Hungary: New tax rate
Further to Taxflash T15028, dated 16 June 2015, Clearstream Banking1 would like to inform customers that effective
1 January 2016
personal income paid will be subject at a flat tax rate of 15%. Consequently, the standard withholding tax rate on all Hungarian securities (debt securities and equities) will also be reduced from the current 16% to 15%.
Background
The Hungarian Parliament approved, on 15 June 2015, the 2016 Tax Bill. The main change impacting Clearstream Banking tax process is the new flat withholding tax rate of 15% applicable on all interest and dividends paid to private individuals. Legal entities will continue to be tax exempt.
Impact on customers
No changes will occur to the tax procedures currently provided by Clearstream Banking. As a result, customers should take note as follows:
Interest paid on Hungarian debt securities registered in the name of Clearstream Banking will continue to be exempt from withholding tax without any action required by the customer to ensure that exemption at source is applied.
It remains the responsibility of beneficial owners that are individual persons to comply, through their annual fiscal declaration, with all legal and regulatory requirements imposed by the legislation of their country of residence in respect of all domestic and foreign income received during the respective calendar year. Clearstream Banking has no direct or indirect liability towards the respective tax authorities, including those of Hungary, if this obligation is not respected by the individual beneficial owners.
Dividends paid on Hungarian equities will be subject to 15% withholding tax. Upon submission of the currently required certification by the applicable deadlines (see announcement A15056, dated 17 March 2015), the following reduced tax rates may be obtained:
- 0% to beneficial owners that are legal entities being resident or not of Hungary; or
- Treaty rate to beneficial owners that are physical persons and qualify for the benefit of a reduced rate of withholding tax in accordance with a Double Taxation Treaty (DTT) between their country of residence and Hungary.
Beneficial owners that are physical persons and residents of Hungary can neither obtain relief at source nor reclaim withholding tax through Clearstream Banking.
Further information
For further information, please contact the Tax Help Desk, Client Services or your Relationship Officer.
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1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500, and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248.