British hedge fund manager Sanjay Shah has to pay back the equivalent of 1.2 billion euros (8.5 billion Danish kroner) in unlawful tax refunds from-ex transactions to Denmark. Shah failed in his appeal this week before the Supreme Court in Dubai, where he has lived for years. This means that an earlier ruling from last autumn is now legally binding.

Marcus Jung

Editor in business.

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After the announcement, Denmark's Tax Minister Jeppe Bruus reacted emotionally with a tweet and victory emojis on Twitter. In an interview with the Danish television station TV 2, the Social Democrat was more objective. "Of course, this verdict is good, but it will only help us if part of the money flows back into the state treasury, where it belongs."

Loss must "never be repeated"

According to him, Denmark is unlikely to regain the total damage of the equivalent of 2 billion euros incurred by 2015 as a result of the-ex share transactions. All in all, it is a very large loss that should never be repeated to this extent, Bruus emphasized.

As in Germany, investors, stock traders and beacons had taken advantage of the tax legislation. From 2012 onwards, they traded the securities of companies listed in the Danish benchmark index OMX Copenhagen 20 around the dividend record date. Subsequently, they submitted their applications for companies based abroad, often American pension funds, to the Danish Tax and Customs Agency, Skat. A withholding tax that had only been incurred once was thus refunded several times.

A whistleblower leaked information to Skat, and tax refunds were stopped as of August 2015. The profits are said to have been laundered through financial institutions abroad, and Danish investigators later also focused on the now insolvent North Channel Bank from Mainz.

Danish tax investigators see Shah as the central puppet master of many stock deals. The former investment banker at Morgan Stanley and Credit Suisse had moved to Dubai, where he founded his hedge fund Solo Capital. Shah had denied any guilt in the past.

Extradition to Copenhagen

Denmark requested his extradition from the Emirates, and after long struggles, the 52-year-old Briton, who is already in detention pending deportation, is to be handed over to the authorities in Copenhagen in a timely manner. The Hamburg Regional Court has also allowed an indictment against Shah and six other defendants for tax evasion and money laundering. Whether and when the trial will take place is still open.

The Danish Tax Agency is tackling organised tax evasion on several fronts. In total, proceedings have been initiated in six countries against 500 people and companies involved in the-ex scandal, Skat said. In addition to the civil proceedings in Dubai, there are numerous claims against US pension funds, and a trial is underway in New York against the stock traders involved.

Skat Shah, Solo Capital and participating banks have also sued the High Court in London for damages. The defendants had a number of assets there that could only be confiscated on the basis of an English judgment, the authority said. "The verdict in Dubai will therefore not have a direct impact on the further proceedings in England."