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Practical Income Manual 2021.

Practical case

Don 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.

  • The products it grows, all of them intended for sale, consist of corn and various horticultural products (lettuce, green beans and chard).

  • In fiscal year 2021, the cost of salaried personnel corresponding to a person who has worked full-time in the activity since 2008 has amounted to 18,000 euros. The remuneration paid to this worker in fiscal year 2021, included in the cost of salaried personnel, amounts to 14,000 euros.

  • Don LHI chooses to allocate the income from its activity according to the collections and payments criteria, according to which, the income corresponding to 2021 that appears in the income record book has been as follows:

    SubjectCostCompensation VAT Total
    Total eligible income (euros) 108,515

    Notes to the box:

    (1) In the previous year (2020), income from performing work for other farmers represented only 6 percent of the total volume of income for that year. Consequently, in 2021, these jobs are considered included in the special regime for agriculture, livestock and fishing for the purposes of VAT and 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 corn sales 49,000 5,880 54,880
    Income from lamb sales 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 Another income in the amount of 6,250 euros has been recorded in the aforementioned record book, corresponding to the amount received in 2021 as direct aid uncoupled from the Common Agricultural Policy (CAP).

  • For its part, the following entries appear in its investment property record book as of December 31, 2020, relating to the elements of fixed assets affected by the activity for which the owner retains complete documentary justification:

    ElementEntry into operationCost priceAccumulated amortization as of 12-31-2020

    (1) The recorded acquisition value (amortizable value) does not include the value of the land.(Back)

    Warehouse and stable 02-10-2008 36,000 (1) 22,000
    Trailer 02-10-2009 3,155 3,155
    Fertilizer machine 02-10-2014 7,500 7,200
    Irrigation installation 02-10-2016 2,500 1,015
    Tractor, accessories and implements 02-10-2016 28,800 9,800
  • Finally, during fiscal year 2021, it has acquired various new farming tools for 1,260 euros, without the unit value of any of them exceeding the amount of 601.01 euros.


Previous issue: performed activities.

The activities carried out by Don 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 ).

1 Phase: Determination of prior net performance.

As a prior operation, it is necessary to determine the computable 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 ( PAC ) must be accumulated to the income from the different crops and farms, in proportion to their respective amounts, without including for this purpose income from other work and accessory services.

Therefore, the computable income will be the following:

Total income from crops and farms: 54,880 (Corn) + 29,835 (Lambs) + 19,040 (p. horticultural) = 103,755 euros.

Computable income from corn sales

Recorded income: 54,880

Proportional share of direct aid decoupled from PAC (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 meat sheep

Recorded income: 29,835

Proportional share 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 share 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 jobs and accessory services

Registered and computable income: 4,760

Applying the corresponding net return indices to the income from each of the products and services, the prior net return is determined as follows:

Previous net performance (sum) 25,889.42

Note to the box

(1) Please note that Order HFP /413/2022, of May 10, has reduced the index for meat sheep to 0.09.(Back)

Product codeType of product/serviceCountable incomePerformance indexBase product performance
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 work and accessory services 4,760.00 0.56 2,665.60

2 Phase: Determination of the reduced net return.

Amount of amortization of fixed assets assigned to 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 performance is determined as follows:

heritage elementAcquisition valueMaximum coefficientAmortization periodAmortization
Total amortizations 11,185

Notes to the box:

(1) On 12-31-2020, the trailer was already fully amortized, so it is not appropriate to compute any amount for this concept in 2021. (Back)

(2) As the amount that would result from the application of the maximum linear coefficient is higher than the amount pending amortization as of 12-31-2020, which amounts to 300 euros (7,500 – 7,200), the amortization of the fertilizer machine has been carried out by the latter. amount. (Back)

(3) They can be freely amortized because their unit value is less than 601.01 euros and because, in addition, the global amount of the new assets acquired in 2021 does not exceed the amount of 3,005.06 euros. (Back)

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

Minorized net return (summary):

Previous net performance: 25,889.42

less: Amortization of tangible and intangible assets: 11,185.00

equal to: Minorized net return: 14,704.42

3 Phase: Corrective indices and determination of the net performance of modules.

Only the corrective index for the use of salaried personnel is applicable in this case, the cost of which represents 16 percent of the total volume of income (18,000 ÷ 114,765 x 100 = 15.68%).

As the aforementioned percentage is between 10 and 20 percent, it is appropriate to apply the corrective index of 0.90. Therefore:

Net performance of modules: (14,704.42 x 0.90) = 13,233.98 euros

4 Phase: Determination of the net performance of the activity.

  • 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 the drought, has increased the reduction provided for in the Provision from 5% to 20%. First additional to Order HAC/1155/2020, of November 25, which develops for the year 2021 for agricultural, livestock and forestry activities included in Annex I of the aforementioned Order.

  • As there are no extraordinary expenses due to exceptional circumstances or the right to reduction for young farmers, the net return on the activity is as follows:  13,233.98 – 2,646.79 = 10,587.19 euros.

5 Phase: Determination of the reduced net return of the activity.

  1. Reduction due to irregularity

    Since no type of return is computed with a generation period of more than two years, nor any obtained in a notoriously irregular manner over time, no reduction should be applied for this concept. Therefore:

    Reduced net income from the activity = Net income from the activity (10,587.19 euros)

  2. Reduction for the exercise of certain economic activities

    Since the income from economic activities is less than 12,000 euros, the reduction 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 return of the activity

Net performance of 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 return from the activity = (10,587.19 – 572.19) = 10,015