The Cum-ex Case: A Look at Germany

Abstract

This paper focuses on a particular form of stock-market trades around ex-dividend days, so-called “cum-ex” transactions, which have resulted in major revenue losses due to illegitimate tax refunds in Germany and other European nations. Until 2012, the loophole in the German withholding tax scheme made it possible for cum-ex traders to receive withholding-tax certificates without prior withholding-tax payment. Because a certain category of investors might use the tax certificates to gain a tax exemption, this opened up the prospect of a particular form of tax arbitration. It was not until 2018 that a cross-border investigation team called the Cum-Ex Files revealed the scandal to its full extend. This paper will mainly focus on the cum-ex scandal in Germany since the literature on the topic is very limited.

Keywords

• tax fraud
• dividend taxes
• cum-ex trading
• tax evasion
• withholding tax