In late March, French prosecutors raided five of the largest banking institutions, including Société Générale and BNP Paribas, as well as the Paris offices of HSBC Holdings, Natixis and units of BNP Exane.
An investigation is underway to find out whether these banks are indeed involved in a series of tax evasion operations. They are suspected of using a “cum/cum trading” or “cum/ex trading” scam.
The history of investigations began in Germany in 2018 and spread to other countries, including USA, Great Britain, Denmark, Belgium, Austria.
A common feature of cum/ex schemes is that the parties agree to buy shares before the dividend is registered. But the settlement according to the agreement takes place already after the announcement of the amount of dividends, so the share is delivered without this income.
So, you can file multiple capital gains tax returns but pay the tax once. Tax authorities collect tax on dividends once, but refund it twice, paying amounts equivalent to this tax. Probably, the size of the fraud is estimated at 55.2 billion euros (in Europe).
According to prosecutors, banking institutions in France raided in March used a similar strategy. Shareholders transferred shares to non-resident investors abroad for a short period of time to avoid paying dividend tax.
A financial scandal of this scale has not been left without a trace and it is assumed that in Europe more and more institutions may be investigated for participation in the “cum/ex” scheme.