Author: Azizur Rahman 15 March 2023
Cum-Cum trading is a practice that involves shareholders moving stock to someone in another country in order to avoid paying a dividend tax.
The name Cum-Cum comes from the Latin for “with-with’’. While Cum-Cum is closely associated with Cum-Ex – which involves the transfer of shares to enable multiple tax rebate claims – it is a different activity.
In Cum-Cum transactions, a person who is not resident in the same country as the company in which they hold shares transfers the shares to someone based in that country.
This is done before a dividend is set to be paid on the shares. The shares are then returned to the original owner after the dividend has been paid.
This is done to exploit the different tax regulations that apply to resident and non-resident taxpayers.
To give an example of how this fraudulent trading scheme works:
The majority of Cum-Cum transactions involve this practice of securities lending - where the owner of shares or bonds transfers them temporarily. There is a variation of this that sees the two parties entering into a non-cash lending agreement.
In this situation, the bank borrows the shares from an investor and agrees to return shares of the same quantity, quality and type upon termination of a security loan, in a way that enables the investor to obtain a tax-free dividend on the shares.
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.