Cum-cum-share deals: International investors in the focus of German criminal prosecution

Just recently public prosecutor’s offices across the nation shifted focus to cum-cum share deals and cum-cum/cum-ex variants involving primarily foreign investors.

In March 2025, the Frankfurt Higher Regional Court allowed the public prosecution to bring charges against former managers of Deutsche Pfandbriefbank for tax evasion through cum-cum transactions. The tax loss in the case of cum-cum is considered times higher than cum-ex. Financial experts have estimated additional taxes of approx. 28.5 billion EUR. No wonder new investigation units and task forces at public prosecutor level are being established dedicated to holding investor and intermediates liable.

Structure

There are many types of cum-cum structures ("dividend stripping"). In a nutshell, the idea is that foreign taxpayers avoid the full tax burden in Germany by transferring shares to domestic taxpayers shortly before the dividend record date. The domestic taxpayer is entitled to a capital gainer tax credit or refund, typically a local bank or other institution as domestic tax resident. Once the dividend has been paid out, it is transferred back to the foreign investor.

Legal background

By circular dated 9 July 2021 (BStBl 2021 I p. 995), the German tax authorities indicated to deem cum-cum-deals as abuse. A conviction for cum-cum by a criminal court has not yet taken place. The Frankfurt Higher Regional Court has only ruled on the initiation of court proceedings. In light of the cum-ex convictions individuals face long prison sentences and financial institutions face high fines and the confiscation of any profits.

Risks and opportunities for financial institutions

We expect that financial institutions involved in cum-cum deals will be targeted by public prosecutors and tax authorities. Companies should therefore be prepared for investigations. On the one hand, this includes preparation of all employees for dawn raids. On the other hand, consideration should be given to clarifying the facts through internal investigations and examining whether a voluntary disclosure is necessary to minimise the risks.

Key take-aways

Financial institutions should therefore:

• Check whether they were involved in cum-cum transactions;
• Carry out employee training on Dawn raids;
• Consider pro-active internal investigations to be prepared for criminal proceedings and especially to mitigate fines;
• Consider subsequent declarations / voluntary declarations.