Prosecutors searched the Munich offices of BlackRock on Tuesday, a person with knowledge of the matter said, as part of the country's largest post-war fraud investigation.
The practice being investigated, known as cum-ex, typically involved trading company shares rapidly around a syndicate of banks, investors and hedge funds to create the impression of numerous owners, each of whom was entitled to a tax rebate.
A BlackRock spokesman said the world's biggest fund manager was "fully cooperating with an ongoing investigation relating to cum ex transactions in the period 2007-2011".
BlackRock's inclusion is significant because it oversees more than $6.4 trillion in assets, including company shares which it lends to banks as part of its business.
State prosecutors in Cologne declined to comment on the search of BlackRock, which came as Germany's finance minister, Olaf Scholz, urged Europe to tighten cooperation against abusive tax schemes, after Reuters and other media revealed sham trading deals that cost taxpayers billions of euros.
Numerous banks and investors are already being investigated over the sham trading.
BlackRock's chairman in Germany, Friedrich Merz, who has helped secure its influence in Europe's industrial powerhouse, took his current role in 2016 -- after the period being investigated -- and has condemned illicit dividend stripping.
Merz has taken an early lead in the race to succeed Angela Merkel as leader of Germany's Christian Democrats and secure the chance of running for chancellor as soon as next year.