The Judgment No. 366/2026 of the Constitutional Court deserves close attention, not only for its outcome, but also for the scope of its reasoning.
In very brief terms, the case brought before the Court concerned the former Non-Habitual Residents (RNH) regime, more specifically the application of the special 20% IRS rate to Category A and B income earned from high value-added activities of a scientific, artistic, or technical nature.
The IRS Code provision referred the definition of those activities to an Ordinance. It was this referral that the Constitutional Court held to be unconstitutional, on the grounds that the law did not contain sufficiently specific criteria and granted the Administration an excessive margin to define who could benefit from the regime.
Context of the decision
The decision is grounded in a constitutionally sound idea: the essential elements of taxes, including tax benefits, must derive from statute.
In a rule-of-law state, tax matters require predictability. Taxpayers must be able to understand, from the law, whether they are covered by a given tax regime. Likewise, the Government should not be able to define freely, by Ordinance, who benefits from a special IRS rate.
On this point, the judgment recalls that tax legality is not a mere formality. It is a safeguard for taxpayers and a limit on administrative action.
Statutory reservation in tax matters
From a doctrinal standpoint, the most debatable part of the judgment lies in the conclusion that the expression “high value-added activities of a scientific, artistic, or technical nature” is a concept that is not only indeterminate, but indeterminable.
This characterisation seems particularly demanding and likely to generate debate in legal scholarship.
It is true that the expression is broad. It is also true that the legislature could have defined the criteria for applying the regime more clearly. However, that does not necessarily mean that the concept was impossible to interpret in legal terms.
Tax law frequently uses open-ended concepts. The Court itself acknowledges that the use of indeterminate concepts is not, in itself, incompatible with the Constitution.
The central question should have been whether the law contained sufficient minimum criteria to guide regulatory action and limit the Administration’s discretion.
Legislative specification of the concept of high value-added activity
This is one of the most relevant points in the discussion.
The legal provision identified several elements of the regime:
- the persons covered: non-habitual residents;
- the relevant income categories: Categories A and B;
- the nature of the activities: high value-added;
- the substantive domains: scientific, artistic, or technical;
- the tax consequence: application of the special 20% rate.
It may be debated whether this level of specification was sufficient. There are strong arguments to support that it was not.
However, stating that the concept was legally indeterminable seems to take the reasoning further than was necessary to resolve the case.
Technical Ordinance or substitution of the legislature?
Another sensitive point lies in how the judgment characterises the role of the Ordinance.
For the Court, the Ordinance defined, in a primary and innovative way, who could benefit from the regime. In other words, it did not merely implement the law: it substituted the legislature in defining an essential element of the tax benefit.
This conclusion is defensible, but it is not inevitable.
It could also be argued that the main policy choice was already in the law: to create a special rate for non-habitual residents who carried out qualified, value-added activities within scientific, artistic, or technical domains.
On that reading, the Ordinance would not create the benefit, nor define the rate, nor independently choose the purpose of the regime. It would merely give technical effect to a legislative choice already made.
The boundary between technical implementation and normative innovation is, in this case, particularly difficult. For that reason, the judgment perhaps called for more nuanced reasoning as to the exact point at which the Ordinance ceased to implement the law and began to substitute it.
The concrete scope of the decision
It is important to stress that the Constitutional Court did not declare the entire Non-Habitual Residents regime unconstitutional.
Nor did it declare, with generally binding force, the invalidity of the entire table of activities.
The decision is confined to the specific case, in particular to Category B income and to the segment of the Ordinance relating to directors of administrative and commercial services.
Even so, the reasoning adopted is broad enough to raise some uncertainty as to the future application of similar concepts and referrals.
By stating that the legal concept was indeterminate and indeterminable, and that the Ordinance ultimately assumed a truly primary normative function, the Court leaves room for similar arguments to be invoked in other tax contexts.
The underlying issue
The decision protects the statutory reservation and reinforces the requirement for legislative specification in tax matters. That reinforcement is positive.
However, the judgment also appears not to place sufficient emphasis on the technical role that administrative regulation plays in complex tax regimes. In many cases, the tax system depends on an interplay between statute and regulation. The question is not whether that interplay can exist. It is how far it can go.
And this is where the judgment becomes most relevant.
The question that remains is not only whether the former RNH regime was poorly designed. The question is broader: to what extent may the tax legislature rely on Ordinances to make operational regimes that the law defines only in general terms?
Judgment No. 366/2026 answers with a high level of strictness, which may be regarded as excessively strict.
The considerations set out are strictly general in nature and do not dispense with a case-by-case analysis of specific situations.
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