Further to our Taxflash L12027, dated 18 December 2012, and effective

1 January 2013

no withholding tax will be applied to interest paid by Clearstream Banking¹ on Slovak government bonds and treasury bills (“T-Bills”).

Background

On 4 December 2012, the National Council of the Slovak Republic has approved the draft law amending Law No. 595/2003 on Income Tax. The law was published in Collection of Laws (as No. 395/2012) on 19 December 2012.

The amendment includes, among other matters, the following changes applicable to all government bonds and T-bills issued before or after 31 December 2012:

• Withholding tax will be abolished for natural persons that meet their tax liability individually in their tax returns.
  
• Entities not established for a business (non-profit organisations), the National Property Fund of the Slovak Republic and the National Bank of Slovakia will continue to be subject to 19% withholding tax but will become taxpayers, who will, therefore, withhold the tax themselves as required by law.

Consequently, for interest paid as of 1 January 2013 on government bonds and T-bills:

• All beneficial owners not resident in Slovakia for tax purposes can be tax-exempt based on Slovak domestic legislation; and
  
• Individual persons and legal entities resident in Slovakia will receive interest without deduction of withholding tax, but they are under the obligation to declare their income in their annual declaration; and
  
• Specific Slovak resident entities (such as non-profit organisations, National Bank of Slovakia, National Property Fund) will receive interest without deduction of withholding tax, but they are under the obligation to withhold the tax themselves as required by law.

Withholding tax rates applied by Clearstream Banking as of 1 January 2013

The following standard withholding tax rates will be applicable on Slovak securities:

19% on interest paid on:

• Corporate bonds;
• Bank (mortgage) bonds;
• Municipal bonds.

0% on income paid on:

• Government bonds and T-Bills;
• Equities (according to the article 12 paragraph 7 letter c. of the Act on Income No. 595/2003 Coll);
• Principal paid at redemption.

Impact on customers

The tax procedure described below, which will replace the one included in our Announcement A11075, dated 8 June 2011 applies to interest paid on corporate bonds, bank (mortgage) bonds and municipal bonds.

Eligibility for tax relief

Upon submission of the required documentation by the prescribed deadlines, the following categories of final beneficial owner will be able to apply to obtain a reduced withholding tax rate on private debt securities (that is, corporate, bank (mortgage) and municipal bonds):

• Beneficial owners qualifying for the benefit of a reduced rate of withholding tax in accordance with a Double Taxation Treaty (DTT) between their country of residence and Slovakia. The maximum rate of withholding tax is defined in the relevant DTT.
  
• Beneficial owners that are legal entities with fiscal residency in Slovakia for tax purposes will receive interest without deduction of withholding tax, but they are under the obligation to declare their income in their annual declaration.

Individual persons resident in Slovakia for tax purposes cannot apply for a reduced tax rate and are subject to the standard rate of withholding tax in Slovakia (currently 19%).

Relief and reclaim procedures available

Relief of withholding tax is available to eligible beneficial owners through Clearstream Banking by means of relief at source or quick/standard refund procedures.

Note: All forms mentioned in the following sections are available on our website under Information Centre / Tax / Slovak Republic / Tax Forms to use – Slovak Republic.

1. Relief at source

In order to benefit from a relief at source on interest payments on Slovak debt securities, customers will need to provide Clearstream Banking with the following documents according to the status and residency of the final beneficial owners:

Beneficial owners that are DTT residents

To obtain relief at source, the following documentation must be submitted:

• One-Time Certificate for Slovak Withholding Tax Purposes
  
  The original, completed and duly signed by the customer and specifying, among other things, whether or not the customer is the sole beneficial owner of all the Slovak debt securities held in the account, must be provided once before the first interest payment and remains valid until revoked. Any changes to any details must be communicated in a new One-Time Certificate.
  
• Certificate of Residence
  
  The original must be issued by the tax authorities of the country of residence of the beneficial owner. If no original is available, a notarised copy is acceptable if it is properly legalised². The Certificate of Residence is valid one calendar year and must cover the impacted payment date.
  
• Declaration of Real Ownership of Revenues (Non-Resident Beneficial Owner)
  
  The original, duly completed and signed by each beneficial owner must be provided once before the first interest payment and remains valid until revoked.
  
• Power of Attorney
  
  If the customer or a third party is completing the Declaration of Real Ownership of Revenues (Non-Resident Beneficial Owner) on behalf of the beneficial owner, a Power of Attorney must be provided.
  
• List of Beneficial Owners
  
  The List of Beneficial Owners indicates the name and complete address of each beneficial owner, the applicable withholding tax rate, the common code or ISIN, the nominal amount or number of securities and the tax rate to be applied. It must be provided before each interest payment.

Beneficial owners that are Slovak legal entities

To obtain withholding tax relief at source, the following documentation must be submitted:

• One-time Certificate for Slovak Withholding Tax Purposes
  
  The original, completed and duly signed by the customer and specifying, among other things, whether or not the customer is the sole beneficial owner of all the Slovak debt securities held in the account, must be provided once before the first interest payment and remains valid until revoked. Any changes to any details must be communicated in a new One-Time Certificate.
  
• Declaration of Real Ownership of Revenues (Resident Legal Entity)
  
  The original, duly completed and signed by each beneficial owner, must be provided once before the first interest payment and remains valid until revoked.
  
• Power of Attorney
  
  If the customer or a third party is completing the Declaration of Beneficial Ownership on behalf of the beneficial owner, a Power of Attorney must be provided.
  
• List of Beneficial Owners
  
  The List of Beneficial Owners indicates the name and complete address of each beneficial owner, the applicable withholding tax rate, the common code or ISIN, the nominal amount or number of securities and the tax rate to be applied. It must be provided before each interest payment.

Deadline for relief at source

Original documentation must be received by Clearstream Banking at the latest four business days before the respective interest payment date by 10:00 CET.

2. Quick refund

A quick refund of withholding tax is available if the required certification was not provided before the relief at source deadline by the beneficial owners eligible for tax relief.

Eligibility criteria and certification requirements are as for the relief at source procedure (see above).

Note: There is no official quick refund in Slovakia. It is up to the issuer or paying agent to accept requests for a tax refund before sending tax withheld at source to the Slovak Tax Authorities.

Deadline for quick refund

The original documents must be received by Clearstream Banking at the latest on the 2nd business day of the month following the date on which the interest payment was made.

If the interest payment date is at the end of the month, the deadline can be exceptionally extended until the 5th business day of the month following the date on which the interest payment was made.

Receipt of refunds

The estimated time for receiving a quick refund is two weeks from the date on which Clearstream Banking receives the certified documents.

However, as the quick refund procedure is based on market practice and all applications will depend on the goodwill of the issuer or the paying agent, Clearstream Banking can give no guarantees. Although Clearstream Banking will assist its customers with quick refund applications, it can only remit to customers’ accounts the amounts that it receives.

3. Standard refund

A standard refund of withholding tax is available if the required certification was not provided, before the relief at source or quick refund deadlines, by the beneficial owners without fiscal residency in Slovak Republic and eligible for tax relief.

Slovak residents eligible for tax exemption at source or via quick refund cannot apply for a standard refund of tax withheld at source through Clearstream Banking.

In order to benefit from a standard refund of withholding tax on interest, customers will have to provide Clearstream Banking with the following documents, regardless the type of the debt security:

• Tax Reclaim Form
  
  The original, completed and duly signed by the final beneficial owner, must be submitted for each tax reclaim application.
  
• Certificate of Residence
  
  The original must be issued by the tax authorities of the country of residence of the beneficial owner. If no original is available, a notarised copy is acceptable if it is properly legalised². The Certificate of Residence is valid one calendar year and must cover the impacted payment date.
  
• Credit Advice
  
  The credit advice identifies income payment details including the security type, gross amount of payment, date of payment and amount of tax withheld. The credit advice must reconcile with the information in the Tax Reclaim Form and must be delivered by the financial institution paying the beneficial owner.
  
  Note: Upon request from the Slovak Tax Authorities all credit advices through the chain of intermediaries until the beneficial owner may be submitted (For example, if the beneficial owner is the customer's client, the credit advice from the customer to the beneficial owner must be provided along with the credit advice received by Clearstream Banking).
  
• Letter of Request for Reclaim
  
  The Letter of Request to Clearstream Banking for Reclaim of Slovak Withholding Tax authorises Clearstream Banking to process the reclaim of withholding tax with the Slovak Tax Authorities on the customer’s behalf. This document, completed and duly signed by the customer, will have to be provided to Clearstream Banking for each tax reclaim application.

Deadline for standard refund

The withholding tax reclaim must be filed with the Slovak Tax Authorities no later than ten years following the date on which the income was paid.

The deadline by which Clearstream Banking must receive the documentation for a standard refund application is at the latest two months before the statutory deadline. All standard refund applications received after this deadline will be processed by Clearstream Banking on a “best efforts” basis. However, in such a case, Clearstream Banking will apply an extra charge and accepts no responsibility for forms that have not reached the Slovak Tax Authorities by the date considered being the statute of limitations deadline.

With respect to tax reclaims in general, customers are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer's responsibility to determine any entitlement to a refund of tax withheld and to complete the forms required correctly and calculate the amount due.

Receipt of refunds

The estimated time for receiving a refund is three months from the date on which the standard refund application was received by the Slovak Tax Authorities, although this can vary depending on when the application is filed and the complexity of the information supplied in the reclaim form.

Additional documentation

Under judgment, the Slovak Tax authorities have the possibility to request additional documentation to prove that the entity applying for the relief/reclaim is the actual beneficial owner of the securities.

Language of documentation

All documentation can be in English but translated versions must also be submitted, in line with regulation, if the tax authorities so demand.

Capital gains tax and stamp duty

Neither capital gains tax nor stamp duty is withheld through Clearstream Banking on Slovak securities held in Clearstream Banking. Capital gains tax or stamp duty may, however, be payable on specific gains or transactions. It is the responsibility of the beneficial owners subject to capital gains tax or stamp duty to report and include their holdings and gains in their annual tax declaration. Clearstream Banking does not assist in this regard and has no direct or indirect liability towards the Slovak Tax Authorities in relation to such obligations.

Please consult your tax advisor for further information.

Further information

For further information, customers may contact the Clearstream Banking Tax Help Desk on:

	Luxembourg	Frankfurt
Email:	tax@clearstream.com	tax@clearstream.com
Telephone:	+352-243-32835	+49-(0) 69-2 11-1 3821
Fax:	+352-243-632835	+49-(0) 69-2 11-61 3821

or Clearstream Banking Customer Service or their Relationship Officer.

1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in the Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF) and Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).
2. The legalised copy of the Certificate of Residence must be either apostiled or completely superlegalised, depending on the country of residence and its membership of Hague “Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents”.

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