Greater clarity in wake of cum-ex fraud

Here is how the cum-ex scheme worked: shares would be traded to and fro around the ex-dividend date so quickly that it was unclear to whom they belonged. Multiple participants would then submit several claims for reimbursement of a tax that had only been paid once. This cost the countries concerned billions of euros. 

In response, their authorities and courts became very cautious with regard to reimbursing tax. Switzerland was also affected by this, even though steps had been taken to prevent this kind of fraud here at an early stage. Foreign investors who held Swiss shares or bonds often needed to fill out long forms and provide extensive proof in order to receive the tax refunds to which they were legally entitled. In many cases, uncertainty over whether they would get their money back at all persisted for a long time. 

This was bad not only for the investors themselves, but also for Switzerland’s appeal as a place to do business. After all, who wants to invest in a country where they cannot be sure that they will ever get back the 20% tax they paid on their returns? 

Switzerland’s Federal Supreme Court has now ruled in a landmark case that a Danish financial institution that had invested in Swiss government bonds is indeed entitled to reclaim the withholding tax on them. The Court noted that the institution itself bore the investment risk and was not obliged to pass on coupons and taxes to third parties. 

This decision sends a positive signal to anyone wishing to invest legitimately in Swiss securities. It restores an element of legal certainty and gives grounds to hope that the situation for investors will improve further.