On March 19, 2025, the Court of Cassation ruled on the case of the manager of a French football club, dismissed under the terms of a contractual termination with payment of a non-taxable severance payment of 738,749 euros, then a gross settlement payment of 430,873 euros resulting from a settlement agreement.

According to the tax authorities, the director had intentionally failed to declare the sum of 400,000 euros, of which 300,000 euros corresponded to the settlement payment, and to have organized his insolvency.

Prosecuted before the Criminal Court, he was found guilty of fraudulently evading income tax in 2011, 2012 and 2013 by organizing his insolvency and obstructing the recovery of the tax and that, over the same period, he had fraudulently evaded the assessment and payment of income tax for the year 2012, by understating the overall income declared.

The Court of Appeal upheld the judgment at first instance.

Before the Court of Cassation, the defendant argued that the Court of Appeal had failed, with regard to income received in 2012, to take into consideration the provisions of Article 80k(1) of the General Tax Code and Article L. 1235-3 of the Labor Code. In accordance with these provisions, when the termination of the employment contract is characterized as a dismissal without real and serious cause, the agreed settlement payment is not taxable.

For the Court of Cassation, the flaw in the Court of Appeal’s decision lay in its lack of reasoning. In this sense, it based its decision on the provisions of Article 593 of the Code of Criminal Procedure, according to which “All judgments must include the reasons justifying the decision. Insufficient or contradictory reasons are equivalent to their absence.”

It thus rejected the reasoning of the Court of Appeal, which considered the material element of tax fraud to have been established, holding in particular that for more than ten years, the defendant had never referred the question of the applicability of the provisions invoked to the labor court; that the defendant had kept the sums resulting from this transaction; that he had tried to conceal them by presenting them as a loan granted by his employer; that the administrative courts to which this question had been referred had all rejected this line of argument.

Dismissing the legal acrobatics of the trial judges with a wave of the hand, the Court of Cassation recalled that “while the taxable nature of the settlement payment is subject to the validity of the contractual termination, it was incumbent upon it to determine, by all means of proof, whether a copy of the termination agreement had been given to the employee.”