Cum/Cum – Transactions
Criminal tax defence in Frankfurt and across Germany
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Tax treatment of Cum/Cum transactions
On 9 July 2021, the German Federal Ministry of Finance (BMF), in coordination with the highest tax authorities of the Länder, published principles on the tax treatment of Cum/Cum transactions. These guidelines are pivotal for the practical handling of such structures under German tax law. For an overview of our services, see our practice areas in criminal defence.
If you are confronted with allegations of tax evasion, VAT fraud or other tax-related offences in Germany – including situations comparable to those described on this page – you should promptly consult our English-speaking criminal defence solicitors in Frankfurt with particular expertise in tax evasion and criminal tax law and, where appropriate, also in white-collar crime and corporate investigations.
For a confidential initial assessment of your situation and the development of a tailored defence strategy, you can reach us on +49 69 710 33 330 or by email at kanzlei@dr-buchert.de.
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Definitions
2.1 Cum/Cum transactions
A Cum/Cum transaction is a share transaction in which both the obligation and transfer of title are concluded with dividend entitlement. In practice, the acquirer obtains civil-law ownership of the shares before or at the latest on the dividend record date.
2.2 Cum/Cum arrangements
These arrangements typically aim to transfer foreign-held shares to a German taxpayer entitled to impute withholding tax shortly before the record date, in order to avoid a final burden with German capital gains withholding tax.
2.3 Structured securities lending
This category comprises securities lending where shares are lent to a borrower so that tax advantages arise through (perceived) relief from withholding tax. The design often targets the creation of deductible expense surpluses at the borrower. For related issues in white-collar contexts, visit our page on fraud and white-collar crime defence.
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Starting position for non-residents
Non-resident taxpayers receiving German-source dividends are subject to a withholding tax of 25%. Due to double taxation treaties, the final burden is frequently 15%.
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Cum/Cum arrangements involving non-residents
Non-residents may avoid a final withholding-tax burden by transferring their German shares to an imputation-entitled German taxpayer before the record date and retransferring them after the payout. Different transactional forms can be used, including securities lending and spot transactions. If you are affected, our team of English-speaking criminal defence lawyers in Frankfurt can advise swiftly.
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Substantive assessment of Cum/Cum arrangements
As a rule, assets are attributed to the civil-law owner. In Cum/Cum structures, however, beneficial ownership may not pass due to contractual stipulations (e.g., fixed resale obligations, risk allocation, dividend substitution). This leads to distinct tax consequences.
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Tax consequences of Cum/Cum arrangements
The recipient of shares in a Cum/Cum set-up is not regarded as the tax shareholder, meaning they are not entitled to imputation or refund of withholding tax. For background on tax-offence defence, see our page on tax evasion defence.
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Illustrative structures and their tax effects
7.1 Securities lending
In Cum/Cum structures based on securities lending, shareholders lend their shares short-term to a German borrower entitled to imputation. The borrower receives the net dividend and pays a compensation amount to the lender.
7.2 Spot transaction
In a spot transaction, a non-entitled shareholder sells shares shortly before the record date to an entitled German purchaser, likewise aiming at withholding-tax reimbursement.
7.3 Repo and pension transactions
In repo/pension transactions, dividend-bearing shares are transferred to domestic banks, which receive the distribution and forward the net dividend and a compensation payment to foreign shareholders.
7.4 Investment funds
Historically, certain investment funds benefited from corporate-tax exemptions until the 2018 reform. Subsequent withholding-tax claims or refunds may depend on the accuracy of statements about the fund’s activity.
Criminal-law implications of Cum/Cum transactions
Depending on contribution and knowledge, the processes described may fulfil the elements of tax evasion in especially serious cases under Section 370(1) no. 1 in conjunction with (3) sentence 2 no. 1 AO. Our experienced general criminal defence team is ready to assist nationwide.
Conduct and incomplete disclosures
Criminal conduct may lie in incomplete or misleading disclosures when applying for credit or refund of withholding tax (KapESt), particularly where information relevant to assessing potential abuse of law (Section 42(1) AO) was not fully presented to the tax authority.
Duties to correct
Taxpayers may be required to correct prior returns if Cum/Cum facts were not stated correctly and a tax shortfall resulted. Liability can arise by omission (failure to notify and correct) under Section 153(1) no. 1 AO. For tailored defence in complex constellations, see our Cum-Ex & Cum-Cum defence page.
FAQ – Cum/Cum transactions
What is a Cum/Cum transaction?
A share transaction with dividend entitlement, where civil-law title passes before or on the record date.
Why is beneficial ownership crucial?
Without the transfer of beneficial ownership, there is generally no entitlement to imputation or refund of withholding tax.
What are the criminal-law risks?
Depending on contribution and intent, tax evasion allegations under Section 370 AO are possible. Immediate advice is vital from criminal defence lawyers in Frankfurt.
Must I correct incomplete disclosures?
Yes. Correction and notification duties may apply. Obtain early advice from our specialists in tax-offence defence.
Who is my first point of contact during investigations?
Initially, tax authorities and public prosecutors. Engage legal representation immediately via our contact page.
Contact us – Specialist criminal defence lawyers in Frankfurt and nationwide
- Dr. Caroline Jacob, Criminal Defence Lawyer, Specialist in Criminal Law
- Frank M. Peter, Criminal Defence Lawyer, Specialist in Criminal Law
- Of Counsel: Prof. Dr. Frank Peter Schuster
- Cooperation Partner: Tax Adviser and Former Tax Investigator Frank Wehrheim
Our law firm Buchert Jacob Peter has worked in Frankfurt am Main for over 25 years with experienced criminal defence lawyers. We represent clients throughout Germany.
📞 Phone: +49 69 710 33 330 · ✉️ E-mail: kanzlei@dr-buchert.de
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