Deutsche Bank sued over $53mn tax bill

Bloomberg

M.M. Warburg & Co, a private bank under investigation in Germany over a series of controversial tax deals, has opened a new legal front by suing Deutsche Bank AG to pick up the bill.
Warburg filed a suit in Frankfurt in December to force Deutsche Bank to pay a 46 million-euro ($53 million) tax bill the company received over so-called Cum-Ex transactions, it said in a statement. The private bank says Deutsche Bank failed to transfer the taxes to revenue officials when it worked for the seller on a stock sale where Warburg was the purchaser.
The civil lawsuit expands the Cum-Ex worries for Deutsche Bank, which has always tried to stress it never participated as a seller or buyer in the trades. Prosecutors around the country are investigating the role of dozens of lenders and hundreds of bankers who handled the transactions, which took advantage of how Germany dealt with refunds on dividend payments.
Deutsche Bank said it say no basis for the allegations that Warburg “had distributed to the media.”
The bank agreed to pay 4 million euros to end a probe by Frankfurt prosecutors into cum-ex deals, people familiar with the case said in December. Cologne authorities are still looking into Deutsche Bank’s role in the transactions.
Cologne prosecutors are looking at Warburg as part of its larger Cum-Ex investigations. While Warburg is also contesting the multi-million-euro tax bill, the private bank can’t challenge tax authorities in court until an internal review at the agency is completed.
Instead, Warburg is suing Deutsche Bank to lay out in court that it acted legally, the bank said. “To speed up the clarification, to protect the good reputation of the bank and to preserve damages claims, Warburg has decided to rebut the allegations by legal actions,” the lender said.
Cum-Ex transactions took advantage of how Germany once handled tax refunds on dividends. The deals involved a type of short sale made just before a company was due to pay a dividend.
When German companies paid dividends at the time, they withheld about a quarter of the money to cover any taxes the shareholder might later owe. Shareholders received certificates from their custodian banks showing how much was deducted, and the amount could be credited against th-
eir tax bill or, if they owed no additional taxes, refunded.
In Cum-Ex transactions, short sales were set up in a way that led to double refunds of tax over the same set of shares, German authorities say.