The cases of a European wine and beer industry businessman, who has been accused of using trusts and a foundation in different countries, under different names, to avoid taxes, caused new commentary last week following a top Swiss court's judgement.

The multi-million tax affairs of Pierre Castel, the beer and wine industry tycoon who also used another of his names, “Jésus,” in financial affairs until his full identity was exposed, continues to cause ripples across the worlds of trusts and foundations. A top Swiss court has issued an important new ruling.

A few days ago, the Swiss Supreme Court published a judgment on Swiss tax evasion via trusts. This judgment follows a case where Castel had used a Liechtenstein foundation. In the most recent matter, relating to a Singapore trust, the Swiss court ruled that settling an irrevocable discretionary trust can be treated as tax evasion when someone continues to benefit from the economic control as well as the factual control over the trust.

The saga shows how courts say that trusts should not be used to guard wealth from tax. The misuse of offshore entities remains a hot-button political issue around the world, given the anger about wealth inequality.

As explained in a commentary on the LinkedIn page of Switzerland-based trusts and tax expert David Wilson, of Schellenberg Wittmer, the (economic) settlor, who had remained a beneficiary of the (Singapore) trust, was, as a member of its investment management committee, the sole beneficiary among a class of six siblings to receive the entire annual distribution for the year under investigation – €55.8 million ($60.3 million). During various tax disputes, he had made several "incoherent statements contributing to a form of opacity regarding the role he played in the structure and the question of precisely which body decided on the beneficiaries and according to what criteria.”

As Wilson explains, quoting the court French language statement, the settlor successively declared (1) “as founder of the group, he remained active in its operational management” vs “he only retained a consultative voice without any true decision power”; and (2) “as a rule, the investment committee decides on the ordinary trust distributions” vs “only the trustee decides the fate of trust’s capital and income.”

As noted by Bloomberg late in 2022, for example, the Administrative Court of Geneva said that Castel, one of Switzerland’s richest men, was required to pay back tax of SFr410 million ($462 million).
 
Explaining the saga further, Wilson said that in 1981, Castel left France for Geneva as an ordinary taxpayer. In 1992, he irrevocably transferred his shareholding in a Liechtenstein foundation. In 2009, the foundation settled them in a listed Singapore unit trust.

Tax recognition in Switzerland of a Liechtenstein foundation is not granted if its sole purpose is tax evasion, Wilson said. 

The only existing document, Wilson said (referring to a presentation he gave on the matter in 2022) was a set of minutes of July 1992 formalising the constitutive meeting, held after its incorporation between the founder and representatives of the five family branches. Furthermore, no protector had ever been appointed and no letter of wishes drawn up. 

An earlier judgment about the case had said: “The founder's explanations as to the lack of written documents, in favour of oral discussions based on trust, are not convincing given the very large amounts at stake. If the founder wished to appear to be the group's CEO when in reality – according to him – he did not manage the group, it was all the more incumbent on him to formalise matters in writing and not by 'shaking hands’.” 

Liechtenstein and Singapore
Reports said that for the past 30 years Castel allegedly failed to tell tax authorities that he headed the Castel Group and earned dividends via a foundation located in Liechtenstein and another fund located in Singapore.

Castel reportedly registered with the revenue administration under his second personal name, Jésus, which enabled him to avoid the attention of inspectors and evade “large sums” of tax, according to the city court in Geneva which first heard the case. His real identity came to light later.

Switzerland does not have its own trust law, but foreign trusts have been fully recognised in Switzerland since the Hague Trust Convention came into force in 2007.