its own name, but in the name of the company E. The Federal Supreme Court ultimately confirmed the tax office’s offsetting of profits at the taxpayer AG (profit tax) and thus also the resulting non-cash benefits to its shareholders – with possible withholding tax and income tax consequences for the shareholders of the AG.
Why did the Federal Supreme Court not recognize the fiduciary relationship?
The reason for the tax office’s discretionary offsetting was that the taxpayer AG had initially not submitted any tax returns. The tax returns also remained incomplete in the subsequent objection proceedings. This was particularly because the taxable company was unable to prove that it had only carried out the precious metal trading in a fiduciary capacity – i.e. as a third-party transaction (acting in its own name, but in the interest and for the account of a third party).
In international relationships in particular, the Federal Supreme Court places strict requirements on the proof of a fiduciary relationship. In practice, in direct tax law, legal relationships and legal transactions are attributed to the person in whose name they are made out – subject to proof to the contrary.
Six cumulative criteria to be met for fiduciary relationships
In order to prove that it only held the gold in the name and on behalf of company E and acted with it, the taxable AG would have had to prove the fiduciary relationship. It was unable to do so. In its established practice, the Federal Supreme Court relies on the information sheet“Fiduciary relationships” issued by the Federal Tax Administration in the still valid version of October 1967. This states that a fiduciary relationship in Switzerland must be proven using six cumulative criteria:
1. fiduciary agreement: there must be written agreements between the principal and the fiduciary from the time the fiduciary-relationship was established.
2. designation of the fiduciary assets: The fiduciary assets must be precisely described in the contract, if necessary by specifying the individual components (designation of the securities with numbers, etc.). A new contract or at least a contract addendum must be drawn up for each increase. It must be possible to document changes in the composition of the fiduciary assets (asset reallocations, sales, repayments, new investments, etc.).
3. risks and costs: The fiduciary may not incur any risks from the investment, management and sale of the fiduciary assets. All associated costs are to be borne exclusively by the principal. This must be expressly stated in the fiduciary agreement.
4. compensation: The fiduciary shall receive compensation (fiduciary commission) from the principal that corresponds to the customary rates for such services. The terms of the fiduciary’s remuneration must be set out precisely in the contract.
5. balance sheets: The fiduciary’s balance sheets to be submitted to the tax administration should clearly show that the fiduciary holds assets on a fiduciary basis. The fiduciary accounts must be listed as such under assets and liabilities or “below the line”.
6. bookkeeping: Special accounts must be opened and kept in the fiduciary’s bookkeeping for the fiduciary assets and the principal’s claims and obligations, which provide the tax authorities with precise information at all times on the composition of and changes to the fiduciary assets and the reciprocal obligations of the parties involved.
The most common mistake in practice
If a company carries out a transaction in its own name, there is a natural presumption for profit and income tax purposes that the transaction is attributable to this person – i.e. that this person bears the entire profit, but also the entire risk from this transaction. If a company only acts as an indirect representative, i.e. in its own name but for the account and at the risk of a third party, it must prove this fiduciary relationship. The practice of the tax authorities and the Federal Supreme Court is based on the six cumulative criteria set out in the Federal Tax Administration’s guidance note on “Fiduciary relationships”.
From my personal practice as a tax advisor, I know that people often think about concluding a written fiduciary agreement that describes the fiduciary assets and regulates the risks, costs and compensation. However, often only the commission from the transaction is recorded in the balance sheet and accounting. The fiduciary assets and the (gross) income and expenses from it are not shown in the balance sheet and accounts. In the event of an audit by the tax authorities, there is a high risk in these cases that (as in the present case) the fiduciary assets and the profit from it will be fully allocated to the fiduciary.
Properly kept accounts in accordance with the Swiss Code of Obligations are the basis for determining the taxable net profit and the correct treatment for withholding tax and stamp duty. As soon as I discover a fiduciary relationship in practice, I make sure that all six FTA criteria – in particular accounting and bookkeeping – are fully met. This is the only way the structure will stand up to a tax audit.
Tax protection for fiduciary structures:
I check existing fiduciary relationships for compliance with the FTA criteria and ensure that the balance sheet and bookkeeping stand up to a tax audit.
👉 Arrange a non-binding 30-minute consultation now
FAQ: Frequently asked questions about fiduciary relationships
No. A fiduciary agreement is only one of six cumulative criteria. It is crucial that the fiduciary relationship is also correctly reflected in the balance sheet and accounting – with separate accounts and transparent presentation of the fiduciary assets.
For profit and income tax purposes, there is a natural presumption that transactions are carried out for one’s own account. The taxpayer bears the full burden of proving that a genuine fiduciary relationship exists – the counter-evidence must be flawless. In the case of international fiduciary relationships, the tax authorities have no direct means of obtaining documents from the foreign counterparty. The taxpayer in Switzerland must therefore do everything possible to prove the fiduciary relationship.
The fiduciary assets and all profits from it are fully attributed to the fiduciary. This can lead to considerable offsetting of profits, withholding tax consequences and, in the case of legal entities, monetary payments to shareholders.
In its established practice, the Federal Supreme Court relies on the FTA leaflet “Fiduciary relationships” of October 1967 (still valid). This defines six cumulative criteria, all of which must be met.
The FTA cumulatively requires:
1. Written fiduciary agreement from the time of formation
2. Precise description of the fiduciary assets with supporting documents for all changes
3. Exclusion of all risks and costs for the fiduciary in the contract
4. Customary fiduciary commission with clear conditions
5. Show fiduciary assets separately in the balance sheet under assets/liabilities or “below the line”
6. Separate accounts for fiduciary assets in the accounts with complete transparency
About the Author
Adrian Briner
Certified Swiss Tax Expert / Certified Public Accountant
Founder and owner of BrinerTax
With over 15 years of experience in Swiss and international tax law, Adrian Briner advises companies, their owners and private individuals on key tax issues – from cross-border corporate taxes and restructurings to international rulings. With his training as an auditor, he ensures that contractual structures are correctly reflected in accounting and balance sheets and recognized for tax purposes.
Claim: practical solutions, documented legal certainty and data protection by design. All client data is processed exclusively in Switzerland, end-to-end encrypted and in compliance with the GDPR.
Basel | Olten | www.brinertax.ch