With its judgment, the Federal Fiscal Court clears the last doubts about the legality of cum-ex transactions.
(Photo: dpa)
Cologne The highest German tax court has ruled: Those involved in share group transactions cannot claim a refund of capital gains tax. The Federal Fiscal Court (BFH) announced on Tuesday that it had dismissed the lawsuit brought by the US fund KK Law against the German tax authorities.
With its judgment, the BFH rejects the model, which aimed to have a withholding tax that has been withheld be credited or paid out twice or even several times by the tax authorities. Trading shares around the distribution date with (cum) and without (ex) dividends made no economic sense. It only served to fool the tax authorities into believing that there were several shareholders and those entitled to reimbursement.
The specific case concerned a tax refund of 27 million euros. Several parties were involved in the short-term share trading with a financial volume of several billion euros.
“The risk of realizing the reimbursement claim was transferred in full to a Luxembourg investor fund set up by a bank against the promise of a short-term return of more than 15 percent,” writes the court.
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This is the Sheridan fund, which was sold to wealthy private customers and institutional investors by the Swiss bank Sarasin. The promise of returns of around 15 percent could not be kept, and in some cases even the capital invested was lost.
Swiss bank under fire
As a result, there were numerous civil law disputes between the investors and the bank. For example, customers Carsten Maschmeyer, Clemens Tönnies and Erwin Müller argued with the institute about the repayment of the investment.
The fund had already failed in the lower court – the Cologne Finance Court – with its lawsuit. The verdict of the court president Benno Scharpenberg sounded like a general settlement with the cum-ex trade. “Anyone who wants money back from the state for a tax must provide proof that they have previously paid this tax,” said Scharpenberg.
“Even if this was repeatedly claimed, there was no legal loophole that would have allowed multiple refunds of taxes,” said the finance judge. Even the assumption that there can be several owners of one and the same share is absurd. Over the years, multiple reimbursements have fed up to an unmanageable number of those involved. “We are dealing with a brilliant criminal achievement here,” said Scharpenberg.
According to the judgment of the BFH, one thing is finally clear: the plaintiff fund KK Law is only entitled to a refund of withholding tax if it is a creditor of the capital gains in accordance with national tax law and the withholding tax has been withheld and paid. Other funds can also bury hope for tax refunds. The US fund KK Law was just part of a group that wanted to steal more than 450 million euros.
The tax court also pointed out that the Federal Court of Justice classified a comparable case as criminal tax evasion.
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