Standard refund - eligibility, documentation, deadlines - Hungarian equities
Who can apply for a Standard Refund?
A standard refund of withholding tax on dividends from Hungarian equities is available through Clearstream Banking for the following beneficial owners (if the required certification has not been provided within the relief at source or quick refund deadlines).
Notes:
- Legal entities claiming with the HTA the full tax amount withheld at source must disclose their identity and provide the requested certification as per below.
- Hungarian residents (both individuals and legal entities) may not introduce a standard reclaim through Clearstream Banking and shall therefore consult with their own tax advisor to determine the most suitable alternative.
Eligible beneficial owners | Effective tax rate after refund | Tax refund available |
Individuals resident of Double Taxation Treaty (DTT) countries | DTT rate | 15% minus DTT rate. a |
Legal entities not resident in Hungary | 0% | 15% a |
a. Before January 2016, the standard withholding tax rate on Hungarian equities was 16%.
Documentation requirements
In order to benefit from a standard refund of withholding tax on income from Hungarian equities, clients must ensure that we receive the following documents. The templates of the forms are available on our Tax Forms to use section.
All beneficial owners, regardless their residency and status and applying for standard refund on Hungarian equities:
- Letter of Request to Clearstream Banking for Reclaim of Hungarian Withholding Tax
The Letter of Request should be duly completed and signed by Clearstream’s client. It authorises us to process the reclaim with the Hungarian Tax Authorities on the client’s behalf. Additionally, it specifies the payment details and the beneficial owner information.
The document should be provided for each reclaim application. - Certificate of Residence
An original Certificate of Residence should be issued in English by the beneficial owner’s local tax authorities for the year of the applicable income payment.
The document should be provided for each reclaim application. - Credit Advice
An original credit advice should be provided by the last intermediary in the chain having the final beneficial owner’s account in its books.
The document identifies income payment details, including the security type, gross amount of payment, date of payment and amount of tax withheld.
The document should be provided for each reclaim application. - Power of Attorney
A Power of Attorney should be duly completed and signed by the final beneficial owner. The document authorises the legal counsel of Clearstream Banking’s local depository, the attorney at law, to introduce tax reclaims.
The document should be provided once and remains valid until revoked.
In addition, by private individuals resident in a DTT country:
- Declaration of Beneficial Ownership
The declaration of beneficial ownership should be completed and signed by the beneficial owner, if it is requested by the applicable DTT.
It should be provided for each standard refund application. - Additional documentation
For the purposes of the tax procedure described above, the tax authority or/and the Hungarian issuers may, at their own discretion, request additional documentation to prove that the beneficial owner is indeed the beneficial owner of the securities and is eligible to obtain tax relief.
Deadline for receipt of documents
Documentation must be received by Clearstream Banking at the latest three months before the statutory deadline, which is five years following the actual date on which the income payment was made. However, clients should take into consideration that there is a dependency on issuers, who may decide not to allow the reclaim although the five year deadline is still running.
In light of the uncertainty regarding the actual reclaim deadline, Clearstream Banking recommends that clients initiate their reclaim as soon as possible after the income payment date.
Receipt of refunded amounts
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.
With respect to tax reclaims in general, clients are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country (and/or, as the case may be, by the relevant issuer).