General information - types of securities, deadlines, other market specifics - Hungary

Types of securities eligible in Clearstream

The eligible securities issued in Hungary are as follows:

• Government debt (bonds, T-bills)
• Corporate bonds
• Equities

Types of beneficial owners

The following types of beneficial owner are recognised for tax purposes in Hungary:

• Individuals resident of a Double Taxation Treaty (DTT) country
• Legal entities not resident in Hungary
• Legal entities resident in Hungary
• Individuals resident in Hungary

Deadlines

Relief at source and quick refund deadlines

In order to benefit from relief at source / quick refund on Hungarian securities, eligible beneficial owners will need to ensure that we receive the accurate documentation by the following deadlines:

Statutory deadline for reclaiming withholding tax

The statutory deadline for reclaiming withholding tax using the standard procedure is five years starting from the actual day the income payment was made. However, there is a dependency on issuers who may decide not to allow the reclaim although the five years deadline is still running. 

Given the uncertainty of the reclaim deadline, Clearstream recommends clients initiate their reclaim as soon as possible after the income payment date.

Standard refund deadline

The deadline by which Clearstream must receive the documentation for a standard refund application is, at the latest, three months before the statutory deadline.

All standard refund applications received after this deadline will be processed by Clearstream on a "best-efforts" basis. However, in such cases, Clearstream will apply an extra charge and accepts no responsibility for forms that have not reached the Hungarian Tax Authorities by the date considered as being the statute of limitations deadline.

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

When are 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. This timing can vary depending on when the application is filed and on the complexity of the information supplied in the reclaim form.

Note on tax reclaims

Clients warrant the completeness and accuracy of the information they supply to Clearstream.

It is the client's responsibility to determine any entitlement to a refund of tax withheld, to complete the forms required correctly and to calculate the amount due. Clearstream is under no obligation to carry out any investigation in respect of such information.

Clearstream accepts no responsibility for the acceptance or non-acceptance by the tax authorities (and/or, as the case may be, by the relevant issuer) of the refund applications nor for the reimbursement of taxes paid.

Market specifics

Automatic tax exemption on debt securities

Hungarian law does not currently recognise the nominee concept for interest payments made on debt securities. Clearstream, as account holder, is recognised as being the registered owner of debt securities. As a result, interest payments made on Hungarian debt securities safekept for Clearstream will be exempt from withholding tax (as legal entities are not subject to this tax).

No action is required by the client to ensure that exemption at source is applied on interest payments. However, it remains the responsibility of the final investors to fulfil their tax declaration and payment obligations.

Holding restriction

For 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 on behalf of final beneficial owners that are private individuals resident in Hungary. Any client not complying with this holding restriction agrees that it shall indemnify and hold harmless Clearstream for any loss, expense, liability, damage or claims, whether direct or indirect, against or incurred by Clearstream arising out of or resulting from such non-compliance.

Capital Gains Tax

From 1 January 2016, the capital gains tax rate is 15%. Before this date, the capital gains tax rate was 16%.

Beneficial owners that are legal entities, whether resident or non-resident of Hungary, are exempt from capital gains tax.

Hungarian law does not currently recognise the nominee concept for capital gains. The entity in whose name the account is opened in Hungary is regarded, for Hungarian tax purposes, as the party subject to personal income tax. Consequently, interest payments made on Hungarian debt securities registered in the name of Clearstream are exempt from capital gains tax (legal entities being eligible to full exemption). No action is required by the client to ensure that this exemption is applied.

Note: 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 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.

Stamp Duty

There is no stamp duty withheld through Clearstream on securities held in Clearstream. Stamp duty may however be payable on specific transactions. Clearstream does not assist in this regard. Please consult your tax advisor for further information.