Case study
Mr. LHI He is the owner of a rural property where he is dedicated to the activities of agriculture and exploitation of meat sheep, whose heads are mainly fed with the pastures that are produced on the farm itself, activities all of which are included in the special regime of the agriculture, livestock and fishing ( VAT) of the Value Added Tax ( VAT). The owner does not carry out any other economic activity.
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The products he grows, all of which are intended for sale, consist of corn and various horticultural products (lettuces, green beans and chard).
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In 2021, the cost of salaried personnel corresponding to a person who has worked full-time in the activity since 2008 amounted to 18,000 euros. The remuneration paid to this employee in 2021, included in the cost of salaried personnel, amounts to 14,000 euros.
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Mr. LHI chooses to allocate the income from its activity according to the collection and payment criteria, according to which, the income corresponding to 2021 that appears in the income record book has been the following:
Subject Cost Compensation VAT Total Total computable income (euros) 108.515 Notes to the table:
(1) In the previous year (2020), income from performing work for other farmers accounted for only 6 percent of the total income volume for that year. Consequently, in 2021, these jobs are considered included in the special regime for agriculture, livestock and fishing for the purposes of VATand do not constitute an independent activity for the purposes of the objective estimation method of IRPF , and must be computed as a differentiated product or service within the sole agricultural and livestock activity carried out by its owner. (Back)
(2) Since the recipients of said work are other farmers also covered by the special regime for agriculture, livestock and fishing of VAT, the reimbursement of compensation in relation to these operations is not applicable. (Back)
Income from the sale of corn 49,000 5.880 54,880 Income from the sale of lambs 27,000 2.835 29.835 Income from sales of horticultural products 17,000 2,040 19.040 Income from work performed for other farmers covered by the special regime for agriculture, livestock and fishing of VAT (1) 4.760 -- (2) 4.760 -
In addition to the above income, Mr. LHI has recorded in the aforementioned register another income amounting to 6,250 euros, corresponding to the amount received in 2021 in the form of direct aid decoupled from the Common Agricultural Policy (CAP).
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For its part, the following entries appear in its investment assets register as of December 31, 2020, relating to the fixed assets assigned to the activity for which the owner keeps complete documentary justification:
Element Commencement of operation Cost price Accumulated amortization as of 31-12-2020 (1) The recorded acquisition value (depreciable value) does not include the value of the land.(Back)
Warehouse and stable 10-02-2008 36,000 (1) 22,000 Trailer 10-02-2009 3.155 3.155 Fertilizer machine 10-02-2014 7,500 7.200 Irrigation installation 10-02-2016 2,500 1.015 Tractor, accessories and implements 10-02-2016 28,800 9.800 -
Finally, during the 2021 financial year, various new farming tools were acquired for 1,260 euros, without the unit value of any of them exceeding the amount of 601.01 euros.
Solution:
Previous issue: performed activities.
Activities carried out by Mr. LHI They are all included in the special regime for agriculture, livestock and fishing of the Value Added Tax, so, for the purposes of applying the objective estimation method of Personal Income Tax , It is a single activity, whose identification code is 1 (agricultural or livestock that may be included in the special regime for agriculture, livestock and fishing of VAT).
Phase 1: Determination of prior net performance.
As a preliminary operation, it is necessary to determine the eligible income corresponding to each of the products obtained and services provided in the exercise of the activity, taking into account that the amount of direct aid decoupled from the Common Agricultural Policy ( CAP ) must be added to the income from the different crops and farms, in proportion to their respective amounts, without including for this purpose the income from other accessory work and services.
Therefore, the following income will be eligible:
Total income from crops and farms: 54,880 (Corn) + 29,835 (Lambs) + 19,040 (p. horticultural) = 103,755 euros.
Computable income from the sale of corn
Recorded income: 54,880
Proportional share of direct aid decoupled from the CAP (54,880 ÷ 103,755 x 6,250) = 3,305.86
Computable income (54,880 + 3,305.86) = 58,185.86
Computable income from the sale of beef sheep
Recorded income: 29.835
Proportional part of direct aid decoupled from the CAP (29,835 ÷ 103,755 x 6,250) = 1,797.20
Computable income (29,835 + 1,797.20) = 31,632.20
Computable income from the sale of horticultural products
Recorded income: 19.040
Proportional part of direct aid decoupled from the CAP (19,040 ÷ 103,755 x 6,250): 1,146.93
Computable income (19,040 + 1,146.93) = 20,186.93
Computable income from other work and accessory services
Recorded and computable income: 4.760
By applying the corresponding net performance indexes to the income from each of the products and services, the prior net performance is determined as follows:
Previous net performance (sum) | 25,889.42 | |||
Note to the table (1) Please note that Order HFP /413/2022 of 10 May has reduced the index for meat sheep to 0.09.(Back) |
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Product code | Type of product/service | Computable income | Performance Index | Product base performance |
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3 | Beef sheep | 31,632.20 | 0.09 (1) | 2,846.90 |
6 | Corn | 58,185.86 | 0.26 | 15,128.32 |
Horticultural products | 20,186.93 | 0.26 | 5.248,60 | |
13 | Other accessory works and services | 4,760.00 | 0.56 | 2,665.60 |
Phase 2: Determination of reduced net income.
Amount of depreciation of fixed assets used for the activity.
Using the amortization table contained in Order HAC /1155/2020, of November 25 ( BOE of December 4), and in accordance with the rules for its application established therein, the amount of amortization that can be deducted from the previous net income is determined as follows:
Heritage element | Acquisition value | Maximum coefficient | Amortizable period | Amortization |
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Total amortizations | 11.185 | |||
Notes to the table: (1) On 31-12-2020, the trailer was already fully depreciated, so no amount should be computed for this concept in 2021. (Back) (2) Since the amount resulting from the application of the maximum linear coefficient is higher than the amount pending amortization as of 31-12-2020, which amounts to 300 euros (7,500 - 7,200), the amortization of the fertilizer machine has been carried out for this last amount. (Back) (3) They can be freely amortized because their unit value is less than 601.01 euros and because, in addition, the total amount of the new assets acquired in 2021 does not exceed the amount of 3,005.06 euros. (Back) |
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Warehouse and stable | 36,000 | 5% | All year | 1,800 |
Trailer | 3.155& | Irrelevant (1) | 0 | |
Fertilizer machine | 7,500 | 25% | All year | 300 (2) |
Irrigation installation | 2,500 | 25% | All year | 625 |
Tractor and accessories | 28,800 | 25% | All year | 7.200 |
Farming tools | 1.260 | 100% (3) | Irrelevant | 1.260 |
Reduced net income (summary):
Previous net performance: 25,889.42
less: Amortization of tangible and intangible fixed assets: 11,185.00
equal to: Reduced net return: 14,704.42
Phase 3: Correction indices and determination of net module performance.
Only the correction index for the use of salaried personnel is applicable in this case, the cost of which represents 16% of the total volume of income (18,000 ÷ 114,765 x 100 = 15.68%).
Since the percentage in question is between 10 and 20 percent, the correction index 0.90 should be applied. Therefore:
Net module yield: (14,704.42 x 0.90) = 13,233.98 euros
Phase 4: Determination of the net return of the activity.
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General reduction: 20% s/13,233.98 = 2,646.79 euros
Comment: Article 4 of Royal Decree-Law 4/2022, of March 15, which adopts urgent measures to support the agricultural sector due to drought, has raised the reduction provided for in the First Additional Provision of Order HAC/1155/2020, of November 25, by which the agricultural, livestock and forestry activities included in Annex I of the aforementioned Order are developed for the year 2021, from 5% to 20%.
- Since there are no extraordinary expenses due to exceptional circumstances or right to reduction for young farmers, the net income from the activity is as follows: 13,233.98 – 2,646.79 = 10,587.19 euros.
Phase 5: Determination of the reduced net return of the activity.
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Reduction for irregularity
Since no type of income is computed with a generation period of more than two years, nor any obtained in a noticeably irregular manner over time, no reduction is applicable for this concept. Therefore:
Reduced net income from the activity = Net income from the activity (10,587.19 euros)
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Reduction for the exercise of certain economic activities
Since the income from economic activities is less than 12,000 euros, the reduction provided for in article 32.2.3 of the Personal Income Tax Law applies.
1,620 - [0.405 x (10,587.19 - 8,000] = 572.19
Determination of the total reduced net income of the activity
Net income from the activity = 10,587.19
less: Reduction of article 32.2.3 of the Personal Income Tax Law = 572.19
equal to: Total reduced net income from the activity = (10,587.19 – 572.19) = 10,015