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Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539

Cum-Ex Trading Schemes Explained & FAQs

The Cum-Ex scandal (sometimes referred to as the "German Dividend Tax Scandal" and "The Cum-Ex Files") is a rapidly-widening cross-border tax fraud probe that is taking in dozens of financial institutions and many individuals.

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What is the German Cum-Ex Tax scandal?

The Cum-Ex scandal (sometimes referred to as the "German Dividend Tax Scandal" and "The Cum-Ex Files") is a rapidly-widening cross-border tax fraud probe that is taking in dozens of financial institutions and many individuals.


Click play below to listen to this article...


What does "Cum-Ex" stand for, and what does it mean?

Cum-Ex (also referred to as "Cum Ex" or "Cumex") is the name given to a huge volume of transactions prior to 2012 that involved exploiting a loophole on dividend payments that enabled a number of parties to claim the same tax refund. It has also been called dividend stripping.

Banks and stockbrokers rapidly traded shares with ("cum") and without ("ex") dividend rights, in a way that enabled them to hide the identity of the actual owner. This meant that they could agree to sell a company stock before the dividend was paid out but then deliver it after the dividend had been paid. This tactic enabled both parties to claim tax rebates on capital gains tax - a tax that had only been paid once – and rapid trading between various parties could give the appearance of numerous owners, creating large profits.


What is the estimated size of the Cum-Ex scandal?

German authorities believe this has cost that country’s treasury 10 billion euros in lost revenue. But there may be more than ten other European countries affected; with estimates saying around 55 billion euros may have been lost to those nations’ treasuries.

With a number of banks having been raided as part of Europe’s growing Cum-Ex scandal, investigators are focusing on precisely how (and by whom) the loophole was exploited to benefit so many.


How does a Cum-Ex trading scheme work?

Generally speaking, three or more parties are needed for a successful Cumex scheme.

A simplified summary example:

  1. Investor A owns shares in Company X worth 20 million euros.
  2. Investor C sells shares worth 20 million euros to Investor B without owning them himself (short selling).
  3. Investor A receives a dividend payout of 750,000 euros (total dividend - 1 million euros).

    After payout, Investor A's shares are worth 19 million euros.
  4. Investor A receives a tax certificate to reimburse 250,000 euros of dividend tax.
  5. Investor A sells shares worth 19 million euros to Investor C.
  6. Investor C delivers shares worth 19 million euros to Investor B and pays him an additional 750,000 euros.
  7. Investor B sells shares worth 19 million euros back to Investor A.
  8. Investor B receives a tax certificate to reimburse 250,000 euros of dividend tax.

    Investor A, B & C share the tax reimbursements.


The infographic below explains the steps involved in a simplified German "Cum-Ex" trading scheme:

Simplified German Cum Ex Scheme v2
Sources/Credits: European Parliament https://www.europarl.europa.eu.


About Cum-Ex Investigations

Excerpt From Article: Cum-Ex and Beneficial Ownership of Shares
By author: Legal Director at Rahman Ravelli (20/12/2019) Read the full article here. The article was also featured on Lexology.com.

While investigations into Cum-Ex are still at a relatively early stage, any examination of the beneficial ownership of shares is likely to focus on whether or not beneficial ownership was actually transferred. In the context of Cum-Ex transactions, beneficial ownership of the shares and the rights this carries includes:

  • the right to share in the company's profitability, income, and assets.
  • a degree of control and influence over company management selection.
  • pre-emptive rights to newly issued shares.
  • general meeting voting rights.
The Cologne tax court recently held that under German law, in the case of an over-the-counter short sale, the share purchaser would not become the beneficial owner of the shares to be delivered at a later stage at the settlement of the purchase agreement.

It remains to be seen just how the UK is affected by the developing Cum-Ex investigation. In the UK, the issue of beneficial ownership of shares was addressed in J Sainsbury Plc v O’Connor [1990], in which Millett J said beneficial ownership was “more than equitable ownership. It requires more than the ownership of an empty shell bereft of those rights of beneficial enjoyment which normally attach to equitable ownership.


WEBINAR: The Cum-Ex Files: Taking a close look at all aspects of Europe’s biggest-ever tax investigation

30th September 2020

The response of enforcement agencies to Cum-Ex was analysed in depth during Rahman Ravelli’s online event examining the rapidly-developing, Europe-wide tax investigation.

Watch Recording


"Cum-ex Trading Scandal Explained"

By Syedur Rahman

Before you continue to YouTube


Cum-Ex / German Tax Scandal Related News & Articles:

LAWYER MONTHLY: (10/02/2021) Joshua Ray assesses the prospect of criminal or civil legal action in the US regarding Cum-Ex for Law360... read more.
SECURITIES FINANCE TIMES: (04/02/2021) Senior Partner Aziz Rahman tells Securities Finance Times what he expects to happen regarding Cum-Ex in 2021... read more.
LAWYER MONTHLY: (20/01/2021) Legal Director Syed Rahman tells Lawyer Monthly the current state of Cum-Ex investigations... read more.
FEATURED NEWS: (20/01/2021) Rahman Ravelli case brings clarity to post-Brexit extradition... read more.
FEATURED NEWS: (19/01/2021) Legal Director Syed Rahman challenges post-Brexit UK- Europe extradition... read more.
FEATURED NEWS: (15/01/2021) With two Britons charged in Denmark over Cum-Ex trading, Syedur Rahman of financial crime specialists Rahman Ravelli warns that many more may need to prepare for investigations into their involvement in the controversial share trading practice.... read more.
BLOOMBERG: (01/12/2020) Senior Partner Aziz Rahman tells Bloomberg about a likely explosion of litigation between companies as Cum-Ex investigations progress.... read more.
LEGAL ARTICLE: (24/11/2020) Syed Rahman of Rahman Ravelli details the main points from the European Securities and Markets Authority report on withholding tax schemes.... read more.
BLOOMBERG: (03/11/2020) Senior Partner Aziz Rahman outlines the latest developments in Cum-Ex investigations to Bloomberg... read more.
SECURITY LENDING TIMES: (26/10/2020) Legal Director discusses authorities looking closely at past legal advice given in relation to Cum-Ex... read more.
LAW 360: (02/10/2020) Legal Director explains to Law 360 why investigations into Cum-Ex are gathering pace... read more.
FRAUD INTELLIGENCE: (27/08/2020) Legal Director outlines the scale, origins and implications of the Cum-Ex scandal to Fraud Intelligence... read more.
THOMPSON REUTERS (26/05/2020) Legal Director discusses the dividend arbitrage challenges facing the European Banking Authority with Thomson Reuters... read more.
THOMPSON REUTERS (25/03/2020) A legal director at Rahman Ravelli was asked by Thomson Reuters to share his thoughts on the current Cum-Ex situation... read more.
BLOOMBERG (27/02/2020) ABN Amro Offices Raided by Police in Frankfurt Over Tax Scandal... read more.
FEATURED NEWS: (13/03/2020) Nicola Sharp considers the repayment problems faced by Martin Shields as a result of the huge tax scandal.... read more.
FEATURED NEWS (18/12/2019) German Cum-Ex case sees London banker facing an estimated $16M bill... read more
Author: Nicola Sharp - Legal Director at Rahman Ravelli.
BLOOMBERG (11/02/2020) London Banker Faces $16 Million Bill in German Tax Case... read more.
MONDAQ (18/12/2019) Germany: A Lawyer Has Been Arrested In Germany As Part Of The Developing Cum-Ex Scandal... read more
Author: Nicola Sharp - Legal Director at Rahman Ravelli.
FEATURED NEWS (05/12/2019) Senior Partner Aziz Rahman gave his thoughts on the developing Cum-Ex scandal and its implications to The Times recently... read more
Author: Azizur Rahman - Senior Partner at Rahman Ravelli.
FEATURED NEWS (27/11/2019) Senior Partner Aziz Rahman recently discussed the background to the Cum-Ex tax scandal and how those investigated should respond with Thomson Reuters... read more
Author: Azizur Rahman - Senior Partner at Rahman Ravelli.

Read more Cum-Ex related media coverage and news here.


Are you are looking for help or advice in relation to Cum-Ex?

If you are facing a national or international Cum-Ex investigation, you need assistance from those who can quickly discover the full situation on your behalf. By examining your position and the opinions of the investigators, we can give carefully-considered, expert advice on exactly what to do next. Rahman Ravelli's team of Cum-Ex Lawyers are expertly placed to help.

Rahman Ravelli has decades of experience in assessing the problems facing clients and devising the course of action that will gain the best possible outcome. We understand that the best way forward may not always be clear to clients who are facing an investigation. But we identify what that way is for you, and make sure the best steps are taken to protect your interests and your reputation.

Read more about our expertise in relation to Cum-Ex Investigations.

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Azizur Rahman

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Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.

Really stands out as the most competent and professional in the field by a country mile.
The Legal 500 2021

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