Seven suspected cases of withholding tax refund fraud sent to prosecutors

Seven suspected cases of fraudulent refund claims related to corporate withholding tax have been passed to the public prosecutor’s office since 2020, Finance Minister Gilles Roth has said.

In certain cases, companies can claim a refund of withholding taxes they paid in connection with their investments in other companies.

The Luxembourg tax office has received more than 2,200 applications for such refunds since 2020, Roth said last week in response to a written parliamentary question from Pirate Party deputy Sven Clement.

Of these applications, just over 10% – 261 requests – were rejected, totalling €9.4 million, Roth said.

Seven cases were referred to the prosecutor’s office over suspected fraud, the minister added, but he did not provide any further detail on whether criminal proceedings had been brought, the files had been dismissed or were still under investigation.

The disclosure comes as countries across Europe lost billions of euros from a withholding tax refund fraud known as CumEx, through deals which were designed to trick governments into refunding withholding taxes on share dividends multiple times.

The CumEx fraud involves a network of traders who lend each other shares in companies just before a dividend payment so that each of them can fraudulently benefit from refunds on withholding taxes.

The exact amount lost to the Luxembourg state through CumEx fraud is unknown, then-Finance Minister Yuriko Backes said back in 2022.

(This article was originally published by the Luxemburger Wort. Translation and editing by John Monaghan)