{"id":3590,"date":"2026-10-06T16:46:45","date_gmt":"2026-10-06T16:46:45","guid":{"rendered":"https:\/\/fiolegal.com\/judgment-no-366-2026-a-significant-decision-on-tax-legality-and-the-limits-of-administrative-regulation\/"},"modified":"2026-10-06T16:46:45","modified_gmt":"2026-10-06T16:46:45","slug":"judgment-no-366-2026-a-significant-decision-on-tax-legality-and-the-limits-of-administrative-regulation","status":"publish","type":"post","link":"https:\/\/fiolegal.com\/en\/judgment-no-366-2026-a-significant-decision-on-tax-legality-and-the-limits-of-administrative-regulation\/","title":{"rendered":"Judgment No. 366\/2026: a significant decision on tax legality and the limits of administrative regulation"},"content":{"rendered":"

The <\/span>Judgment No. 366\/2026<\/span><\/a> of the Constitutional Court deserves close attention, not only for its outcome, but also for the scope of its reasoning.<\/span><\/p>\n

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.<\/span><\/p>\n

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. <\/span><\/p>\n

Context of the decision<\/b><\/p>\n

The decision is grounded in a constitutionally sound idea: the essential elements of taxes, including tax benefits, must derive from statute.<\/span><\/p>\n

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. <\/span><\/p>\n

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. <\/span><\/p>\n

Statutory reservation in tax matters<\/b><\/p>\n

From a doctrinal standpoint, the most debatable part of the judgment lies in the conclusion that the expression \u201chigh value-added activities of a scientific, artistic, or technical nature\u201d is a concept that is not only indeterminate, but indeterminable.<\/span><\/p>\n

This characterisation seems particularly demanding and likely to generate debate in legal scholarship.<\/span><\/p>\n

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. <\/span><\/p>\n

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. <\/span><\/p>\n

The central question should have been whether the law contained sufficient minimum criteria to guide regulatory action and limit the Administration\u2019s discretion.<\/span><\/p>\n

Legislative specification of the concept of high value-added activity<\/b><\/p>\n

This is one of the most relevant points in the discussion.<\/span><\/p>\n

The legal provision identified several elements of the regime:<\/span><\/p>\n