Citigroup says being investigated in Germany over dividend trades
Citigroup is being investigated by German tax authorities over an equity trading strategy known as "cum-ex," or "dividend stripping," the U.S. bank said on Tuesday.
Dividend stripping involves buying a stock just before its dividend rights expire, then selling it, taking advantage of a now-closed legal loophole that allowed both buyer and seller to claim tax credits.
"Citi's Germany unit has never been trader, broker or structurer of cum-ex trades," a Citi spokesman in Frankfurt said.
He said the bank did act as a settlement agent for clients' trades, but only supplied its infrastructure had no knowledge of the actual trades being carried out.
German daily Handelsblatt corrected a March 22 report that said the Frankfurt tax office had asked for 706 million euros ($791.07 million) in back taxes from Citigroup over dividend-stripping transactions.
"This sum is no longer a topic of discussion between the bank and the German tax authorities and no tax or payment demand has been made by the authorities," the magazine said. A number of large banks have already paid hundreds of millions of euros in back taxes and tens of millions to settle disputes with German authorities.