Deutsche Bank wins dismissal of Warburg’s cum-ex suit
24 September 2020 Frankfurt
Image: f11photo/Adobe.com
Deutsche Bank is not liable to reimburse a €167 million tax bill related to cum-ex deals paid by MM Warburg, Frankfurt's regional court has ruled.
The Hamburg-based private bank cannot hold Deutsche Bank, in its capacity as a custodian, jointly liable for unpaid capital gains taxes related to cum-ex transactions over a decade ago.
"The Warburg private bank is the original tax debtor and therefore has to bear the taxes primarily in relation to Deutsche Bank," the court decided yesterday in dismissing the suit.
Germany’s largest bank acted as the custodian of the share seller, ICAP, in around 400 share transactions by Privatbank Warburg between 2007 and 2011 around the dividend date.
Since Warburg bought the shares with ‘cum’ dividend entitlement before the respective dividend cut-off date, but only received them after the dividend cut-off date without ‘ex’ dividend rights, compensation was credited to it.
Warburg did not pay any capital gains tax for these trades but had it offset against its corporate income tax.
The Hamburg tax office later demanded capital gains tax of around €167 million from the private bank.
In response, Warburg demanded compensation from Deutsche Bank for these tax debts claiming it to be a joint-debt compensation. The Frankfurt court disagreed.
Warburg’s trading activity the subject of criminal proceedings in Bonn in March, which culminated in two British traders being found guilty on multiple counts.
The first was convicted of tax evasion in 10 cases and aiding and abetting tax evasion in another case. He was handed a suspended jail sentence of one year and 10 months.
The second defendant was found guilty of aiding and abetting tax evasion and also given a suspended sentence.
SLT understands that an appeals process is already underway and will be heard early next year.
Elsewhere, the next cum-ex criminal case is set to begin on 20 October when Hanno Berger, a prominent German tax lawyer, will face fresh accusations of facilitating the dividend arbitrage transactions that were under the spotlight in Bonn.
The Hamburg-based private bank cannot hold Deutsche Bank, in its capacity as a custodian, jointly liable for unpaid capital gains taxes related to cum-ex transactions over a decade ago.
"The Warburg private bank is the original tax debtor and therefore has to bear the taxes primarily in relation to Deutsche Bank," the court decided yesterday in dismissing the suit.
Germany’s largest bank acted as the custodian of the share seller, ICAP, in around 400 share transactions by Privatbank Warburg between 2007 and 2011 around the dividend date.
Since Warburg bought the shares with ‘cum’ dividend entitlement before the respective dividend cut-off date, but only received them after the dividend cut-off date without ‘ex’ dividend rights, compensation was credited to it.
Warburg did not pay any capital gains tax for these trades but had it offset against its corporate income tax.
The Hamburg tax office later demanded capital gains tax of around €167 million from the private bank.
In response, Warburg demanded compensation from Deutsche Bank for these tax debts claiming it to be a joint-debt compensation. The Frankfurt court disagreed.
Warburg’s trading activity the subject of criminal proceedings in Bonn in March, which culminated in two British traders being found guilty on multiple counts.
The first was convicted of tax evasion in 10 cases and aiding and abetting tax evasion in another case. He was handed a suspended jail sentence of one year and 10 months.
The second defendant was found guilty of aiding and abetting tax evasion and also given a suspended sentence.
SLT understands that an appeals process is already underway and will be heard early next year.
Elsewhere, the next cum-ex criminal case is set to begin on 20 October when Hanno Berger, a prominent German tax lawyer, will face fresh accusations of facilitating the dividend arbitrage transactions that were under the spotlight in Bonn.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
