The Hungarian retail tax has once again become the focus of European legal disputes. As previously reported, in April 2026 the European Commission decided to refer Hungary to the Court of Justice of the European Union (CJEU), challenging the legality of the current Hungarian retail tax. Although the outcome of the case remains uncertain, a ruling condemning Hungary could raise the possibility of reclaiming Hungarian retail tax paid in the past.

The issue is particularly sensitive for market participants, as the Hungarian retail tax has imposed a significant additional burden on larger players in recent years. Therefore, the ongoing procedure carries not only legal but also substantial economic and financial implications.

How did we get here?

The special retail tax re-entered the Hungarian tax system in 2020. Its reintroduction was largely supported by the CJEU’s 2020 judgment in the Tesco case, in which the Court held that a progressive, turnover-based special tax – whose actual burden is primarily borne by large, typically foreign owned companies – is not, in itself, contrary to EU law.

The judgment emphasised that:

• Member States enjoy a broad margin of discretion in designing their tax systems;
• progressive taxation is not in itself discriminatory;
• differences in tax burdens may also stem from market structure.

However, the dispute did not end there. According to the European Commission, the current regulation differs in several respects from the system previously examined. Therefore, in 2024 it launched an infringement procedure against Hungary, which entered the judicial phase in 2026.

What is the Commission’s main objection to the Hungarian retail tax?

According to the Commission, the Hungarian rules may infringe the EU freedom of establishment, as the progressive tax burden primarily affects large, integrated companies – typically foreign-owned.

The most important new element is that the current regulation no longer allows businesses to restructure their operations in a way that could previously mitigate the tax burden. Under the applicable rules, even in franchise systems, tax bases must be aggregated where the structure resulted from a reorganisation (fragmentation) carried out after the entry into force of the Hungarian retail tax law.

This is a key difference compared to the Tesco case, where the CJEU still took into account that market participants could, to some extent, shape their operational structure.

Accordingly, the key questions in the current procedure may be:

• Does the current regulation actually restrict the freedom of establishment?
• Does indirect discrimination exist?

What decisions may be expected?

The current system remains in place

One possible scenario is that the CJEU, similarly to the Tesco judgment, again finds the Hungarian rules lawful. In this case:

• the Hungarian retail tax could remain unchanged;
• no retroactive tax refunds would be available.

Modification or phase-out of the regulation

It is also conceivable that the CJEU will object to the current system but limit the effects of its judgment to the future. In this case:

• the regulation may be amended or gradually phased out;
• however, reimbursement of previously paid tax would not be possible.

From a budgetary perspective, this solution would impose a significantly lower burden on Hungary. However, it remains a question to what extent such an outcome aligns with the government’s short- and long-term policy objectives.

Establishment of retroactive unlawfulness

The most far-reaching outcome would be if the CJEU were also to declare that the regulation had been incompatible with EU law in the past. In this case reimbursement of previously paid Hungarian retail tax could arise.

At the same time, it is important to note that, according to the CJEU’s practice, the temporal effects of a judgment may be limited in exceptional circumstances, particularly if repayment would seriously endanger a Member State’s budget. In this case, retroactive unlawfulness would not necessarily result in a tax refund.

Could the path to tax refund procedures open?

If the CJEU establishes a breach of EU law, affected businesses may have the opportunity to initiate specific tax refund procedures.

Under Hungarian tax procedural rules, taxpayers may request the reimbursement of tax paid on the grounds that the underlying legislation is contrary to EU law.

It is also important to note that:

• it is not necessarily required to wait for the final CJEU judgment;
• procedures may already be initiated now;
• due to limitation periods, proper timing may be crucial.

This may be particularly relevant for businesses that have paid substantial amounts of Hungarian retail tax in recent years.

Why is it important to pay attention now?

The significance of the current procedure goes beyond a classical tax dispute. The case:

• may entail considerable budgetary risk;
• could set a precedent for the assessment of other special taxes;
• may materially influence future Hungarian special tax policy.

Therefore, it is advisable for market participants in the retail sector to:

• continuously monitor the proceedings before the CJEU;
• assess potential refund claims;
• and examine available legal options in a timely manner.

The current procedure may realistically open the door to further disputes related to the Hungarian retail tax, including refund claims.

Our team of experts continuously monitors developments relating to the Hungarian retail tax, in particular the relevant communications and measures of the European Commission, the Court of Justice of the European Union, and the Hungarian government. Upon request, we are available to assist in clarifying strategic issues and potential procedural and enforcement options related to the Hungarian retail tax.

This article is for general information purposes only and should not be considered as advice.