Author: Salomé Lemasson 29 July 2021
Germany’s highest criminal court has ruled that claiming capital gains taxes that were not withheld via dividend trading arrangements – a practice known as Cum-Ex - constitutes criminal tax evasion.
The Federal Court of Justice in Germany has rejected appeals against a lower court ruling from March 2020, which found that Cum-Ex deals were criminal tax evasion. The ruling had resulted in suspended jail sentences for two British former bankers.
In a statement, the court said: "The Federal Court of Justice confirmed the opinion of the lower court that the assertion of capital gains tax that was actually not withheld against the tax authorities on the basis of such Cum-Ex transactions constitutes the criminal offence of tax evasion.’’
The ruling may boost Germany’s attempts to recover some of the tens of billions of euros it lost to Cum-Ex. The practice involved company shares being sold or swapped just before a dividend pay-out, to give the impression of numerous owners. Various parties involved would then claim tax rebates.
Salomé Lemasson, head of EU business crime and regulatory practice at Rahman Ravelli, told Law360 that the "landmark" decision confirms Germany’s “aggressive enforcement strategy and determination to recover lost funds’’ and emphasises it is "one of the most active countries in bringing sanctions against banks and individual brokers in relation to Cum-Ex trading."
She added that the decision sets a strong precedent for future prosecutions by lower courts in Germany and will assist in uncovering further Cum-Ex related cases.
Salomé's comments featured on Law360. (Subscription required)
Of Counsel Head of EU Business Crime and Regulatory Practice Group
Salomé works on Europe’s most challenging and significant white-collar and complex crime cross-border cases. She leads Rahman Ravelli’s EU Business Crime and Regulatory Practice Group, representing and advising companies and individuals in high-stakes investigations.