The Dutch public prosecution service has fined US investment bank Morgan Stanley €101 million for avoiding dividend tax in the Netherlands through a structure that gave it an unlawful tax advantage.

Morgan Stanley agreed to the penalty “shortly before the start of the criminal trial”, the public prosecution service said. Prosecutors had announced plans earlier this year to take legal action against the bank, but it is now avoiding a court case by accepting the fine.

An investigation by the finance ministry inspectors found that a Dutch subsidiary of Morgan Stanley repeatedly received large blocks of shares in other companies at the moment dividends were paid out.

The tax on those payouts could then be offset against other taxes, after which the shares were transferred back to foreign parties.In total, the unlawful offsets were made in five corporate tax returns.

During this brief period of ownership, €830 million in dividends was paid out, enabling the subsidiary to avoid €124 million in dividend tax. Only companies that are genuinely established in the Netherlands are entitled to the tax break.

The tax office detected the transactions at the end of 2010 and began asking questions, leading to a review that lasted several years. Morgan Stanley repaid the tax owed, including interest, in 2024. The fine comes on top of the repayment.