Monday, 3 August 2026
Hungary has introduced a significant package of constitutional and tax reforms that reshapes both the country’s legal framework and several aspects of its tax system. The measures combine institutional changes with fiscal reforms designed to satisfy commitments linked to the release of previously suspended European Union funding.
The constitutional amendment, which entered into force on 19 July 2026, is the seventeenth revision of Hungary’s Fundamental Law. Among its most notable provisions is the establishment of a National Asset Recovery and Protection Office, alongside changes affecting the Constitutional Court and the appointment process for the President of the Kúria, Hungary’s Supreme Court.
Constitutional Court Regains Wider Powers
One of the most significant legal developments is the removal of constitutional provisions that had limited the Constitutional Court’s ability to review legislation concerning the state budget, taxation, customs duties and other fiscal matters.
For more than a decade, the Court’s oversight of budget-related legislation was restricted to a narrow range of constitutional issues. Following the amendment, judges may once again examine whether fiscal legislation complies fully with Hungary’s Fundamental Law.
The change is expected to strengthen judicial oversight of future tax legislation and may provide taxpayers and businesses with broader constitutional grounds to challenge disputed fiscal measures.
Tax Changes Linked to EU Recovery Funding
Alongside the constitutional reform, Parliament adopted an extensive tax package implementing commitments associated with Hungary’s Recovery and Resilience Plan (RRP). The legislation forms part of the country’s efforts to meet conditions agreed with the European Union for unlocking previously withheld funding.
The package introduces a broad range of tax measures aimed at simplifying the tax system, adjusting preferential tax treatments and aligning several areas of Hungarian taxation with commitments made under the agreement reached with the EU earlier this year.
Among the reforms are changes affecting trust taxation, corporate tax incentives, retail taxation, value-added tax provisions and environmental charges.
CO₂ Quota Tax to Be Refunded
One of the most notable provisions reverses the carbon-emissions quota tax introduced under emergency legislation during the previous government.
The new law abolishes the levy with retrospective effect dating back to October 2023 and allows eligible taxpayers to recover amounts already paid together with statutory interest.
Businesses seeking reimbursement must submit their applications within 90 days after the legislation enters into force. However, the simplified repayment process is available only where taxpayers have not already pursued compensation through alternative legal channels.
Trust Taxation Revised
The legislation also reshapes the tax treatment of fiduciary asset management structures and private foundations.
The reforms are intended to establish greater tax neutrality while limiting opportunities for tax-free distributions. Under the revised framework, profits generated from assets transferred into trusts will no longer benefit from certain tax exemptions that previously became available after a defined holding period.
The National Tax and Customs Administration will also conduct systematic reviews of trust structures established within the applicable limitation period, with older arrangements scheduled for examination first before broader inspections begin in later years.
Corporate and Environmental Taxes Adjusted
The package introduces several additional fiscal measures affecting businesses.
Certain corporate tax incentives will be narrowed, while the gradual withdrawal of the Growth Tax Credit will continue. Amendments have also been made to VAT legislation, customs administration and local business tax rules governing corporate demergers.
Environmental taxation has also been strengthened through higher pollution-related charges, increasing costs for businesses subject to environmental load fees.
Wider Administrative Changes
Beyond taxation, the legislation contains amendments governing the organisation and operation of Hungary’s National Tax and Customs Administration, including provisions affecting its institutional structure and leadership.
Taken together, the constitutional amendment and accompanying tax package represent one of Hungary’s most significant legislative updates in recent years. While many of the fiscal measures are aimed at meeting EU funding commitments, the restoration of broader Constitutional Court oversight over tax legislation could have longer-term implications for the stability and judicial review of Hungary’s fiscal framework.
Source: CMS
