In its judgment of 12 February 2026 (3-22-1043), the Administrative Chamber of the Supreme Court clarified the taxation of financial transfers between a company and a member of its management board, as well as the allocation of the burden of proof where the business use of transferred funds is not demonstrated. The ruling significantly shapes practice regarding when payments to a board member’s personal account may be treated as remuneration.

The tax authority assessed additional taxes, concluding that transfers to the board member—formally described as business advances and loan repayments—were in substance hidden remuneration. The payments were made to the board member’s personal account, and the company had not declared any salary or board member remuneration. As no evidence was provided to show that the funds were used for business purposes, the tax authority treated them as net remuneration and imposed employment taxes.

The lower courts annulled the tax decision in part, finding that the tax authority had not sufficiently justified why the payments should be classified specifically as board member remuneration rather than, for example, non-business expenses or other taxable disbursements. They also considered it possible that some transfers were related to business financing, although no convincing evidence supported this.

The Supreme Court largely disagreed. It held that while the tax authority must present a plausible basis for suspecting tax non-compliance, once such suspicion is substantiated, the burden of proof shifts to the taxpayer. Where funds are transferred to a board member’s personal account and their business use is not demonstrated, it may be presumed that the payments constitute remuneration for management duties. It is not necessary for the tax authority to prove personal use; it is sufficient that a business purpose remains unproven.

The Court also emphasised that a tax decision cannot be upheld on a legal basis different from that relied upon by the tax authority. The taxation of board member remuneration and non-business-related payments involves distinct legal grounds, and substituting one for another in court proceedings would impermissibly alter the operative part of the decision. Accordingly, the tax authority must clearly define both the type of tax and its legal basis.

At the same time, the Court agreed with the lower courts that a genuine loan relationship had been proven in part. A specific loan granted to the company and its repayment were substantiated, and the tax decision remained annulled to that extent. However, for the remaining payments, the company failed to provide sufficient evidence of business use or to rebut the tax authority’s conclusions.

The ruling underscores that the decisive factor is the economic substance of the transaction, not its formal description or subsequent explanations. Where a company cannot credibly demonstrate a business purpose, the tax authority may treat payments as remuneration and impose employment taxes. The authority was not required to consider whether the payments might constitute dividends, as this argument was not raised by the taxpayer. The Court reiterated that the responsibility for properly documenting dividend distributions lies primarily with the company.

The judgment also confirms that there is no improper reversal of the burden of proof: once the tax authority has substantiated its suspicion, it is for the taxpayer to demonstrate how and for what purpose the funds were used.