Distinguished Client,

We would like to give essential information on the certificates issued by the tax authority on the basis of the Council Directive 2003/48/EC on taxation of savings income in the form of interest payments (hereinafter: Directive) for the clients who ask for or use this certificate.

The ultimate aim of the Directive is to enable savings income in the form of interest payments made in one Member State to individual beneficial owners resident for tax purposes in another Member State to be made subject to effective taxation in accordance with the laws of the latter Member State. The automatic exchange of information concerning interest payments covered by the Directive makes possible the effective taxation of those payments in the beneficial owner’s Member State of residence for tax purposes.

For the purposes of the Directive:

-        Interest payment means interest paid or credited relating to debt claims of every kind - in particular interest from government securities, bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures – except for the penalty charges for late payments.

-        Beneficial owner means any individual resident for tax purposes in another Member State who receives an interest payment or for whom an interest payment is secured.

-        Paying agent means the agent who pays interest to or secures the payment of interest for the immediate benefit of a beneficial owner resident for tax purposes in another Member State of the European Community whether the operator is a legal person or unincorporated business association or other association.

According to the regulations of the Directive the paying agents of 22 Member States report information on the interest paid directly to the beneficial owner resident for tax purposes in another Member State. The data disclosure is compulsory not only for the paying agents, but any economic operator, whether the operator is a legal person or unincorporated business association who pays interest to or secures interest for members of entity regarded as beneficial owners of that entity provided that interest is paid or secured via this entity established in another Member State. Person subject to disclosure of data is required to communicate information to the competent authority, unless it is able to verify with official documents of being a legal person or is subject to corporate taxation in the Member State where established or it operates as a European investment fund or is being treated as a European investment fund as verified by a certificate issued by the competent authority of the Member State in which the entity is established.

Such an official document to verify  the corporate taxation subject status is the certificate claimed by the association/entity and issued by the county Directorate of NTCA (NAV). The certificate includes the following data:

-        name of the applicant

-        address of the applicant

-        tax identification number (tax number) of the applicant

-        certification of the fact that its profits are taxed under the general arrangements for business taxation in the country which issues the certificate.

The taxpayers liable to corporate tax resident in Hungary can ask for this certificate of residence by filling in the application form No. K07 or submitting another form indicating the same data to the central or branch office customer services of the NTCA (NAV) Directorates. Use of the certificate issued by the tax authority is not compulsory, the entities can provide the paying agents with any other official document to verify that their profits are taxed under the general arrangements for business taxation.

According to the Directive during the transitional period beginning on 1 January 2005 Austria, Belgium and Luxembourg  do not use the automatic exchange of information. The interest is rated at withholding tax in these countries during the transitional period when the Member State of the residence of the beneficial owner is other than the Member State of the residence of the paying agent.

Austria, Belgium (from 1 January 2010 no withholding tax but data supply) and Luxembourg shall levy a withholding tax at a rate of 15% during the first three years of the transitional period, 20%  in the subsequent three years and 35% thereafter. The Member States levying withholding tax will transfer 75% of the revenue to the Member State of residence of the beneficial owner of the interest within a period of six months following the end of the tax year.

According to the Point 15 of the Schedule No. 7. of the Act XCII of 2003 on the Rules of Taxation (hereinafter: RoT) during the transitional period the state tax authority shall open a Euro account for receiving payments of withholding tax from Member States where this form of tax is levied on seventy-five per cent of the amount withheld. Within thirty days from the date when payment is received the tax authority shall transfer this payment to the beneficial owner’s tax account, plus twenty-five per cent, exchanged for forints by the official NBH exchange rate in effect on the day of transfer, if the competent authority of the Member State in question supplies sufficient information for the identification of the taxpayer and the amount withheld or if this information is provided by the individual supported by documentary evidence with an official Hungarian translation attached.

According to the Section 1 of the Article 13 of the Directive Member States levying withholding tax shall provide for one or both of the following procedures in order to ensure that the beneficial owners may request that no tax be withheld:

-          a procedure which allows the beneficial owner expressly to authorise the paying agent to report  suitable information of any interest payment to the competent state tax authority,

-          a procedure which ensures that withholding tax shall not be levied where the beneficial owner presents to his paying agent a certificate drawn up in his name by the competent authority of his Member State of residence including the data detailed above.

The individual beneficial owner resident in Hungary can ask for a certificate for non-deduction of withholding tax by filling in the application form No. K06 or submitting another form indicating the same data to the central or branch office customer services of the NTCA (NAV) Directorates.

The certificate includes the following data:

-          name, address and tax identification number (date and place of birth in the lack of these data) of the beneficial owner

-          name and address of the paying agent

-          the bank account number of the beneficial owner or the identification number of security

-          certificate of residence

The issue of the certificate is exempt from duty.

When the individual does not possess a tax identification number, the county directorate of the domicile of the individual creates a tax identification number for him/her on the basis of the data of the claim.

The applicant can supply the name and the address of the paying agent and the data identifying the investment in the claim or in the certificate form attached to the claim by filling in the data indicating in the point 1.1, 1.2 and 1.3.

In order for the implementation of the rules of the Council Directive 2003/48/EC on taxation of savings income in the form of interest payments the Republic of Hungary signed agreements with Channel Island, Isle of Man and the dependent or associated Caribbean areas. When an individual resident in Hungary is qualified beneficial owner in Guernsey, Jersey, Isle of Man, The Netherlands Antilles, Aruba, Anguilla, British Virgin Islands, Cayman Islands or in Monserrat and submit an application for the issue of the certificate, the tax authority will issue the certificate mentioned above according to the procedure drawn up in this leaflet.

 In order to avoid document forgery the issuing NTCA (NAV) Directorate will verify the authenticity of the certificate upon request by the paying agent (or the user of the certificate) provided that they annex a copy of the certificate and supply the inscription of the impressed stamp.

According to the regulations of the Directive the certificate shall be issued to any applicant within two months following such request. The directorates of the NAV stamp such certificates with impressed stamp. The certificate is valid for a period not exceeding three years.

The certificate can be issued on a certificate form established by an authority of another Member State if the applicant attaches the official Hungarian translation of the certificate and the form includes the data detailed above.

The application form for the certificate and the certificate form are published on the Internet and can be downloaded. It is not obligatory to use that application form or certificate form; nevertheless, their use and submission are practical to supply the required data  to allow for faster administration.

These  guidlines include  basic information. If you have further questions, please turn to the central or  branch office customer services of the Directorates where you can obtain answers. The addresses, phone numbers and opening hours of the central or branch office customer services of the Directorates are available on the official website of the NTCA (NAV) (.

• Application form No. K07 for the issue of the certificate of the taxation under the general arrangements for business taxation*

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• Certificate for entities whose profits are taxed under the general arrangements for business taxation*

• Application form No. K06 for the issue of the certificate for non-deduction of withholding tax*

• Certificate for non-deduction of withholding tax*

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