Hungarians with U.S. Investments Should Consider the U.S. Tax Implications of the Termination of the Hungary-U.S. Income Tax Treaty
July 18, 2022

Az egyesült államokbeli befektetésekkel rendelkező magyaroknak mérlegelniük kell a Magyarország-USA jövedelemadó-szerződés felmondásának amerikai adóvonzatait

On July 15, 2022, the U.S. Department of Treasury (“the Treasury”) announced that it provided notice to Hungary that it was terminating the United States notified Hungary of its termination of the Convention between the Government of the United States of America and the Government of the Hungarian People’s Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, in force since 1979 (the “Treaty”). The Treasury provided this notification on July 8, 2022, with an effective date of January 28, 2023. However, the reduced withholding tax rates of the Treaty will remain through December 31, 2023.


The following chart highlights some of the anticipated changes due to the termination of the Treaty:

Type of Income Treaty Withholding Rate* Withholding Rate After Termination
Dividends paid to a company that owns, directly or indirectly, at least 10% of the voting shares of the dividend-distributing company 5% 30%
Other dividends 15% 30%
Interest 0% 30%
Royalty 0% 30%

*Certain exclusions may apply.


With the high increase in withholding tax rates, Hungarians with U.S. investments should review their current American holdings from a tax efficiency perspective. Other tax structures may reduce the impact of the higher withholding tax rates. Investors should also consider the capital structure of their U.S. investments to ensure the best tax efficiency.


It has been widely reported that the Treasury’s decision to terminate the Treaty resulted from Hungary’s reluctance to adopt a global corporate minimum tax rate as part of the OECD Base Erosion and Profits Shifting tax law recommendations. We understand that it may be possible for the Treasury to rescind the termination notice of the Treaty, but the process is not described in the Treaty. Hungarian taxpayers should still consider the U.S. tax considerations before the increase in withholding tax rates, as any tax planning may take time to complete.


Please contact International Capital Associates, LLC if you need help with inbound tax planning and structuring or U.S. investment tax reviews.

U.S.-Russia Tax Treaty Suspension

June 18, 2024
The U.S. Department of the Treasury announced on June 17, 2024, that the United States has formally notified the Russian Federation about the suspension of certain articles and provisions of the Convention between the United States of America and the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, signed at Washington, June 17, 1992. This suspension will take effect on August 16, 2024, and will continue until otherwise decided by the two governments. This decision is in response to the Russian Federation's notification on August 8, 2023, expressing its desire to suspend specific articles and provisions of the Convention and the Protocol. The announcement can be seen at United States’ Notification of Suspension, By Mutual Agreement, of the 1992 Tax Convention with Russia | U.S. Department of the Treasury . Taxpayers who rely on the U.S.-Russia income tax treaty should plan for this suspension. Please contact International Capital Associates, LLC if you need help planning for the treaty suspension or if you need other U.S. tax services .

U.S. Internal Revenue Service Releases Updated Form W-8EXP With Updates for Qualified Foreign Pension Funds

December 11, 2023
In November 2023, the U.S. Internal Revenue Service released an updated Form W-8EXP. The Form W-8EXP is a U.S. withholding tax certificate for foreign governments or other foreign organizations. Confusingly, the words “qualified foreign pension fund” do not appear on the Form W-8EXP. However, the updates to the Form W-8EXP are intended to allow a non-U.S. pension fund (or qualifying entity) to certify its Qualified Foreign Pension Fund status. A non-U.S. pension fund may certify that it is a “Withholding Qualified Holder Under Section 1445” provided it meets the requirements of Section 897(l) and Treas. Reg. 1.897(l)-1 as a Qualified Foreign Pension Fund. A “Qualified Holder” includes certain wholly-owned entities that meet the requirements of Treas. Reg. 1.897(l)-1(d)(2) or (3). A “Withholding Qualified Holder” also consists of a non-U.S. partnership wholly owned by Qualified Holders. Unfortunately, Form W-8EXP still does not contain sections to allow the taxpayer to claim the benefits of a U.S. income tax treaty. Non-U.S. pension funds and governments will still need to complete Form W-8BEN-E to claim U.S. income tax treaty benefits with a U.S. withholding agent, such as reduced dividend and interest withholding rates. The release of the updated Form W-8EXP does not invalidate any prior Qualified Foreign Pension Funds certifications. In the future, U.S. withholding agents may request a valid Form W-8EXP instead of other Qualified Foreign Pension Fund certifications. A Withholding Qualified Holder should ensure that the Form W-8EXP is complete and valid to make a Qualified Foreign Pension Fund certification using the Form W-8EXP. Please contact International Capital Associates, LLC if you need help determining if the entity is considered a Withholding Qualified Holder, if you need assistance completing Form W-8EXP , or if you need other U.S. tax services .