The Dutch Public Prosecution Service (OM) announced on Thursday (November 27) that it had imposed a total fine of 101 million euros (approximately 117 million US dollars) on two entities owned by Morgan Stanley in London and Amsterdam. The reason behind the penalty is the bank’s alleged involvement in using a special trading structure to unlawfully claim dividend tax refunds without eligibility, constituting tax evasion behavior.
This fine is separate from the tax settlement reached between Morgan Stanley and the Dutch tax authorities at the end of 2024. The settlement was concluded by the end of 2024, where Morgan Stanley made supplementary payments for the related tax liabilities and paid accumulated interest.
Under Dutch tax law, domestic investors are eligible to apply for a refund or deduction of dividend tax, while foreign investors typically do not have this right. According to investigations by the prosecution, Morgan Stanley devised a special trading structure that allowed ineligible foreign parties to inappropriately claim tax refunds.
These types of operations are often categorized as “tax fraud” and have been one of the central issues in tax investigations across European countries in the past decade. Such transactions involve multi-party buying and selling of stocks and tax identity conversions, enabling multiple traders to apply for tax refunds on the same dividend tax. This has been regarded by multiple prosecuting authorities as a widespread tax avoidance or evasion scheme, sparking significant legal actions in countries like Germany, Denmark, and France.
Earlier this year, the prosecution had indicated plans to issue a criminal summons to Morgan Stanley. However, before the formal proceedings began, Morgan Stanley opted to accept the fine, leading to the case being resolved.
The case is related to a corporate tax declaration submitted by Morgan Stanley in the Netherlands twelve years ago, making it a “historic” case.
Morgan Stanley expressed satisfaction in “successfully resolving this historic event” and noted that the matters at hand pertained to its corporate tax filing in the Netherlands twelve years ago.
This hefty penalty once again underscores the European regulatory authorities’ expanded scrutiny on cross-border tax operations. More financial institutions may face supplementary payments or fines, emphasizing that tax compliance has become an integral risk that major multinational financial institutions cannot overlook.