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https://support.steampowered.com/kb_article.php?ref=1122-RTSC-0478#transferred
https://store.steampowered.com/steam_refunds/
Steam Wallet Refunds
You may request a refund for Steam Wallet funds within fourteen days of purchase if they were purchased on Steam and if you have not used any of those funds.
Pay Pal is not a bank.
You will be issued a full refund of your purchase within a week of approval. You will receive the refund in Steam Wallet funds or through the same payment method you used to make the purchase. If, for any reason, Steam is unable to issue a refund via your initial payment method, your Steam Wallet will be credited the full amount. (Some payment methods available through Steam in your country may not support refunding a purchase back to the original payment method. Click here for a full list.)
Depending on your country, PayPal might not show up, but I am not sure.
For example, I am in the US and when I use the link, PayPal is in my list as supported.
But of course, I can't say for sure as I can't test that as I am in the US.
As this refund policy largely follows what the EU law we've all spoken about before says, it follows the term that whatever payment method you used to buy, you will get refunded to unless you request otherwise.
And if you made payment by Paypal you can absolutely expect refund through Paypal.
The only issues that could potentially arise here is if there's some prepaid debit card, where payment back to it might not be possible, in which case it'll probably just default to steam wallet.