Arrest in dividend stripping investigation
The Dutch Fiscal Intelligence and Investigation Unit/ Service (FIOD) arrested a 53-year-old man from the municipality of Aerdenhout on Tuesday, June 6. He is suspected of actually leading the deliberate filing of incorrect dividend tax and dividend stripping declarations resulting in over 4 million euros being wrongfully paid out by the Dutch tax authorities. His home and office were searched. The office of his tax advisor was also searched.
Serious form of white-collar crime
The Dutch Public Prosecutor's Office sees dividend stripping as a serious form of organized white-collar crime. By using clever non-transparent transactions, the treasury is harmed to the tune of hundreds of millions of euros every year. The University of Mannheim, in cooperation with research network Correctiv, has launched a study and estimates that 141 billion in dividend tax was wrongfully refunded in Europe in the period 2000-2020. Of this 141 billion, 26 billion would come from the Dutch treasury. The Dutch Public Prosecutor's Office has had this type of fraud in its sights for several years.
Three criminal investigations
Three criminal investigations into dividend stripping have been ongoing for some time under the direction of the Office of the Public Prosecutor. The Prosecutor's Office is carefully investigating a number of major cases and is unable to provide more information on the substance of these cases at this time.
There are several forms of dividend stripping, with the common denominator being the wrongful reclaiming of dividend tax. Dividend tax (15%) is withheld from dividend payments by Dutch companies. The law and tax treaties determine who is entitled to a dividend tax refund and what conditions must be met. Several CumEx cases are pending abroad in which the same dividend tax was wrongfully reclaimed by several parties.
This investigation looks at a CumCum case, where shares are temporarily moved for a short period around the dividend payment to a party that has a better dividend tax position. Specifically, a foreign bank that is not entitled to a full refund of dividend tax temporarily moves the shares on which the dividend is paid to a foreign pension fund that is entitled to a refund of dividend tax. The foreign banks and the pension fund make use of all kinds of complicated contracts that ensure that the price risk on the shares remains with the foreign bank and therefore not with the foreign pension fund, and that the ownership relations are concealed. Agreements are also made regarding the distribution of the reclaimed dividend tax.