Morgan Stanley fined €101 million for evading €124 million in Dutch dividend taxes

The Public Prosecution Service (OM) has imposed a 101 million euro fine on Morgan Stanley for evading dividend tax in the Netherlands. Morgan Stanley improperly used a special scheme to claim dividend tax refunds from the Belastingdienst, the Dutch tax office, even though the financial group was not entitled to the benefit, prosecutors said.

The OM accused the financial group’s Dutch subsidiary of briefly holding shares in Dutch publicly traded companies. This was timed to happen on dividend distribution days, allowing this subsidiary to offset the dividend tax against other taxes. After the dividend distribution dates, the shares were then returned to foreign parties. The bank evaded a total of 124 million euros in dividend tax through this scheme between 2009 and 2013.

The Public Prosecution Service said Morgan Stanley was not entitled to the tax benefit. Only organizations established in the Netherlands can offset this tax against other taxes. But in Morgan Stanley’s case, the vast majority of the dividends flowed to other financial institutions outside the Netherlands.

Morgan Stanley will pay the fine following a plea agreement in which the Public Prosecution Service imposes a penalty without the involvement of a judge. This makes it possible for the bank to avoid a lawsuit. Earlier this year, the Public Prosecution Service announced it Morgan Stanley would have to testify on the matter.

Last year, Morgan Stanley also reached a settlement with the Belastingdienst regarding the matter. The bank repaid the disputed tax amount, plus interest.

The penalty order also establishes that the investment firm was guilty in the matter. Morgan Stanley, in response to the summons, stated earlier this year that the prosecutors had created an inaccurate framing of the situation, and based their findings on incomplete investigations.

The bank now says it is pleased “that this historic case, which concerned corporate tax returns filed in the Netherlands more than twelve years ago, has been closed.