General information - types of securities, deadlines, other market specifics - Hungary
Types of securities eligible in Clearstream Banking
The eligible securities issued in Hungary are as follows:
- Government debt (bonds, T-bills)
- Corporate bonds
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
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:
Relief at source
Automatic exemption at source based on Clearstream Banking status. No action required.
Relief at source
List of Beneficial Owners (LBO)
At the latest the record date by 10:00 CET.
At the latest two business days before the record date by 18:00 CET.
Revised List of Beneficial Owners (LBO)
Upon confirmation of the issuer, quick refund is available if the certification is received the latest by 10:00 CET on 15 December of the year in which the dividend took place.
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 Banking recommends clients initiate their reclaim as soon as possible after the income payment date.
Standard refund deadline
The deadline by which Clearstream Banking 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 Banking on a "best-efforts" basis. However, in such cases, Clearstream Banking 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 Banking 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 Banking.
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 Banking is under no obligation to carry out any investigation in respect of such information.
Clearstream Banking 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.
Automatic tax exemption on debt securities
Hungarian law does not currently recognise the nominee concept for interest payments made on debt securities. Clearstream Banking, 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.
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 Banking 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 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.
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 Banking 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 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.
There is no stamp duty withheld through Clearstream Banking on securities held in Clearstream Banking. Stamp duty may however be payable on specific transactions. Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.