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Practical Income Manual 2022.

Activity 8: Uses that correspond to the transferor in forestry activities carried out under a sharecropping regime

According to the provisions of the Civil Code, the sharecropping contract is governed, among other provisions, by those relating to the partnership contract. Therefore, to the extent that the transferor assumes a part of the risks and responsibilities derived from the exploitation, the tax regulations attribute to him the consideration of an agricultural entrepreneur or direct cultivator.

The sharecropping contract is one by virtue of which the owner of a farm or farm temporarily transfers its use and enjoyment, or that of any of its uses, as well as that of the elements of the farm, livestock, machinery or circulating capital in agreement with the sharecropper assignee to distribute the products in aliquot shares in proportion to their respective contributions.

Both the transferor and the sharecropper are farmers and receive income from business activities when the transferor intervenes in the management of means of production and/or human resources. Otherwise, its classification will be that of real estate capital returns, such as income received from the ownership of real estate.