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Art. 7.

Definitions of common terms


(1) For purposes of this Code, except for Title VI, the terms and expressions below have the
following meanings:1
1. activity any activity carried out by a person for the purpose of earning revenues;
2. dependent activity any activity carried out by an natural person in an employment
relationship;
2.1. Any activity can be reclassified as dependent if it meets at least one of the
following criteria:
a) the income beneficiary is subordinated to the income payer, namely to the
management bodies of the income payer, and complies with the working requirements
imposed by the latter, such as: job description, working place, working hours;
b) in the course of activity, the income beneficiary uses the material resources of the
income payer, that is adequately equipped premises, special work or protection equipment,
tools and similar and contributes only their efforts, be it physical or intellectual, but not their
equity;
c) for business purposes, the income payer bears the travel expenses of the income
beneficiary, such as the allowance for delegation and secondment in Romania and abroad, as
well as other similar expenses;
d) the income payer bears the annual leave allowance and the allowance for
temporary work incapacity, on behalf of the income beneficiary.2
2.2. If an activity is reclassified as dependent, income tax and mandatory social
security contributions, assessed according to the law, shall be recomputed and transferred,
being jointly due by the income payer and the income beneficiary. In this case, the rules
concerning assessment of tax on salary income derived outside the primary position,shall
apply;3
3. dependent activity at the primary position any dependent activitycarried out based
on an natural person employment contract or a special status set out by legislation reported to
the employer as the primary position by the employee; if the activity is conducted for several
employers, the employee is bound to report to each employer the place wherefrom such
position which they consider primary is performed;4;

1
Article 7 paragraph (1) - the introductory part was amended by EO 106/2007.
2
Subparagraph 2.1 was amended by EO 82/2010 as of 10.09.2010.
3
Article 7 paragraph (1) point 2.1 was inserted by EO 58/2010 as of 01.07.2010.
4
Point 3 was amended by point 1 of Ordinance no. 30/2011 as of 01.01.2012
4. independent activity any activity carried out on a regular basis by a natural person
other than a dependent activity;
5. association without legal personality any consortium, economic interest group,
civil partnership (Rom. societate civila) or other entity that is not a separate taxable person for
purposes of income and profit tax, according to norms issued in application thereof;
51. central tax authority - the Ministry of Public Finance, an institution in charge with the
consistent application of the tax legislation; 5
6. competent tax authorities the tax authorities within the Ministry of Public Finance
and the specialized offices of the local public administration authority, as the case may be,
that are in charge with tax-related issues;
7. finance lease agreement any lease agreement that satisfies at least one of the
following conditions:
a) the risks and rewards of the ownership right over the leased asset are transferred to
the lessee when the lease agreement takes effect;
b) the lease agreement specifically provides for the transfer of the ownership right
over the leased asset to the lessee when the agreement expires;
c) the lessee has the option to purchase the asset upon expiry of the agreement, and
the residual value expressed as a percentage is less or equal to the difference between the
lease term and the maximum normal useful life, compared to the maximum normal useful life,
expressed as a percentage;
d) the lease term exceeds 80% of the maximum normal useful life of the leased asset;
within the meaning of this definition, the lease term includes any period for which the lease
agreement may be extended;
e) the total amount of lease payments, save for ancillary expenses, exceeds or equals
the entry value of the asset.6
8. operating lease agreement any lease agreement entered into by and between a
lessor and a lessee which transfers to the lessee the risks and rewards of the ownership right,
save for the sale risk of the asset at the residual value and which does not meet any of the
conditions referred to in letters b) to e) under point 7. The sale risk of the asset at residual
value exists when the buy-back option is not exercised at the beginning of the agreement or

5
Point 51 was inserted by point 3 of EO no. 117/2010 as of 01.01.2011.
6
Point 7 was amended by art. I point 1 of Law no. 343/2006 as of 01.01.2007.
when the lease agreement specifically provides for the return of the asset upon expiry of the
agreement;7
9. commission any payment in cash or in kind made to a broker, a general
commissioner agent or to any person similar to a broker or a general commissioner agent, for
intermediation services performed in connection with a commercial operation;
10. mandatory social security contributions any contributions that must be paid in
accordance with the effective legislation for protection of unemployed persons, health
insurance or social security;
11. tax credit a reduction in income or profit tax by the amount of the tax paid abroad,
according to double tax treaties or as provided in this Code;
12. dividend a distribution in cash or in kind made by a legal person to a participant in
the legal person as a consequence of the ownership of shares/units in such legal person,
except for:
a) a distribution of additional shares/units that do not modify the percentage of
ownership of the shares/units of any participant in the legal person;
b) a distribution made in connection with the acquisition/redemption of its own
shares/units in the legal person that does not modify the percentage of ownership of the
shares/units of participants in the legal person;
c) a distribution in cash or in kind made in connection with the liquidation of a legal
person;
d) a distribution in cash or in kind made upon reduction of share capital actually
constituted by participants.
e) a distribution of issue premiums, proportionally with the part incumbent on each
participant.
The following amounts shall also be treated as dividends from a tax perspective and shall be
subject to the same tax treatment as dividend income:
- the amount paid by a legal person for goods or services purchased from a
participant in the legal person exceeding the arms length price for such goods and/or
services, if the amount in question was not subject to taxation for income or profit tax
purposes at the beneficiary;
- the amount paid by a legal person for the goods or services supplied in favour of a
participant in that legal person, if the payment is made by the legal person to its personal
interest.8
7
Point 8 par. (1) was amended by art. I point 1 of Law no. 343/2006 as of 01.01.2007.
13. interest any amount that is required to be paid or received for the use of cash,
regardless whether required to be paid or received within a debt obligation, in connection with
a deposit, or under a finance lease agreement, instalment sale or other deferred payment sale;
131. copyright and related rights literary, artistic or scientific original works of
authorship, regardless of means of creation, medium of expression and independently of their
value or destination, derivative works employing one or more pre-existing works, as well as
related rights and sui generis rights, according to Law no. 8/1996 regarding copyright and
related rights, as amended and completed.9
14. franchise a trading system based on continuous collaboration between financially
independent natural persons or legal persons, in which a person, called the franchiser, entitles
another person, called the beneficiary, to use or develop a business, product, technology or
service;
141. deferred profit tax tax payable / recoverable in the future in relation to temporary
taxable / deductible differences between the accounting value of assets or debts and the tax
value thereof;10
15. know-how any information on certain industrial, commercial or scientific
experience that is necessary for the manufacture of a product or for the application of an
existing process and that is not permitted to be disclosed to other persons without the
authorization of the person that provided such information; inasmuch as it is derived from
experience, know-how is what a manufacturer cannot know from mere examination of the
product and mere knowledge of technical progress;
16. fixed asset any tangible asset that is held for use in the production or supply of
goods or services, for rental to third parties, or for administrative purposes, if the asset has a
normal useful life of more than one year and a value exceeding the limit provided by
Government Decision;
17. non-resident any foreign legal person, any non-resident natural person, and any
other foreign entities, including collective placement bodies without legal personality, which
are not registered in Romania according to the law;11
18. non-profit organisation any association, foundation or federation established in
Romania in accordance with the legislation in force, but only if the income and assets of the

8
Point 12 par. (2) letter d) was amended by art. I point 1 of GO 83/2004 and by EO 109/2009 as of 01.01.2010.
9
Article 7 paragraph (1) point 131 was inserted by EO 58/2010 as of 01.07.2010.
10
Point 141 was inserted by point 2 of Government Ordinance no. 125/2011 as of 01.01.2012.
11
Point 17 was amended by art. I point 1 of EO 127/2008 as of 01.01.2009.
association, foundation or federation are used for an activity of general, community or non-
lucrative interest;
19. participant any person that is the owner of a share/unit;
20. person any natural person or legal person;
21. related parties a party is related with another party if the relationship between them
is defined in at least one of the following cases:
a) an natural person is a related party of another natural person if such persons are
spouses or relatives up to the third degree, inclusively. Between related parties, the price for
the transfer of tangible or intangible assets or the price for the supply of services constitutes a
transfer price;12
b) an natural person is related with a legal person if the natural person owns, directly
or indirectly, including holdings of related parties, a minimum of 25%, by value or by
number, of the shares/units or voting rights in the legal person, or effectively controls the
legal person;
c) a legal person is related with another legal person if at least:
(i) the first legal person holds, directly or indirectly, including holdings of related
parties, a minimum of 25% of the value/number of shares/units or voting rights in the other
legal person or controls the legal person;
(ii) the second legal person holds, directly or indirectly, including holdings of
related parties, a minimum of 25% of the value/number of shares/units or voting rights in the
first legal person;
(iii) a third party legal person holds, directly or indirectly, including
holdings of related parties, a minimum of 25% of the value/number of shares/units or voting
rights both in the first and in the second legal person.13
22. non-resident natural person - any natural person who is not a resident natural person;
23. resident natural person - any natural person who meets at least one of the following
conditions:
a) the person has his or her domicile in Romania;
b) the centre of vital interests of the person is located in Romania;
c) the person is present in Romania for a period or periods that exceed in aggregate
183 days during any period of 12 consecutive months ending in the calendar year in question;

12
Letter a) was amended by point 2 of Law no. 343/2006 as of 01.01.2007.
13
Point 21 was amended by art. I point 2 of GO 83/2004 as of 01.01.2005.
d) the person is a Romanian citizen who is working abroad as an official or employee
of Romania in a foreign state.
By way of derogation from letters a) to d), a resident natural person shall not be a foreign
citizen under a diplomatic or consular status in Romania, a foreign citizen who is an official
or employee of an international and intergovernmental organisation that is accredited in
Romania, a foreign citizen who is an official or employee of a foreign state in Romania nor
the family members of such foreign citizens;
24. Romanian legal person any legal person that was incorporated in accordance with
the Romanian legislation;14
241. legal person set up according to the European legislation any legal person
incorporated under the terms and using the mechanisms provided by European regulations;15
25. foreign legal person any legal person that is not a Romanian legal person and any
legal person set up according to European legislation not having the registered office in
Romania;16
26. arms length price the amount that an independent customer would pay to an
independent supplier at the same time and place for an identical or similar good or service
under fair competition terms;
27. real estate any land, building or construction erected or incorporated into the
land;17
28. royalty any amount required to be paid in cash or in kind for the use of, or the right
to use, any of the following:
a) a copyright of a literary, artistic or scientific work, including films or tapes for
radio or television broadcasts, as well as for carrying out audio or video recordings;
b) any patent, invention, innovation, license, trademark, trade name, franchise,
drawing, design, model, plan, sketch, secret formula or production process, or software;
Within the meaning of this law, a royalty does not include remuneration in cash or in kind
paid for the acquisition of software that is intended solely to operate such software, without
modifications other than those necessary to install, implement, store or use such software. In

14
Amended by EO 109/2009 as of 01.01.2010
15
Inserted by EO 109/2009 as of 01.01.2010.
16
Amended by EO 109/2009 as of 01.01.2010.
17
Point 27 was amended by art. I point 2 of GO 83/2004 as of 01.01.2005. [27. immovable property - any of the
following: a) any land; b) any building or other construction erected or incorporated in land; c) any crop,
timber, mineral deposit or other natural resource that is attached to land; d) any property that is accessory to
property provided in letters a) to c), including any livestock and any equipment used in agriculture or forestry;
e) any right to property described in lett. a) d), including the right to use or the right to obtain income from
such property;]
addition, for purposes of this law, a royalty does not include remuneration in cash or in kind
paid for the acquisition of the entire copyright of a computer program.
c) any broadcast, including public broadcasts, be it direct or indirect by cable,
satellite, fibre-optic or other similar technology;
d) any industrial, commercial or scientific equipment, any movable assets, means of
transport or containers;
e) any know-how;
f) the name or image of any natural person or other similar rights concerning an
natural person.
Furthermore, a royalty includes any amount required to be paid in cash or in kind for the right
to record or broadcast in any manner a performance, a show, a sporting event or any other
similar activity.
29. resident any Romanian legal person, any foreign legal person having the place of
effective management in Romania, any legal person having the registered office in Romania,
set up according to the European legislation, and any resident natural person;18
30. Romania the territory of the state of Romania, including the territorial waters and
the air space above the territory and territorial waters, over which the state of Romania
exercises its sovereignty, as well as the contiguous zone, the continental shelf and exclusive
economic zone over which Romania exercises its sovereign rights and jurisdiction, according
to domestic law and international legal norms and principles;
31. unit/share any share or other holding in a general partnership, limited partnership,
joint stock company, joint stock partnership, limited liability company, or other legal person
or an open investment fund;
311. security any transferable securities, units in an open investment fund or other
financial instrument, qualified as such by the National Securities Commission, including
derivative financial instruments, and shares;19
32. transfer any sale, assignment or alienation of the ownership right, the exchange of
the ownership right for services or for another ownership right as well as the transfer of the
patrimonial fiduciary mass within the fiduciary operation, as per the Civil Code;20
33. fiscal value is as follows:

18
Amended by EO 109/2009 as of 01.01.2009.
19
Inserted by EO 109/2009 as of 01.01.2009.
20
Point 32 was amended by point 2 of Ordinance no. 30/2011 as of 01.10.2011
a) for assets and liabilities, other than those referred to in letters b) and c) - the entry
value, as per the accounting regulations;21
b) for shares/units/securities the acquisition or contribution value used for the
computation of the gain or loss, for income or profit tax purposes;22
c) for depreciable fixed assets and land the acquisition cost, the production cost or
the market value of fixed assets acquired free of charge or established as contribution on entry
into the taxpayers assets, used for the computation of fiscal depreciation, where applicable.
The fiscal value shall also include accounting revaluations performed according to the law. In
case of revaluation of depreciable fixed assets which results in a decrease of their value below
the acquisition cost, production cost or market value of fixed assets acquired free of charge or
established as a contribution, as applicable, the undepreciated value of depreciable fixed
assets shall be re-computed up to the amount established based on the acquisition cost,
production cost or market value of fixed assets acquired free of charge or established as a
contribution, as applicable. In case of the revaluation of land which triggers a decrease of their
value below the acquisition cost or market value of those acquired free of charge or set up as a
contribution, where applicable, the fiscal value is the acquisition cost or the market value of
those acquired free of charge or set up as a contribution, as applicable;23
d) for provisions and reserves the deductible value upon computation of the taxable
profit.24
34. Taxpayers applying the accounting regulations in line with the International Financial
Reporting Standards so as to determine the fiscal value shall also consider the following rules:
a) For intangible assets, revaluations carried out under the accounting regulations
shall also be included in the fiscal value. If revaluations of intangible assets are carried out,
resulting in a reduction of their value below the undepreciated value determined based on the
entry value, the undepreciated value of intangible assets shall be recomputed up to the level of
the one determined based on the entry value.
b) If the cost-based model is used instead of the revaluation model, the discount by
the inflation rate shall not be included in the fiscal value of assets and liabilities determined in
line with the rules under point 33, except for depreciable fixed assets and land;

21
Amended by EO 109/2009 as of 01.01.2010.
22
Amended by EO 109/2009 as of 01.01.2010.
23
Article 7 point 33 letter c) was amended by EO 106/2007 as of 01.01.2008.
24
Point 33 of par. (1) was inserted by art. I point 3 of GO no. 83/2004 as of 01.01.2005.
c) If the cost-based model is used instead of the revaluation model, revaluations
performed in line with accounting regulations shall be subtracted of the fiscal value of
depreciable fixed assets and land, and an discount by the inflation rate is also included;
d) For real estate classified as real estate investments, the fiscal value shall be the
acquisition cost, production cost or the market value of the real estate investments acquired
free of charge or established as a contribution, upon the date they enter the patrimony of the
taxpayer, used for the computation of tax depreciation, as applicable. Accounting evaluations
performed in line with accounting regulations shall be also included in the fiscal value. If
evaluations are conducted in relation to real estate investments resulting in a reduction of their
value below the undepreciated value determined based on the acquisition/production cost or
the market value of real estate investments acquired free of charge or established as
contribution, the fiscal undepreciated value of real estate investments shall be recomputed up
to the level of the one determined based on the acquisition/production cost or market value, as
applicable, of real estate investments.25
e) For depreciable fixed assets classified as biological assets, the fiscal value shall be the
acquisition cost, production cost or the market value in the case of biological assets acquired
free of charge or established as a contribution, upon the date they enter the patrimony of the
taxpayer, used for the computation of tax depreciation, as applicable. Accounting evaluations
performed in line with accounting regulations shall be also included in the fiscal value. If
evaluations are conducted in relation to biological assets resulting in a reduction of their value
below the undepreciated value determined based on the acquisition/production cost or the
market value in the case of biological assets acquired free of charge or established as
contribution, the fiscal undepreciated value of biological assets shall be recomputed up to the
level of the one determined based on the acquisition/production cost or market value, as
applicable.26
(2) The criteria for determining whether an activity carried out by a natural person is
dependent or independent shall be provided in norms.

25
Point 34 was introduced by point 3 of Emergency Ordinance no. 125/2007 as of 01.01.2012.
26
Inserted by GO no.8/2013.

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