Banking giant Citigroup has today confirmed that it is tied up in a lengthy legal dispute with the German tax authorities regarding accusations linked with dividend stripping.
Dividend stripping, or cum-ex trading, involved using a now closed legal loophole to claim tax credits for both buyers and sellers of shares by buying shares just before their dividends expire and then selling them on straight away.
German daily newspaper Handelsblatt reported today that the German tax authorities could be clawing back a significant sum in back taxes, although this is not something the bank has confirmed.
A Citigroup spokesperson said: "Citi provides settlement services for the trading of equities in markets around the world, including in Germany. Citigroup Global Markets Deutschland (CGMD) firmly believes that it is not liable for any tax as a withholding agent in relation to the so-called cum-ex activity. CGMD did neither place nor execute any sell or buy orders in the market on behalf of clients. CGMD acted purely as settlement agent. CGMD will of course fully cooperate with the tax authorities."
Bafin, Germany's financial watchdog, has declined to comment on the issue.
However, Reuters reported that Bafin is currently investigating 1,800 lenders in the country to see if they took advantage of dividend stripping.