U.S.A.: Termination of Double Taxation Treaty with Hungary
Clearstream Banking1 informs clients that effective
1 January 2024
the Double Taxation Treaty between USA and Hungary (“DTT”) that was terminated by the U.S.A. on 8 July 2022 will cease to have effect.
Impact on clients
Under the DTT, residents of Hungary were subject to a maximum withholding rate of 15% on U.S. sourced dividends and were exempt from U.S. withholding tax on payments of interest that did not qualify for the portfolio interest exemption. Those benefits will no longer be available after 31 December 2023, nor will any other treaty provisions apply (including any exemption for other income payments). A 30% full statutory withholding rate on payments to Hungarian residents will come into effect on 1 January 2024 unless conditions for another exemption (for example, portfolio interest exemption) under U.S. domestic law are met.
The U.S. tax certification already provided to Clearstream Banking will remain valid for portfolio interest exemption (if applicable) as well as for reporting purposes. No further action is expected from our clients, unless they hold U.S. securities on behalf of Hungarian residents on a segregated account benefiting from a reduced withholding tax rate under the DTT. These clients will have to either remove the holdings from the account or recertify the account. One-time certificates will remain valid unless clients inform us otherwise.
Further information
For further information, please contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or your Relationship Officer.
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1. Clearstream Banking refers collectively to 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, and Clearstream Banking AG (for Clearstream Banking AG clients using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.