AI-generated illustration of securities transactions and their tax-law review.
Correction duties, voluntary disclosure and defence in historical cum-cum cases
As of 9 September 2026 (first version 13 June 2026)
Few words currently cause as much unease in the tax departments of German banks and insurers as “cum-cum”. For a long time many market participants regarded these transactions as routine capital-market business. Meanwhile the Higher Regional Court (Oberlandesgericht) of Frankfurt am Main has ordered the opening of trial proceedings against former bank executives, and the tax authorities have significantly expanded their review of historical cases. For those affected, the pressing question is therefore what legal duties to act now exist. Errors in assessing and fulfilling these duties can have significant consequences under criminal law.
The starting point is a difference in tax treatment. A domestic investor may, subject to the statutory requirements, claim a credit or refund for tax (Kapitalertragsteuer) withheld from a dividend on German shares. A foreign investor often does not, or only in part. For the foreign investor a portion of the tax remains a final burden. Cum-cum is built on precisely this difference.
The underlying picture is simple. Shortly before the dividend record date a foreign investor “parks” its shares with a domestic partner entitled to a tax credit – usually a bank. The dividend now accrues to the bank, the tax is credited there, and shortly after the record date the shares travel back. The benefit is shared. What is shifted is not the tax itself but the entitlement to have it credited. In practice this came in several variants – securities lending, spot sales with repurchase, transfers by way of security – and the Federal Ministry of Finance, in its circular of 9 July 2021, also deals with variants at the level of the tax withholding itself. Cum-cum is therefore not a single scheme but a family of structures.
The published figures concern substantial amounts but rest on different foundations. In his model estimate updated in 2021, the Mannheim economist Christoph Spengel puts the tax revenue lost to cum-cum transactions in Germany between 2000 and 2020 at roughly EUR 28.5 billion. That is an academic estimate based on DAX dividends, not a loss established by any authority. The data actually gathered by the supervisor are set out in the Federal Government’s answer of July 2026 to a parliamentary question. In a survey by the financial supervisory authority BaFin, 54 credit institutions confirmed involvement in cum-cum transactions or classified themselves accordingly, together with 18 insurers and three reports from the securities sector. That is neither an admission of guilt nor a count of convicted banks. The financial burdens already incurred and potentially arising for the institutions, as evaluated by BaFin, including civil-law claims and with possible double counting, amount to roughly EUR 4.8 billion. That, too, is neither an established tax loss nor money received by the Treasury. No “recovery rate” can be calculated from these figures. The model estimate, reported burdens and banks’ provisions are not directly comparable for that purpose.
For the defence this is the most important distinction of all. Cum-ex involved short sales around the dividend record date at the end of which withholding tax was credited or refunded that had in fact never been withheld. The Federal Court of Justice (Bundesgerichtshof) classified this as tax evasion in its judgment of 28 July 2021 (1 StR 519/20). Claiming a credit for tax that was never withheld is a false statement. In cum-cum the dispute lies elsewhere. In the typical case involving tax credits, withholding tax was indeed withheld, and the questions are to whom the dividend is attributable for tax purposes, who was entitled to the credit, whether the structure amounts to an abuse of law under section 42 of the Fiscal Code (Abgabenordnung, AO), and whether the specific requirements for a credit were met. This is distinct from variants concerning the withholding of tax at source. That is not one legal question but a bundle of them. Cum-cum and cum-ex must therefore be distinguished carefully in any legal assessment.
In tax terms much depends on who is treated as the beneficial owner of the shares around the record date (section 39 AO). The tax authorities rely, among other decisions, on the judgment of the Federal Fiscal Court (Bundesfinanzhof, BFH) of 18 August 2015 (I R 88/13) on securities lending. On an overall assessment, beneficial ownership may exceptionally remain with the lender where the borrower receives only formal legal title. The BFH describes this as an “empty shell of ownership”.
In its judgment of 13 November 2024 (I R 3/21), published on 27 March 2025, the BFH refined the standard for a case involving shares transferred by way of security. What matters is whether the essential rights attached to the shares are legally and factually at the acquirer’s disposal. The mere fact that the acquirer does not exercise voting rights does not, on its own, prevent attribution. This helps taxpayers, because it limits an approach that infers an empty shell from the acquirer’s conduct alone. It is not, however, the end of the empty shell. Purely formal legal title still does not suffice, and the judgment concerns a specific set of facts from the 2006 tax year, not every cum-cum model. Above all, the BFH did not decide the question of abuse under section 42 AO. It referred the case back to the tax court and itself identified circumstances that may point to an abusive arrangement. Anyone who treats section 42 AO as settled is misreading the judgment. And it says nothing at all about sections 153 or 176 AO.
The Ministry of Finance circular of 9 July 2021 (Federal Tax Gazette I p. 995) has therefore not gone away. It remains listed in the Ministry’s list of applicable circulars dated 20 March 2026 (item no. 929). It has not been officially revoked. What is true is that blanket attribution criteria can no longer be maintained in their full generality after I R 3/21, particularly insofar as the tax authorities might make beneficial ownership depend solely on whether the acquirer actually exercises the rights attached to the shares. The circular binds the tax offices, not the courts, and in each individual case it must be examined which of the administration’s views remain compatible with the BFH’s case law.
Since 2016, section 36a of the Income Tax Act (EStG) has imposed additional requirements for crediting withholding tax, in particular a minimum holding period and a minimum exposure to the risk of changes in value, subject to its own exceptions. Section 42 AO continues to apply alongside it. For earlier years the provision says nothing – neither that the structures were permissible then nor that they were retroactively prohibited.
In purely tax terms the picture is thus more nuanced than the ministry circulars suggest. Those who write off the historical cases too quickly underestimate how much has moved on beneficial ownership. Those who regard them as won are overlooking section 42 AO.
The assessment under criminal law remains contested. This is illustrated by a case before the Hessian courts in which two instances reached opposite conclusions. By order of 12 February 2024 (6 KLs 1141 Js 23920/12), the Regional Court (Landgericht) of Wiesbaden declined to open trial proceedings against former executives of a credit institution. The transactions, it held, had been disclosed in the corporation tax returns and intent was lacking. The Higher Regional Court of Frankfurt am Main set that order aside on 10 December 2024 (3 Ws 231/24) and ordered the case to trial. In its assessment the returns had presented only fragments of the transactions. Precisely the circumstances that, in the tax authorities’ view, constitute the empty shell of ownership were missing. The court thus works with the figure of a return that appears complete but is not.
In its answer of 31 March 2026 to a question in the Hessian state parliament, the Hessian state government described the securities-lending transactions at issue as “cum-cum-like” – an indication that even the terminology is not self-evident. It commented only cautiously on scheduling, and the same document shows that this is not the only pending case of its kind in Hesse. None of this says anything about guilt or innocence. The Higher Regional Court affirmed sufficient suspicion for trial, nothing more.
The scope of disclosure is crucial. Taxpayers may generally choose a tax-efficient arrangement and put forward a legal view that differs from the tax office’s position. The facts relevant to taxation, however, must be declared completely and truthfully, and that includes facts whose legal significance is seriously in doubt where the tax office needs them for its own assessment. The precise extent of this duty is often clarified only in later court proceedings. The different decisions in Wiesbaden and Frankfurt show how contested that distinction can be.
Intent requires equally careful examination. A legal opinion that examines the actual facts, takes a clear position and whose conditions were in fact implemented can be weighty evidence against an intent to evade tax. It is not a guarantee, because what is ultimately examined is the personal culpability of each individual. A mere warning in the small print carries little weight. Conversely, however, someone who knew of a legal risk has not thereby necessarily accepted the evasion of tax as a possible consequence. Conditional intent (dolus eventualis) requires more than awareness of risk. Also, the mere act of obtaining several professional opinions does not in itself make anyone a suspect. It becomes critical where serious warnings are set aside and the search is solely for the desired result.
Section 153 AO is central to assessing existing duties to act. Paragraph 39 of the Ministry of Finance circular of 9 July 2021 makes notification and correction in cum-cum cases subject to the statutory requirements. These are an objectively incorrect or incomplete return, subsequent recognition before the assessment period expires, and a possible or actual understatement of tax caused by that error. A legal presumption that every cum-cum return is objectively incorrect does not apply across the board. A recommendation to file a precautionary correction or voluntary disclosure therefore cannot replace an assessment of the individual case.
Section 153(1) AO has three requirements that must be kept apart. The return must already have been objectively incorrect or incomplete when it was filed. The taxpayer must subsequently recognise this positively. Mere doubts or a “should have known” are not enough under the official application decree on section 153 AO. And the error must have led, or be capable of leading, to an understatement of tax, the notification being owed only until the assessment period expires.
The decisive argument hangs on this. Section 153(1) AO asks whether the return was objectively incorrect when filed. A later different legal view taken by the authorities or courts does not replace that assessment. For the defence, it is essential to establish which tax-relevant facts were disclosed fully and accurately. A legal view that was defensible at the time matters particularly to the separate assessment of culpability, but does not automatically exclude an objectively incorrect return. If the return was free of errors and the tax office alone subsequently made an assessment error, that error does not trigger a correction duty. The BFH decided such a case involving subsequent errors by the tax authorities in its judgment of 4 December 2012 (VIII R 50/10). But the argument carries only as far as the facts were actually complete. However defensible a legal opinion, it does not cure missing facts – and the completeness of the facts is exactly what the courts are arguing about. No general cum-cum immunity can be derived from VIII R 50/10.
A side glance at section 176 AO confirms the point without overstretching it. That provision protects the taxpayer’s legitimate expectations where an assessment is to be set aside or amended because, for instance, the case law of a supreme federal court that the tax authority had previously applied has changed, or because a general administrative regulation has been declared incompatible with the law by a supreme federal court. It has its own narrow requirements. A mere change of view by the Ministry does not satisfy them, and the provision has no direct bearing on criminal liability. But it reveals the statute’s underlying value judgment regarding finality. Whoever relied on the supreme-court position prevailing at the time is to be protected under certain conditions when assessments are amended. This is an argument against hastily deriving a criminally sanctioned duty of correction from section 153 AO merely because the administration has changed its mind, though it does not legally preclude such a duty entirely. And the last word on the interpretation of tax law belongs to the Federal Fiscal Court, not to the Ministry.
The other side must not be ignored, and it is more layered than an either/or picture suggests. Where decisive facts were withheld – the overall concept of the transactions, compensation payments, the agreed retransfer – section 370 AO comes into play from the outset. Section 153 AO does not thereby drop out. Even someone who filed an incomplete return without fault at the time and recognises the omission only later is obliged to notify. If that notification is deliberately omitted, the omission itself can become an independent criminal charge. And even if conditional intent could already be attributed to the filer at the time, the administration’s view is that this does not exclude a subsequent duty of correction. In such situations a correction under section 153 AO or a carefully prepared voluntary disclosure under section 371 AO may be an urgently required way to limit legal damage.
Everything said here concerns section 153(1) AO. The newer subsection 4 of the provision, which attaches to audit findings implemented in final assessments, is a separate rule with its own transitional provisions. Whether and for which periods it covers historical cum-cum cases at all is a separate question and is not dealt with here.
Whether a notification under section 153 AO is owed therefore cannot be answered across the board. It depends on what was actually declared at the time. Once the statutory duty is established, it must be fulfilled without undue delay. That means without culpable hesitation, not immediately. The time needed to prepare the detailed correction must be distinguished from the duty to notify the recognised error without undue delay. Notification that is already required must not generally be postponed until the reconstruction of the facts is complete.
Anyone who fears their own criminal liability can rely on the specific safeguards governing the relationship between tax proceedings and criminal proceedings (section 393 AO). Those safeguards do not generally remove statutory tax duties. The right to remain silent as a suspect in criminal proceedings must be distinguished from those duties. Where evasion was already committed with conditional intent, the application decree also takes account of the protection against self-incrimination. Under paragraph 5.2, notification is still considered timely for as long as a reasonable period must be allowed to prepare a voluntary disclosure under section 371 AO.
The differences between the three routes are equally clear. A notification under section 153 AO fulfils a statutory duty in respect of errors recognised after the fact. A voluntary disclosure under section 371 AO can lead to immunity from punishment for intentional evasion already committed, but requires compliance with its substantive and timing conditions. Section 378(3) AO governs the route for reckless understatement. Which declaration is filed determines the legal consequences, the grounds that bar immunity, and the payment obligations. A premature “precautionary correction” can create additional risks if the declaration that is legally required has not been identified beforehand. An ineffective voluntary disclosure can complicate the defence without securing the intended immunity from punishment. There is no guarantee of success on any of the three routes.
An orderly assessment begins with the returns filed at the time and their underlying records. From a defence perspective, the facts, the law and individual responsibility need to be considered together.
The ministry circulars, commentaries and legal opinions relevant when the return was filed should be preserved for that purpose. They help establish whether the position taken was defensible at the time. The facts must then be distinguished from their legal assessment. Where all relevant facts were disclosed, a different legal assessment alone does not establish a criminal allegation. Missing facts, however, cannot be replaced by a defensible legal opinion.
Before any further declaration is filed, it must be established whether section 153, section 371 or section 378(3) AO applies. That assessment must proceed promptly and take account of the applicable duties to act. Doubtful questions should also be addressed openly in current and future returns. An open presentation of divergent legal views in the qualified free-text field (section 150(7) AO) can counter any accusation of concealment. For precisely defined transactions not yet carried out, a binding ruling (section 89(2) AO) may be considered. Neither replaces a complete and truthful declaration of the facts, nor offers absolute immunity regarding the tax matter itself, but they can protect against the charge of having hidden the facts.
A lawyer experienced in criminal tax law should therefore be involved early. The position and the possible consequences must be clarified before a declaration is made to the tax office, without delaying compliance with an existing statutory duty.
Alongside the tax assessment, judicial impartiality can also be significant for the defence in dividend cases. In large case complexes the same chambers frequently sit in judgment on many participants one after another, and earlier judgments not infrequently contain findings about persons who are indicted only later. In a cum-ex case, our firm represents a client on whose behalf Dr. Tobias Rudolph has lodged an application with the European Court of Human Rights alleging bias through prior involvement (no. 25095/23). As of 9 September 2026 the outcome is open. That case will not decide the tax treatment of cum-cum transactions. It concerns a question that matters to every participant in a mass proceeding. More on this in our article on bias through prior involvement.
The order opening trial proceedings in the Wiesbaden and Frankfurt case shows that the disputed tax questions are also being examined by the criminal courts. With billions at stake, a tax administration that is expanding its technical and staffing capacity for reviewing withholding-tax cases, and a visible split between the Regional Court and the Higher Regional Court, the criminal courts will have to engage with cum-cum at length. Whether and how far the duty of disclosure extended in those historical constellations, and when awareness of risk tips over into conditional intent, could play a role in future appellate clarifications by the Federal Court of Justice. Until then, unprepared steps in the context of voluntary disclosures remain risky – as does the failure to fulfil statutory duties.
Whether a notification or correction is required today, and what defence options are available, depends significantly on what was declared at the time. A careful reconstruction of the facts must therefore be combined with an assessment of the legal duties to act. Premature declarations should be avoided, as should any failure to fulfil an existing duty.
The development of tax attribution is addressed in the BFH judgment of 18 August 2015 – I R 88/13 and in the BFH judgment of 13 November 2024 – I R 3/21 (full text, bundesfinanzhof.de) and its press release no. 020/25 of 27 March 2025. The limits of the correction duty are also addressed in the BFH judgment of 4 December 2012 – VIII R 50/10 (bundesfinanzhof.de).
The tax administration’s position is set out in the Federal Ministry of Finance circular of 9 July 2021, Federal Tax Gazette I p. 995 (tax treatment of cum/cum transactions, para. 39) and list of applicable circulars of 20 March 2026, item 929. The duties discussed here are based on the Application decree on section 153 AO and section 153 AO including subsection 4 (official Fiscal Code handbook 2025) and the Fiscal Code (Abgabenordnung) and section 176 AO (gesetze-im-internet.de). The additional statutory requirements for tax credits are contained in Section 36a EStG (gesetze-im-internet.de).
The account of the criminal proceedings draws on the order of the Higher Regional Court of Frankfurt am Main of 10 December 2024 – 3 Ws 231/24 (Hessian case-law database). It followed the order of the Regional Court of Wiesbaden of 12 February 2024 – 6 KLs 1141 Js 23920/12. Further procedural information appears in the Hessian state government’s answer of 31 March 2026, printed paper 21/3615. The comparison with cum-ex is based on the Federal Court of Justice judgment of 28 July 2021 – 1 StR 519/20 (cum-ex).
The figures and information about the authorities’ work are drawn from the Federal Government’s answer of 21 July 2026, printed paper 21/7322 (BaFin survey), Spengel, Estimation of the Tax Revenue Loss Caused by Cum/Cum Transactions, update of 14 October 2021 (University of Mannheim) and the Hessian Ministry of Finance press release of 14 July 2026 (withholding-tax investigation centre, KICC).
Further German-language reading includes Sunde in NZWiSt 2024, 392, Rau in DStR 2021, 6 and Rübenstahl/Loy in ZWH 2024, 281. Additional references are Haselmann/Holle in DStR 2021, 2425, Hölters in NZWiSt 2024, 396, Beyer in NWB 44/2021, 3244 and Spengel in DB 2016, 2988.
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