‘These operations maybe legal, but I don't consider them legitimate,’ said Finance Minister Wolfgang Schaeuble.
The operations, called ‘cum/cum’ in financial jargon, help a foreign investor pay less taxes on dividends through a temporary transfer of the investor's German shares to a German bank.
Foreign investors are subjected to a withholding tax levied by Germany on dividends earned on their German stocks. But to circumvent the flat 15-percent levy, they simply transfer their holdings to a bank such as Commerzbank, which benefits from a more favourable domestic investor regime.
German media this week reported that the state may have lost out on around one billion euros ($1.2 billion) a year since 2011 owing to such operations.
A spokeswoman at the finance ministry did not confirm the figure, but said the issue will also be raised with Commerzbank, in which the state still has a 15-percent stake after a 2008 bailout.
‘We consider these operations illegitimate as their purpose is to evade taxes on dividends,’ she added.
In a statement, Commerzbank said it carries out 100,000 financial transactions daily, and that ‘in this context, we are inevitably confronted with so-called cum/cum situations’.
‘Through our internal system and controls, we assure that all the transactions conform to the applicable laws,’ it added.
A draft law banning cum-cum operations has yet to be put to parliament, but if approved, it will be retroactive from January 1, 2016.