Form W-8BEN and the US Treaty: What Actually Gets Withheld

General information about tax rules, not tax or legal advice. Rules change and every situation is different: check with a qualified adviser in your country before you file.

If you opened an account with an American broker from Budapest before 2023, you filled in a Form W-8BEN, you wrote Hungary on line 9, and the treaty claim you made was true. If you fill in the same form today and write the same word in the same box, you are certifying something that is no longer correct.

The income tax convention between Hungary and the United States, in force since the end of the 1970s, has been terminated. Not suspended, not renegotiated, not under review. Terminated, by the American side, with a set of dates that have already passed. Hungary is now in the small group of countries whose residents deal with the United States on statutory terms only.

For somebody holding American dividend stocks that is an expensive change. For somebody trading MNQ, MES or CL it changes far less than the headlines suggest, because futures profits were never inside the withholding system in the first place. But it does change something at the Hungarian end that almost nobody mentions, and that part deserves your attention more than the American part does.

What was terminated, and when

The dates are on the record and worth writing down, because a lot of forum advice is still working from the old world.

The IRS keeps a page of Hungary tax treaty documents, and it states that in accordance with the convention's provisions on termination, termination was effective on 8 January 2023. It then gives the two dates that actually govern money: with respect to taxes withheld at source the convention ceased to have effect on 1 January 2024, and in respect of other taxes it ceased to have effect for taxable periods beginning on or after 1 January 2024.

The same message appears on the IRS list of income tax treaties, where Hungary still has an entry but carries a caution that the treaty is terminated. That is the operative fact for any American payer's compliance system: there is an entry, and the entry says do not apply treaty rates.

So the honest answer to the question at the top of this article is that Part II of your W-8BEN, lines 9 and 10, stays empty. You do not write Hungary there. You do not write the European Union there. A treaty claim under a terminated treaty is not an optimistic interpretation, it is a false certification made under penalties of perjury, and the signature at the bottom of page two is yours.

Part I still matters more than Part II

Losing the treaty does not make the form pointless. It makes the first half of it more important, not less.

The IRS title, given on the page about Form W-8BEN, is Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting. The treaty claim is an optional module attached to a document whose main purpose is to establish that you are a foreign person and that the money belongs to you.

That statement has value on its own. Without a valid form the payer must rely on presumption rules, and those rules are written to protect the US Treasury. An undocumented payee can end up treated as a US person who has not certified a taxpayer identification number, which triggers backup withholding under the domestic rules. Backup withholding is applied to gross proceeds. On an active futures account, gross proceeds bear no relationship whatsoever to what you earned, and watching a percentage of them leave is a memorable experience.

The instructions put the consequence in one sentence: failure to provide a Form W-8BEN when requested may lead to withholding at the thirty per cent foreign person rate, or to backup withholding. The current revision of the form is dated October 2021.

Where the thirty per cent lands now

American law splits what a non resident can receive from the United States into two families. One is income effectively connected with a US trade or business, taxed on a net basis at graduated rates through a US return. The other is income that is fixed, determinable, annual or periodical, shortened by the IRS to FDAP, taxed at a flat thirty per cent, with no deductions, collected by the payer before you see the money.

FDAP is a defined list: dividends, certain interest, royalties, some pensions and annuities. It is the family that treaties usually discount, and it is exactly where the loss of the Hungarian treaty is felt.

Take the simplest case. A Hungarian resident holds a US listed dividend paying share in a brokerage account. Before 2024, the treaty's dividend article gave a reduced rate on portfolio dividends. From 1 January 2024, with the convention no longer in effect for taxes withheld at source, the statutory thirty per cent applies. On a payment of one thousand dollars of dividends a year, the difference between the old treaty rate and the statutory rate is not a rounding error, and it repeats every year.

Interest is less dramatic, because a large part of ordinary interest paid to non residents falls under the domestic portfolio interest exemption, which is a feature of American law rather than of any treaty and therefore survived the termination untouched. Check the specifics with your broker rather than assuming.

Futures gains are still outside all of this

Now the part that matters to a futures trader, and it is genuinely good news.

The profit on a closed MNQ position is not a dividend, not interest and not a royalty. It is a gain on the disposal of a contract, and gains sit under different rules from FDAP. Two of those rules keep a Hungarian resident out of the American withholding machinery, and neither of them depends on a treaty existing.

The first is sourcing. For a non resident individual, a gain on the sale of personal property is generally sourced to where the seller resides, not to the exchange where the order was matched. A trade closed by someone sitting in Debrecen produces a gain that is not US source income. US withholding reaches US source income, so there is nothing to withhold, and therefore nothing a treaty would have reduced. The termination is irrelevant to that case.

The second is the trade or business test. Trading for your own account through a US broker does not by itself make a non resident who is not a dealer into a person carrying on a trade or business in the United States. That safe harbour is why European retail clients can hold accounts in Chicago without acquiring an American filing obligation, and it did not change in 2023 or 2024 either.

One limit, stated plainly. A flat thirty per cent can be imposed on US source capital gains of a non resident individual who is physically present in the United States for one hundred and eighty three days or more in the tax year, and the IRS is explicit that this test is not the substantial presence test and can catch transactions executed while you were outside the country. If you spend half your year in the United States, you need an American adviser.

The Hungarian knock on that nobody mentions

Here is the part that actually costs Hungarian traders money, and it happens at home rather than in Washington.

Hungarian personal income tax law has a favourable category for income from what it calls controlled capital market transactions, ellenőrzött tőkepiaci ügylet. Income in that category is calculated on a net basis across the year, losses can be set against gains within the rules, and it is taxed as capital market income rather than as general other income.

The category is not open to every transaction anywhere. It is defined by reference to the investment service provider and the market: broadly, the provider has to be operating in a state of the European Economic Area, or in a state with which Hungary has a double taxation convention. Read that second condition again with the termination in mind. For an American broker that was not in the EEA, the qualifying route ran through the existence of the treaty, and the treaty is gone.

The consequence, if your transactions fall outside the controlled category, is that the income is dealt with under a different and generally less favourable heading, with a different calculation base and the possibility of social contribution tax on top of personal income tax. The flat personal income tax rate is not the whole bill in that scenario, which is the difference that hurts.

Two things follow, and they are the most important sentences in this article for a Hungarian reader. First, this is a question about your own broker, your own account type and your own year, and the answer is not the same for everybody. Second, it is a question for NAV, the National Tax and Customs Administration, or for a Hungarian tax adviser who deals with securities income, and not for a trading group. NAV publishes the rules, the current rates and the guidance on double taxation and on the taxation of foreigners and foreign income, and its own English pages warn that the full detail exists only in Hungarian.

If you have been trading through an American broker since before 2024 and have never had this conversation with anyone qualified, that is the single most valuable hour you can book this quarter.

It is also worth being clear about what the termination did not touch, because the rumour mill in 2023 was not careful. It did not stop Hungarians opening accounts with American brokers. It did not create an American filing obligation where none existed. It did not retroactively tax years that closed before 2024. What it did was remove the reduced rates on a specific list of payments from a specific date, and remove one of the two routes through which a foreign investment service provider qualifies under Hungarian domestic law. Everything else works as it did.

Filling the form in from Hungary

The mechanical part is short, and the same handful of lines cause every rejection.

Line	What a Hungarian resident puts in it
1	Your name as it appears in your passport. Note that Hungarian name order is reversed on international documents, so use the passport version and use it consistently everywhere.
2	Country of citizenship, written out in full.
3	Your permanent residential address in Hungary. Not a post box, not an accountant's office, and never an address in the United States.
5	US taxpayer identification number, only if you really have one. Most Hungarian traders leave it blank.
6a	Your foreign tax identifying number, which in Hungary is the ten digit adoazonosito jel, the personal tax identification number issued by NAV.
8	Date of birth in month, day, year order. Hungarian date habits run year, month, day, so this field is reversed twice over and is the most misfiled line on the form.
9	Leave blank. The treaty has been terminated.
10	Leave blank.

Line 6a is required rather than optional where you hold an account at a US financial institution and receive US source income, unless your jurisdiction does not issue identifying numbers. Hungary does, so put the number in. A form missing it is the most common bounce there is.

If you filed a W-8BEN before 2023 with Hungary written on line 9, it is worth replacing. The old form is not a crime, it was true when you signed it, but the instructions require you to notify the payer within thirty days when a change in circumstances makes information on the form incorrect, and the disappearance of the treaty you claimed under is about as clear a case as exists. A form generally remains valid until the last day of the third calendar year after signature in any event, so most pre termination forms are expiring around now anyway.

w-8ben hungary withholding

Educational content, not investment advice. Trading futures involves substantial risk of loss and is not suitable for every investor. Any reference to Algomyth results is hypothetical, simulated over historical data, and shown in full on the performance page; past performance does not guarantee future results.