Yankees: cum-cum / cum-ex
Anzeigenhauptmeister:
I've got a question for the American users:
Are you able to make use of the terms "cum-cum" and "cum-ex"?
I'm inquiring because before I wanted to write something about President Johnson's cum-ex chancellor, I wanted to make sure that the anglophone sphere knows of those terms, because if they don't, those words may sound a bit "ambiguous".
I discovered that the BBC does indeed use that terminology, while I couldn't find anything on CNN.com.
Tintrlvr:
Never heard of either term, can't make heads or tails of them with some Latin knowledge, either.
Anzeigenhauptmeister:
Quote from: Tintrlvr on October 17, 2022, 08:46:28 AM
Never heard of either term, can't make heads or tails of them with some Latin knowledge, either.
Good to know. The official stock exchange term is "dividend stripping", i.e. some form of tax evasion.
Investors and banks trade shares of a DAX group with ("cum") dividend entitlement, i.e. before the payment date, when the dividend has not yet been paid out, and without ("ex") dividend entitlement after the payment date, when the dividend has just been paid out. A dividend tax of 25 percent is automatically levied on the dividend for private individuals. Institutional investors, such as funds or banks, are exempt from the tax; they can reclaim it from the state.
In contrast to the cum-ex transactions, which have been declared illegal in 2021, the blocks of shares in cum-cum transactions are sold under the law of obligations before the dividend effective date with ("cum") dividend entitlement and also transferred in rem with ("cum") dividend entitlement, so that the shares at the time of the dividend effective date are owned by the purchaser, a corporation with unlimited tax liability in Germany. Ultimately, this enables the buyer to offset or reimburse the dividend tax, which is essential for the functioning of the business.
Cum-cum and cum-ex deals essentially differ in the main goal they pursue. While cum-ex transactions are aimed in particular at multiple reimbursement of capital gains tax, stakeholders making use of cum-cum transactions merely want to avoid paying capital gains tax to the state via detours.
PS: Sorry for my non-understandable prose™. I hope I translated all those technical terms properly; stock exchange parlance is not my métier. 🤷🏼♂️
Clarko95 📚💰📈:
I only know these terms because I am an accountant. While you can use these terms in American English, most people won't understand it, and I don't think we have any such tax regime in place that exempts institutional investors from dividend taxation like Germany, only nonprofits (which includes pension funds) get such exemptions.
So even as someone who worked in corporate tax, I still had to familiarize myself with how this tax structure worked to understand the scandal in the first place. If this scandal is confusing to people outside of Germany, it's not because of the Latin terminology, but rather because of the unique and complex tax structure.
Tintrlvr:
Quote from: Tulsi for President on October 17, 2022, 10:55:32 AM
Quote from: Tintrlvr on October 17, 2022, 08:46:28 AM
Never heard of either term, can't make heads or tails of them with some Latin knowledge, either.
Good to know. The official stock exchange term is "dividend stripping", i.e. some form of tax evasion.
Investors and banks trade shares of a DAX group with ("cum") dividend entitlement, i.e. before the payment date, when the dividend has not yet been paid out, and without ("ex") dividend entitlement after the payment date, when the dividend has just been paid out. A dividend tax of 25 percent is automatically levied on the dividend for private individuals. Institutional investors, such as funds or banks, are exempt from the tax; they can reclaim it from the state.
In contrast to the cum-ex transactions, which have been declared illegal in 2021, the blocks of shares in cum-cum transactions are sold under the law of obligations before the dividend effective date with ("cum") dividend entitlement and also transferred in rem with ("cum") dividend entitlement, so that the shares at the time of the dividend effective date are owned by the purchaser, a corporation with unlimited tax liability in Germany. Ultimately, this enables the buyer to offset or reimburse the dividend tax, which is essential for the functioning of the business.
Cum-cum and cum-ex deals essentially differ in the main goal they pursue. While cum-ex transactions are aimed in particular at multiple reimbursement of capital gains tax, stakeholders making use of cum-cum transactions merely want to avoid paying capital gains tax to the state via detours.
PS: Sorry for my non-understandable prose™. I hope I translated all those technical terms properly; stock exchange parlance is not my métier. 🤷🏼♂️
As Clarko set out, I think this doesn't make sense to Americans in part because dividend stripping doesn't work as a tax planning strategy in the U.S. tax system given the higher tax rates on dividends and lack of exemptions for institutions.
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