Agricultural activity - how is it different from economic activity?

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Economic activity and agricultural activity in terms of income settlement differ radically from each other, therefore it is very important to correctly delineate the appropriate sources of income. Often, however, taxpayers have a problem with correctly determining whether a given income is still an agricultural activity or it is already an economic activity. The answers to the emerging doubts should be found in the income tax laws.

Agricultural activity - exemption from income tax

In accordance with the regulations, we do not apply the regulations contained in tax laws to the income generated by agricultural activity. They are taxed with agricultural tax. Tax laws precisely define what is meant by agricultural activity.

Agricultural activity 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, production of ornamental plants , cultivated and orchard fungi, breeding and production of seed material of animals, birds and commercial insects, industrial and 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 occurs, are at least:

  1. month - for plants,

  2. 16 days - in the case of highly-intensive specialized fattening of geese and ducks,

  3. 6 weeks - for other poultry for slaughter,

  4. 2 months - for other animals

- from the date of purchase.

A key feature of agricultural activity is the production of unprocessed (natural) plant and animal products. Manufacturing is understood to mean the activity which produces plant or animal products. On the other hand, a processed product is understood as one that has acquired new features and properties as a result of applying certain technological processes to it. 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.

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Example 1.

The entrepreneur grows blackcurrants, which are then processed into juices and sold to wholesalers. Such activity is considered to be economic. If the entrepreneur sells the currant itself, which additionally comes from his crops, it will be an agricultural activity, because the product will be unprocessed.

The animal or plant product is to be obtained from its own cultivation, breeding or rearing. It is a self-employed activity.

Cultivation is a series of treatments from sowing or planting to harvest, planned care for the growth and development of plants. Breeding should be understood as activity consisting in the planned care for the growth and development of animals or plants, with particular care for individuals intended for reproduction. On the other hand, breeding is the rational maintenance of animals or plants and their care.

In addition to particular types of cultivation, rearing or breeding, agricultural activity also includes the activity consisting in keeping the purchased plant or animal products for at least the specified period during which their biological growth takes place. Biological growth is understood to mean a situation in which plant or animal products increase in size (expressed in mass, volume or dimensions) due to biological processes.

It is worth paying attention to the indicated minimum periods allowing to classify a given activity as agricultural. If the periods of keeping the purchased animals and plants are less than specified, then we are dealing with economic activity.

Example 2.

The entrepreneur purchased 1000 chickens on September 1. He kept them in his farm until September 15, after which he sold all the pieces to another entrepreneur. Income obtained from such sale should be classified as income from economic activity, because only such activity in which the period of keeping poultry for slaughter is at least 6 weeks is considered an agricultural activity. In this case, it was only 2 weeks.

Activities that are not considered to be agricultural

Note that even if an activity is closely related to an agricultural activity, but does not meet the criteria and conditions outlined, it will be considered an economic activity. On the basis of the developed literature and the available jurisprudence, one can give many examples of activities related to agriculture, which, however, are classified as economic:

  • income from the provision of herd care services, grazing someone else's livestock and preparing farm animals for exhibitions and shows;

  • lease of land intended for windmills;

  • income from the collection of sand from leased land;

  • income from the packaging and retail sale of meat, as these activities are commercial activities;

  • compensation received for damage to agricultural crops and land reclamation caused by the construction of an oil pipeline;

  • structural pension paid on the basis of the provisions on supporting rural development from funds from the Guarantee Section of the European Agricultural Guidance and Guarantee Fund, in accordance with the Rural Development Plan.

Legal basis

  • art. 2 clause 1 point 1 of the Personal Income Tax Act

  • art. 2 clause 1 point 1 of the Corporate Income Tax Act