Practical case

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 holder does not obtain income from work or carry out any other economic activity.

The products he grows, all of which are intended for sale, consist of corn and various horticultural products (lettuces, beans and chard).
In 2024, 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 2024, included in the cost of salaried personnel, amounts to €14,000.
In this year, the amount of agricultural diesel required for agricultural activity amounts to 6,000 euros, as documented in the fuel invoices kept by the owner.

Mr. LHI chooses to allocate the income from its activity according to the collections and payments criterion, according to which, the income corresponding to 2024 that appears in the income record book has been the following:

Subject	Cost	Compensation VAT	Total
Total computable income (euros)			108.515
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

Notes to the table:

⁽¹⁾ In the previous year (2023), income from performing work for other farmers represented only 6 percent of the total income volume for that year. Consequently, in 2024, these works are considered to be 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 separate 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)

In addition to the above income, Mr. LHI has recorded in the aforementioned record book another income amounting to 6,250 euros, corresponding to the amount received in 2024 as direct aid decoupled from the Common Agricultural Policy (CAP).

For its part, the following entries appear in its investment asset record book as of December 31, 2023, relating to the fixed assets assigned to the activity for which the owner retains complete documentary evidence:

Element	Commencement of operation	Cost price	Accumulated amortization as of 12/31/2023
Warehouse and stable	10-02-2012	36,000 ⁽¹⁾	22,000
Trailer	10-02-2012	3.155	3.155
Fertilizer machine	10-02-2017	7,500	7.200
Irrigation installation	10-02-2019	2,500	1.015
Tractor, accessories and implements	10-02-2019	28,800	9.800

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

Finally, during the 2024 financial year, it acquired various new farm implements for 1,260 euros, with the unit value of none exceeding 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, in this specific case, 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 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 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:

Product code	Type of product/service	Computable income	Performance Index	Product base performance
Previous net performance (sum)				27,154.71
3	Beef sheep	31,632.20	0.13	4.112,19
6	Corn	58,185.86	0.26	15,128.32
6	Horticultural products	20,186.93	0.26	5.248,60
15	Other accessory works and services	4,760.00	0.56	2,665.60

Phase 2: Determination of reduced net income.

35% reduction in the purchase price of agricultural diesel (DA3 Order HFP /1359/2023, of December 19 - BOE of December 21-)

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

35% of 6,000 euros (amount of agricultural diesel 2024) = 2,100 euros

Amount of depreciation of fixed assets assigned to the activity .

Using the amortization table contained in Order HFP /1359/2023, of December 19 ( BOE of December 21), 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
Total amortizations	11.185
Warehouse and stable	36,000	5%	All year	1,800
Trailer	3.155	Irrelevant ⁽¹⁾		0
Fertilizer machine HFP	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

Notes to the table:

⁽¹⁾As of December 31, 2024, the trailer was fully amortized, so no amount for this item can be computed in 2024. ^(Back)

⁽²⁾Since the amount resulting from the application of the maximum linear coefficient is greater than the amount pending amortization as of 31-12-2023, which amounts to 300 euros (7,500 – 7,200), the amortization of the fertilizer machine has been carried out for the latter amount. ^(Back)

⁽³⁾They can be freely amortized because their unit value is less than 601.01 euros and because the total value of the new assets acquired in 2024 does not exceed 3,005.06 euros. ^(Back)

Reduced net income (summary):

Previous net performance: 27,154.71

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

less: Amortization of tangible and intangible fixed assets: 11.185

equal to: Reduced net return: 13,869.71

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: (13,869.71 x 0.90) = 12,482.74 euros

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

General reduction: 5% on 12,482.74 = 624.14 euros

Comment: The first Additional Provision of Order HFP /1359/2023, of December 19, which develops the objective estimation method of personal income tax for the year 2024, has reduced from 10 to 5 percent the general reduction applicable to the net income of modules obtained in the tax period 2024 provided for in the first Additional Provision of Order HFP /1172/2022.
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: 12,482.74 – 624.14 = 11,858.6 euros

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

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 (11,858.6 euros)

Determination of the total reduced net income 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 Income Tax Law is applied.

Since the amounts are between 8,000.1 euros and 12,000 euros (11,858.6 euros), the amount of the reduction to be applied is the result of the following operation: 1,620 - [0.405 x (11,858.6 – 8,000] = 57.27

Therefore:

Net income from the activity = 11,858.6

less: Reduction of article 32.2.3 of the Personal Income Tax Law = 57.27

equal to: Total reduced net income from the activity = (11,858.6– 57.27) = 11,801.33