In the higher circles of the financial industry, cum-ex deals were once considered a watertight investment that promised secure returns.

But now it is clear: Those times are finally over.

The state is allowed to reclaim the profits from these transactions, even for acts that date back a long time and are already statute-barred, at least from a tax point of view.

This was determined by the Federal Constitutional Court in a groundbreaking decision on Friday.

Corinna Budras

Business correspondent in Berlin.

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In this specific case, it is about 176.5 million euros, which the private bank MM Warburg has to repay to the state.

The Bonn Regional Court had ordered this in criminal proceedings in connection with cum-ex transactions.

According to the findings of the criminal court, the bank participated in cum-ex transactions between 2007 and 2011, and the amounts gained from them must therefore be repaid.

The Federal Constitutional Court had no objections to this either, although the legislature had to use a trick: In December 2020, the black-red coalition changed the criminal law in such a way that confiscation in the event of serious tax evasion is still possible even if the tax claims for repayment already exist are statute barred.

This was explicitly aimed at skimming off profits in the cum-ex process, which has been proving difficult for some time.

Such an approach is normally met with great concern, as it violates the ban enshrined in the Basic Law that criminal norms may not be imposed retrospectively.

However, the constitutional judges have now ruled that this is exceptionally permissible because of “overriding concerns of the common good”.

The decision is another milestone in the long-term process of dealing with the complicated cum-ex deals in which a number of banks were involved in the early 2000s.

The crux of these stock trades around the dividend record date was that the securities were resold between multiple parties.

A tax on the dividend payment that had only been paid once could be reimbursed several times without the tax authorities noticing it for a long time.

In 2012, a change in the law finally removed the basis for these transactions.

Since then, the state has been struggling with the criminal and financial processing of these cum-ex deals.

So far, there have only been a few convictions against the bankers involved, and the tax authorities have only recovered a fraction of the estimated damage of around 7 billion euros.

But it shouldn't stay that way.