Agricultural activity and direct sale of products

Service-Tax

Polish law lacks a uniform concept defining the production processes in agriculture. If you want to earn income from farming or breeding animals, it is worth knowing how to classify them correctly and what and when the farmer or breeder can sell them directly. Agricultural activity, what should be understood by this? We answer!

Economic activity - definition

Economic activity within the meaning of the Personal Income Tax Act is an activity that meets a total of six conditions:

  1. it is a profit-making activity, i.e. profit-oriented (it should be emphasized that the focus is on obtaining profit, not actually obtaining it);
  2. activity belongs to one of the above-mentioned types (it is manufacturing, construction, trade, service activity, consisting in searching for, identifying and extracting minerals from deposits, or consisting in the use of intangible and legal assets and assets);
  3. it is an activity carried out on one's own behalf;
  4. it is an activity conducted in an organized manner,
  5. it is a continuous activity; as explained by the Provincial Administrative Court in Gliwice in the judgment of 18 January 2012, I SA / Gl 818/11:
    "To maintain continuity, it is sufficient for all the circumstances to indicate the intention to repeat a specific set of specific activities aimed at earning money"
    ;
  6. revenues from this activity are not included in a source of revenues other than non-agricultural economic activity.

What is agricultural activity?

Pursuant to Art. 2 clause 1 point 1 of the provisions of the act on personal income tax does not apply to income from agricultural activities, with the exception of income from special departments of agricultural production. Pursuant to Art. 2 clause 2 above of the act on agricultural activity within the meaning of sec. 1 point 1 is an activity consisting in the production of plant or animal products in an unprocessed (natural) state from own crops or breeding or breeding, including the production of seed, nursery, breeding and reproductive material, vegetable production in the field, greenhouse and under foil, plant production ornamental, cultivated and orchard fungi, breeding and production of seed material of animals, birds and commercial insects, industrial-farm animal production and fish breeding, as well as activities in which the minimum periods of keeping purchased animals and plants, during which their biological growth takes place , are at least:

  1. month - for plants,
  2. 16 days - in the case of highly-intensive specialized fattening of geese or ducks,
  3. 6 weeks - for other poultry for slaughter,
  4. 2 months - for other animals,

from the date of purchase.

Special departments of agricultural production pursuant to Art. 2 clause 3 above the Acts cover cultivation in greenhouses and heated foil tunnels, cultivation of mushrooms and their mycelium, "in vitro" plants, farm breeding and breeding of slaughter and laying poultry, poultry hatcheries, breeding and breeding of fur and laboratory animals, earthworm breeding, entomophagous breeding, silkworm breeding , running apiaries as well as breeding and rearing other animals outside the farm.

The unprocessed state is the state of the product which does not differ substantially from the state in which the product was immediately after its manufacture.

A processed product is one that has acquired new features and properties as a result of the technological processes applied to it (see individual interpretation of the Director of the Tax Chamber in Bydgoszcz of August 28, 2014, ITPB1 / 415-618 / 14 / WM).

Similarly, in the individual interpretation of the Director of the Tax Chamber in Warsaw of February 20, 2017, file ref. 1462-IPPB1.4511.1135.2016.1.RK, we can read:

"The production of sauerkraut and cucumbers obtained from her own farm conducted by the Applicant does not constitute special departments of agricultural production. The production and sale of silage does not constitute agricultural activity within the meaning of the act on personal income tax ”.

In its judgment of October 11, 1996, SA / Lu 2526/95, the Supreme Administrative Court stated that:

"Agricultural activity within the meaning of Art. 2 clause 1 point 1 of the Act of 1991 on personal income tax is plant and animal production. Livestock production includes activities such as pig breeding, slaughter of fattening pigs, including post-slaughter demolition. This production does not include the so-called packaging or retail sale of meat, as these activities are commercial activities. '

How to classify direct sales by a farmer?

As of January 1, 2016, a new type of income appeared among the revenues from other sources: revenues from the sale of non-industrial processed plant and animal products obtained from own cultivation, breeding or breeding.

Pursuant to Art. 20 paragraph 1c of the Personal Income Tax Act, the sale of processed agricultural products classified as income from other sources does not constitute economic activity, provided that the following conditions are met, including:

  • processing of plant and animal products and their sale will not take place when employing people on the basis of employment contracts, mandate contracts, specific specific contracts and other contracts of a similar nature;
  • a sales register is kept;
  • the amount of revenues free from personal income tax from the sale of products produced by farmers is PLN 40,000;
  • the amount of plant or animal products from own cultivation, breeding or rearing used in the production of the product in question represents at least 50% of that product, excluding water.

The quantitative limits for food sold as part of agricultural retail trade are specified in the Regulation of the Minister of Agriculture and Rural Development of 16 December 2016 on the maximum amount of food sold under agricultural retail trade and the scope and method of its documentation. The annual limit is, for example, for:

  • vegetable silage - 5000 kg,
  • strawberries - 14 tons,
  • raw milk - 52,000 l,
  • cucumber under covers - 35 kg per m2.

Taxpayers who earn revenues from direct sales of agricultural products should keep (separately for each tax year) records of the sale of plant and animal products. The records should include the following data:

  • number of the next entry,
  • date of obtaining income,
  • the amount of income,
  • revenue cumulative from the beginning of the year.

Daily income should be recorded on the day of sale. Sales records should be available at the point of sale of processed plant and animal products. Farmers who make the sale in question are not required to issue invoices for the above-mentioned sale.

Direct sales of plant and animal products by a farmer up to PLN 40,000 per year are tax exempt. After exceeding the limit of PLN 40,000, the income tax is 2%.

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As part of direct sales, the farmer can sell, inter alia, raw milk, cream, eggs, unprocessed bee products, fresh meat, meat products (e.g. hams, pates, sausages), delicatessen products that are composite products (e.g. dumplings with meat, cheese, cabbage rolls, vegetable and meat salads). In terms of the sale of plant products, the most sold include: vegetable raw materials, preserves (e.g. fruit juices, jams, dried fruit, silage, pickles and vegetable juices), cereal preparations (e.g. flour), bread, oils and ready meals (e.g. non-meat dumplings, Silesian dumplings and dumplings, fruit dumplings, potato pancakes).

Legal aspects of direct selling

Direct sellers are obliged to display, in a legible and visible way for the consumer, the words "agricultural retail trade" at each point of sale of food within agricultural retail trade, which takes into account:

  • name and surname or name and seat of the entity conducting agricultural retail trade,
  • address of the place where the food is produced
  • the veterinary identification number of an agricultural retailer (for food of animal origin and composite food).