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Practical manual for Income Tax 2021.

Special rules applicable to certain subsidies or aid

Without prejudice to the peculiarities that may arise from the regulatory regulations or the specific conditions of each of them, it is worth mentioning the treatment applicable, in general, to the following subsidies or aid:

  • Direct aid decoupled from the Common Agricultural Policy (basic payment, payment for agricultural practices beneficial for the climate and the environment, payment for young farmers and, where appropriate, payment under the simplified scheme for small farmers). The amount of aid will be added to the income from the recipient's crops or farms in proportion to their respective amounts.

    However, when the recipient of direct aid has not obtained any income from agricultural or livestock activities, the net return index to be applied will be 0.56 .

    In these cases, in addition to the general reduction of 20% (2021) and the reduction planned for young farmers, the corrective indices discussed below for agricultural and livestock activities may be applied, if applicable, since the fact that no direct income has been obtained from these activities does not imply, in any case, that no activity has been carried out, given that the receipt of direct aid requires recipients to carry out certain farm maintenance tasks. Depreciation may also be reduced as appropriate.

  • Public aid provided for in the National Framework for Rural Development in Spain. In this case, when the recipient of direct aid has not obtained any income from agricultural or livestock activities, the net return index to be applied will be 0.56.

  • Subsidies for interruptions in crops or farms . If the subsidy or aid is granted for the interruption of a specific crop or livestock production and is intended to compensate for lost income, the net yield index corresponding to the crop or production that was previously carried out will be applied to the amount that, where applicable, must be computed in the financial year.

  • Subsidies not linked to specific crops or productions . When subsidies are received that are not linked to a specific crop or production, such as those for the withdrawal of land from production or fallow land, the amount of the subsidy that must be computed in the year will be distributed among the remaining crops or farms that the farmer or rancher carries out, in proportion to the income from each of them, subsequently accumulating them for the purposes of applying the corresponding net return indices.

  • Subsidies received to contract agricultural insurance . The subsidies received by farmers or ranchers who take out combined agricultural insurance policies, whether received from the State Agricultural Insurance Entity (ENESA) or from the Autonomous Communities, should not be included among the income taken as a basis for determining the net return, since in order to establish the net return indices applicable to each type of crop or product, the cost of the insurance was already taken into account as what the policyholder actually pays, once the subsidized part has been deducted.

  • Insurance compensation . The amount of compensation received from insurance companies as a result of incidents affecting farm products, whether in progress or finished, will be included in the total income corresponding to the type of crop or production in question.

    This type of incident or loss does not include expenses arising from the destruction of animals, so the compensation paid by the insurance to cover expenses arising from the destruction of animals will not be included in the total volume of income from the activities.

  • Certain subsidies or aid from the Community agricultural policy ( CAP ) , as well as other public subsidies that aim to repair the destruction, in certain circumstances, of affected heritage elements, have a special tax treatment, which can be consulted in Chapter 7 of this Manual.

  • Forestry subsidies . Subsidies granted to those who exploit forest farms managed in accordance with technical forest management plans, forest management, forestry plans or reforestation plans approved by the competent forestry authority will not be included in the tax base, provided that the average production period, depending on the species in question, is equal to or greater than 20 years.

Note: benefits received from Social Security for temporary disability, risk during pregnancy or provisional disability, where applicable, will be taxed as employment income.