The Hungarian authorities have confirmed that the reform of withholding tax procedures for dividends paid on assets held in nominee accounts became effective on 2 May.
Provided the tax authorities receive details of the beneficial owner or owners on the relevant record date (including name, tax residence, quantity of securities held, and the cash amount received) before the end of the calendar year in which the dividend was paid, and the issuer confirms the same details within thirty days, tax can be reclaimed in full on assets held in nominee accounts. Correct documentation has still to be submitted through a local custodian.
Although registration of securities in nominee names has been available in Hungary for some years, it was rarely used because institutional investors had to pay a 20% withholding tax on assets that were not registered in the name of the beneficial owner. No relief was offered at source, and it was difficult to reclaim the tax after the payment of the dividend.
“Nominee registration was very rarely used since the gross 20% Hungarian dividend withholding tax applied in case of institutional investors,” says Lilla Juranyi of ING Bank in Budapest. “Not only relief at source but also the tax reclaim was not possible due to documentation difficulties.”