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, beans and chard).
In fiscal year 2022, 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 2022, included in the cost of salaried personnel, amounts to 14,000 euros.
In said year, the amount of agricultural diesel necessary for agricultural activity amounts to 6,000 euros, as documented in the fuel invoices that the owner keeps.

Don LHI chooses to allocate the income from its activity according to the collections and payments criteria, according to which, the income corresponding to 2022 that appears in the income record book has been as follows:

Subject	Cost	Compensation VAT	Total
Total eligible income (euros)			108,515
Notes to the box: ⁽¹⁾ In the previous year (2021), the income corresponding to carrying out work for other farmers represented only 6 percent of the total volume of income for that year. Consequently, in 2022, 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 2022 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, 2021, relating to the elements of fixed assets affected by the activity for which the owner retains complete documentary justification:

Element	Entry into operation	Cost price	Accumulated amortization as of 12-31-2021
⁽¹⁾The recorded acquisition value (amortizable value) does not include the value of the land.^(Back)
Warehouse and stable	02-10-2010	36,000 ⁽¹⁾	22,000
Trailer	02-10-2010	3,155	3,155
Fertilizer machine	02-10-2015	7,500	7,200
Irrigation installation	02-10-2017	2,500	1,015
Tractor, accessories and implements	02-10-2017	28,800	9,800

Finally, during fiscal year 2022, 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.

Solution:

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:

Product code	Type of product/service	Countable income	Performance index	Base product performance
Previous net performance (sum)				21,234.55
3	Beef sheep	31,632.20	0.09	2,846.90
6	Corn	58,185.86	0.18	10,473.45
6	Horticultural products	20,186.93	0.26	5,248.60
15	Other work and accessory services	4,760.00	0.56	2,665.60

2 Phase: Determination of the reduced net return.

35 percent reduction in the acquisition price of agricultural diesel (DA7 Order HFP /1172/2022, of November 29 - BOE of December 1-)

As these are purchases of agricultural diesel necessary for the development of the activity documented by the corresponding invoices, this reduction should be applied for the following amount:

35% s/ 6,000 euros (amount of agricultural diesel 2022) = 2,100 euros

Amount of amortization of fixed assets assigned to activity .

Using the amortization table contained in Order HFP /1335/2021, of December 1 ( BOE of December 2), 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 element	Acquisition value	Maximum coefficient	Amortization period	Amortization
Total amortizations	11,185
Notes to the box: ⁽¹⁾On 12-31-2022, the trailer was already fully amortized, so it is not appropriate to compute any amount for this concept in 2022. ^(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 12-31-2021, 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 2022 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: 21,234.55

less: Reduction for the acquisition of agricultural diesel: 2,100

less: Amortization of tangible and intangible assets: 11,185

equal to: Minorized net return: 7,949.55

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: (7,949.55 x 0.90) = 7,154.59 euros

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

General reduction: 25% s/7,154.59 = 1,788.65 euros

Comment: the Eighth Additional Provision of Order HFP /1172/2022, of November 29 ( BOE of December 1), raised from 5 to 15 percent the general reduction provided for in the first Additional Provision of Order HFP /1335/ 2021, of December 1, by which the objective estimation method of the Personal Income Tax and the special simplified regime of the Value Added Tax are developed for the year 2022. However, in order to take into account the sharp increase in costs borne by the agricultural sector as a consequence of the war in Ukraine, article 2 of Order HFP /405/2023, of April 18, which reduces for the 2022 tax period the net return indices and the general reduction applicable in the objective estimation method of the Personal Income Tax for agricultural and livestock activities affected by various circumstances exceptional cases ( BOE of April 25) has once again raised this general reduction to 25 percent for agricultural, livestock and forestry activities that determine the net return by the objective estimation method.
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: 7,154.59 – 1,788.65 = 5,365.94 euros

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

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 return on activity = Net return on activity (5,365.94 euros)

Determination of the total reduced net return of the activity

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.

Since it is less than 8,000 euros (5,365.94 euros), the amount of the reduction to be applied is 1,620 euros.

Therefore:

Net performance of the activity = 5,365.94

less: Reduction of article 32.2.3 of the Personal Income Tax Law = 1,620

equal to: Total reduced net return from the activity = (5,365.94 – 1,620) = 3,745.94