Hungary adopts constitutional reform, major tax package now in the draft stage

On 19 July 2026, Hungary enacted the seventeenth amendment to Hungary's Fundamental Law, which creates a new National Asset Recovery and Protection Office, revises rules for Constitutional Court membership, and changes the election process for the President of the Supreme Court (i.e. Kúria). 

The amendment repeals paragraphs (4) and (5) of Article 37 of the Fundamental Law. which had long restricted the Constitutional Court's ability to review the constitutionality of laws governing the central budget, central taxes, duties, contributions and customs, other than on a narrow set of grounds. With their repeal, the Constitutional Court can once again examine whether legislation on the budget, central tax types, duties, contributions and customs complies with the Fundamental Law. This is a notable expansion of constitutional oversight over fiscal legislation, which will be studied by taxpayers and practitioners assessing the durability of tax measures going forward.

Draft: Summer tax package for EU Funds

Separately, the government submitted legislative proposal T/387 to Parliament on 17 July 2026, entitled the bill on tax measures necessary for the implementation of the Recovery and Resilience Plan (RRP), certain government programme points and a government decision, together with amendments to various other laws. The bill implements commitments Hungary must meet by 31 August 2026 to access previously blocked EU funds under a political agreement reached with the EU on 29 May 2026, including abolishing the personal income tax exemption for trust management, narrowing preferential corporate tax elements, levelling competitive conditions in the retail tax, and reducing the overall number of tax types.

A central feature is the retroactive (to 7 October 2023) abolition of the CO2 quota tax introduced under the previous government’s wartime emergency decree regime. The bill would refund, upon request, the tax already paid together with accrued interest to the taxpayer's domestic bank account. Importantly, this simplified refund procedure is available only to taxpayers who have not already enforced their claim relating to the CO2 quota tax and its interest through another route. Requests must be filed within 90 days of the provision's entry into force. Interest is to be calculated and paid under the existing rules of the Tax Procedure Act.

The bill also proposes reregulation of taxation on trusts (i.e. fiduciary asset managements) and trust funds (i.e. private foundations). The purpose is tax neutrality. Regarding future asset transfers, the option to pay out profits from the sale of assets placed in trust tax-free after five years is expected to be eliminated. In addition, the draft bill stipulates that starting in 2028, the tax authority is required to audit the establishment and operation of all trust and trust-fund structures established before 12 September 2023.

The draft also proposes various technical changes to tax laws, including narrowing corporate tax allowances and the phase-out of the growth tax credit, VAT Act amendments and a doubling of the unit fees for air pollution load under the environmental load fee regime. 

Other provisions apply to customs administration, local business tax advance payment rules on corporate demergers, and the organisational and status arrangements of the National Tax and Customs Administration and its president. 

Because this bill is still pending before parliament, its final content and timing of adoption remain have yet to be confirmed.

For more information on the legislative initiative of the new Hungarian government, contact your CMS client partner or the CMS experts who contributed to this article. 

The article was co-authored by Anna Rideg.