CumEx-Files

The network stole several billion Euros from the treasury, through what Correctiv calls a "cum-ex" trade: The participants in the network would lend each other shares in large companies, so that to tax authorities there would appear to be two owners of the shares, when there was only one. The bank that was used in stock trading would then issue a "confirmation" to the investor that tax on the dividend payment had been paid, without it being done. "It's a bit like parents claiming a child benefit for two – or more – children when there is only one child in the family." writes Correctiv.[1] This practice was outlawed in 2012.[5]

In cum-ex trades, shares with and without dividend rights were quickly traded between various market participants just before the payout date for the dividend, allowing traders to reclaim double the taxes.

Financial institutions in essence allowed two parties to simultaneously claim ownership of the same shares, therefore allowing both to claim tax rebates to which they were not entitled.

Authorities have since deemed the reclaims illegitimate, but at the time of the trades, this was less black and white, and a vast network of traders, analysts and lawyers were thought to be involved in the practice throughout the continent.[6]

The elite law firm Freshfields Bruckhaus Deringer gave tax advice which was used to justify the legality of the scheme. In November 2019, Ulf Johannemann, a former Freshfield partner who was head of the international tax department, was arrested.[7][8][9]

In May 2020, the European Banking Authority announced a 10-point action plan to enhance the future regulatory framework surrounding dividend arbitrage trading schemes.[10] According to the report, in some countries, the cum ex deals are not criminal offences.[11]

In 2010, in an audit report, the Danish Ministry of Taxation was found to have ignored warnings on multiple occasions of a tax loophole concerning dividend tax.[12]

In June 2020, it was reported by investigators that such transactions took advantage of European rules on the taxing of dividends, which made it possible to get refunds by using a combination of short sales and future transactions.[13]

At the end of October 2018, the Socialist deputy Boris Vallaud filed a complaint against X for fraud and aggravated tax fraud laundering with the National Financial Prosecutor's Office.[14] A parliamentary information mission on tax evasion[15] of the National Assembly has also published a report on the results of the fight against cross-border malicious financial engineering.[16]

The Danish State Commissioner August Schäfer first warned of the practice in 1992, after the testimony of five whistleblowers. However, the practice remained widespread until an administrative assistant in the German Federal Central Tax Office noticed abnormally large tax rebate claims from a US pension fund.[5]

Various banks and other financial institutions were involved in these alleged trades. Among those named in the leaked files include Macquarie Bank, Deutsche Bank, HypoVereinsbank, M. M. Warburg, Maple Bank, Merrill Lynch, KPMG, Ernst & Young, Investec,[17] and Freshfields.[18] Investigations revealed that since 2012 Investec had provided the Dutch broker Frank Vogel with more than €12 billion to facilitate his alleged tax arbitrage scheme.[19]

• Dividend stripping
• Sanjay Shah

Media related to CumEx-Files at Wikimedia Commons

• Official website from Correctiv