Dusseldorf First the investigators came, then the mail from the tax office: The major Swedish bank SEB and its German subsidiary DSK Hyp are under massive pressure because of questionable share transactions.
The prosecutors investigate possible criminal offenses. The institute is said to have been involved in potentially unlawful cum-ex and cum-cum deals, which, from the judiciary’s point of view, aimed at an unlawful refund of capital gains taxes. The additional demands on the SEB Bank increase dramatically.
While 80 public prosecutors, tax investigators and police officers searched the SEB offices in Frankfurt on Wednesday, the Frankfurt tax office received a new decision. Thereafter, the German SEB subsidiary DSK Hyp AG is to repay a further 511 million euros. The bank had previously spoken of possible claims amounting to 425 million euros. Now it is a total of 936 million euros, plus interest.
It doesn’t have to stay that way. “The total withholding tax in the customer business of DSK Hyp in the years 2008 to 2015 amounts to around 1.5 billion euros”, the SEB announced on Wednesday. “It cannot be ruled out that there will be further reclaims and that this will have negative financial effects on SEB. If you only add the accruing interest, six percent per year, the amount to be paid could rise to more than two billion euros.
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Cum-ex deals were designed to steal taxes that had not been paid. Those involved traded shares in a circle – often in the billions. The deals were characterized by large-scale short sales. In addition to the actual owner, the buyer of the shares also had capital gains tax reimbursed.
In the end, there were two refunds and only one tax actually paid. The SEB subsidiary is accused of aiding and abetting these transactions. She is said to have covered the short sellers with shares.
Treasury has tightened the pace
However, SEB was also active in the cum-cum business, which usually involved the reimbursement of taxes from foreign shareholders who are not entitled to do so themselves. In order to circumvent this rule in German tax law, foreign shareholders briefly pass on their papers to German institutes by way of loan or purchase and repurchase.
Such designs were common in the money industry for a long time. The Federal Ministry of Finance, however, described them as generally inadmissible in a letter dated July 9, 2021. The financial world therefore expects a new wave of persecution. The tax damage caused by cum-cum deals is said to be much higher than the damage caused by cum-ex deals. The latter is estimated at twelve billion euros.
The SEB is combative and announced to defend itself against the payments: “The bank rejects these reclaims resolutely and will contest them.” In its annual reports the bank speaks of an “unforeseeable application of law”. The bank is “based on legal analyzes from external sources of the opinion that the recovery of the tax authorities violate both EU law and German law”.
The institute is advised by the law firm Clifford Chance, which has many years of experience in cum-ex transactions. However, their reputation is not impeccable: The tax chief of Clifford Chance is accused of preventing punishment. He is said to have obstructed investigations into the ABN Amro case.
More: Everyone versus everyone – How Cum-Ex participants cover each other with complaints