Hungary: New withholding tax procedure for equities

04.11.2013

Effective

immediately

and based on confirmation received from our local custodian of the withholding tax practice with regard to income from Hungarian equities, the procedure described below must be followed.

Applicable tax rates

As of 1 January 2011, the 16% withholding tax applies to private investors and to undisclosed positions on dividends paid for stock exchange listed and non-listed equities1.

Holding restriction

In the case of dividends paid on non-listed shares, private individuals resident in Hungary must pay an additional 14% of Healthcare Contribution.

As a consequence, it has been decided to restrict the holding of non-listed Hungarian equities in Clearstream Banking2 on behalf of final beneficial owners that are private individuals resident in Hungary.

Any customer not complying with this holding restriction agrees that it shall indemnify and hold harmless Clearstream Banking for any loss, expense, liability, damage or claims, whether direct or indirect, against or incurred by Clearstream Banking arising out of or resulting from such non-compliance.

Eligibility criteria for tax relief

After submission of the required certification, the following categories of final beneficial owner may obtain reduced tax rates as indicated:

Eligible beneficial ownersListed and non-listed Equities
Relief at sourceQuick refundStandard refund
Residents of countries with an effective Double Taxation Treaty (DTT) with HungaryDTT rateNot availableDTT rate
Legal entities (regardless of country of residence)0%0%Not available

Beneficial owners that are not eligible for tax relief or do not certify within the prescribed deadlines will be taxed at the maximum rate of 16%.

Withholding tax procedures

For relief at source

Relief at source from withholding tax on dividends from Hungarian equities is available to the following beneficial owners only:

  • 0% for legal entities regardless of their country of residencey; and
  • Double Taxation Treaty (DTT) rate for DTT country resident individuals;

provided that the following documentation has been submitted within the prescribed deadlines:

  • One-Time Certificate for Dividend Payments on Hungarian Equities, certifying that the customer is or is not the beneficial owner of all the Hungarian equities held in the account. Any changes to the information supplied in the One-Time Certificate with respect to dividend payments on Hungarian equities must be communicated to Clearstream Banking in a new One-Time Certificate.
  • Tax breakdown, to be provided before each relief at source application, including:

    • The total number of shares held by the customer;
    • The total number of shares held by legal entities;
    • The total number of shares held by undisclosed holders (considered as individuals);
    • The total number of shares held by disclosed DTT resident individuals.

    Note: For legal entities:

    • No disclosure of names and holdings is requested.
    • They will obtain tax exemption based only on the Tax Breakdown.
    • No further certification need be provided, unless required by the issuer and/or the Hungarian Tax Authorities (HTA).

    If the breakdown is not submitted, the entire position will be considered as being held by undisclosed individuals and therefore taxed at the maximum tax rate.

Plus, for DTT resident individuals:

  • List of DTT resident individual beneficial owners to be provided before each relief at source application and indicating the following for each beneficial owner:

    • Full name;
    • Birth name;
    • Date and place of birth;
    • Gender (male/female);
    • Mother’s full maiden name;
    • Full address;
    • Nationality;
    • Passport/card ID number.

    The List of Beneficial Owners must be uploaded electronically from http://www.clearstream.com/ (under Custody / Tax Services / Upload BO List/Hungary).


  • Certificate of Residence issued in English for the year of the dividend payment, to be provided before each relief at source application.
  • Declaration of Beneficial Ownership completed and signed by the beneficial owner to be provided before each relief at source application.

Important note: In addition to the documentation listed above, the issuers, the paying agents or the Hungarian Tax Authorities (HTA) may, from time to time, require further documentation (for example, as a disclosure requirement ). Clearstream Banking will advise customers holding Hungarian equities immediately upon receipt of such request. Deadline for relief at source

The deadline for submitting the required certification depends on the deadline set by the issuer or paying agent for each dividend payment. Therefore, Clearstream Banking will include the respective deadline in each SWIFT/CreationOnline message sent to customers before each dividend payment event.

For quick refund

Quick refund is not available for individual beneficial owners.

Legal entities that did not certify their holding via the breakdown at source and were therefore taxed at the maximum tax rate may apply for a quick refund of tax only if the issuer allows such quick refund. Clearstream Banking’s local depository must submit the claim to the issuer, who decides whether to make a revision of their declaration or not towards the HTA. It is exclusively the issuer’s decision whether or not to revise its books.

If the issuer does not offer such possibility, Clearstream Banking will inform the customer before the respective income event via SWIFT/CreationOnline message.

Note: Clearstream Banking can give no guarantees with regard to the quick refund procedure as it is based on market practice and all applications depend on the good will of the paying agent. Although Clearstream Banking will assist customers with quick refund applications, it can remit to customers' accounts only the amounts that it receives.

To apply for a quick refund of withholding tax on dividends from Hungarian equities, customers must submit to Clearstream Banking:

  • A Revised Tax breakdown including:

    • The total number of shares held by the customer (the same as the number submitted at source);
    • The total number of shares held by legal entities (revised);
    • The total number of shares held by undisclosed holders (revised);
    • The total number of shares held by disclosed DTT resident individuals (the same as the one submitted at source).

    Note: For legal entities, no disclosure is requested to recover the full tax amount withheld at source, unless required by the issuer and/or the Hungarian Tax Authorities (HTA).

    If the breakdown is not submitted for quick refund, the tax amount withheld at source will not be refunded and the beneficial owners that are legal entities will not be able to apply for standard refund with the HTA.

Deadline for quick refund

The Revised Tax Breakdown must be received by Clearstream Banking at the latest by 10:00 CET on 15 December of the year in which the dividend payment took place. When are quick refunds received?

The estimated time for receiving a quick tax refund is between two weeks and two months from the date of receipt of the revised tax breakdown by the Hungarian issuer.

For standard refund

Standard refund is not available for legal entities.

A standard refund of withholding tax is available, per beneficial owner that is a DTT resident individual, if the deadline for relief at source has not been met and provided that application for the standard refund is made within the prescribed deadlines.

To apply for a standard refund of withholding tax on dividends from Hungarian equities, the following documentation must be submitted to Clearstream Banking:

  • Details of the DTT resident individual beneficial owner, to be provided with each standard refund application:

    • Full name;
    • Birth name;
    • Date and place of birth;
    • Gender (male/female);
    • Mother’s full maiden name;
    • Full address;
    • Nationality;
    • Passport/card ID number.

  • Certificate of Residence issued in English for the year of the dividend payment, to be provided with each standard refund application.
  • Declaration of Beneficial Ownership completed and signed by the beneficial owner, to be provided with each standard refund application.
  • Power of Attorney from the final beneficial owner authorising the legal counsel of Clearstream Banking’s local depository (KELER), the attorney at law, to introduce tax reclaims, to be provided once and remaining valid until revoked.
  • Request to the Hungarian Tax Authorities including details of the beneficial owner (name, legal status (by default it should be individual), full address for tax purposes) and details, per security, of the relevant holding (issuing company and type of security, payment date, number of securities held, gross income, tax withheld, DTT rate and refund amount).
  • Chain of original Credit Advices provided for each standard refund application by each intermediary between the final beneficial owner and Clearstream Banking.
  • Letter of Request to Clearstream Banking for Reclaim of Hungarian Withholding Tax authorising Clearstream Banking to reclaim withholding tax from the Hungarian Tax Authorities on behalf of a beneficial owner.

Deadline for standard refund

Documentation must be received by Clearstream Banking at the latest two months before the statutory deadline, which is five years after the respective dividend payment date. When are standard refunds received?

The estimated time for receiving a standard tax refund is two months from the date of receipt of the documents by the Hungarian Tax Authorities.

Further information

The above-mentioned forms are available under Tax Forms to use – Hungary.

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

LuxembourgFrankfurt
Email:tax@clearstream.comtax@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.

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1. The dividends must be related to the fiscal year 2011 and onwards.
2. Clearstream Banking refers to Clearstream Banking S.A., 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).

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