Taxation rules for special departments of agricultural production

Service-Tax

One of the sources of income listed in the PIT Act are special departments of agricultural production. The specificity of running special departments results mainly from the possibility of choosing the way in which the taxpayer will determine the amount of income earned. Below we present the rules of taxation of special sectors of agricultural production.

Definition of special departments of agricultural production

First of all, it should be noted that pursuant to Art. 2 clause 1 of the PIT Act, income tax is not subject to income tax, except for income from special departments of agricultural production. This provision clearly shows that one of the types of agricultural activity are special departments of agricultural production. In accordance with the definition cited in the regulations, revenues from special departments of agricultural production are revenues from crops in greenhouses and heated foil tunnels, cultivation of mushrooms and their mycelium, cultivation of plants in vitro, farm breeding and rearing of slaughter and laying poultry, poultry hatcheries, animal husbandry and breeding. and laboratory, earthworm breeding, entomophagous breeding, silkworm breeding, keeping apiaries and breeding and rearing other animals outside the farm (Article 2 (3) of the PIT Act).

The provision of Art. 2 clause 3a of the Act, stating that the revenues from the cultivation, breeding and rearing of animals in sizes not exceeding the amounts specified in Annex 2 to the Act do not constitute revenues from special departments of agricultural production. Therefore, if a given type of crop or breeding is not listed in the definition of special departments or does not exceed the size specified in Annex 2, then it is not subject to the PIT Act only under the agricultural tax regime.

Example 1.

In accordance with Annex 2, the standard of estimated income is specified for slaughter poultry above 100 heads. This means that the breeding of 95 poultry does not constitute special departments of agricultural production. Such activity is an agricultural activity subject to agricultural tax.

At the same time, due to the fact that special departments are a type of agricultural activity, the minimum requirements for agricultural activity described in Art. 2 clause 2 of the PIT Act. Pursuant to this provision, the minimum period of keeping plants and animals from the date of purchase is:

  • month - in the case of growing plants;
  • 16 days - in the case of highly-intensive specialized fattening of geese and ducks;
  • 6 weeks for other poultry for slaughter;
  • 2 months - for other animals.

If the deadlines described are not met, the conducted activity is considered as commercial activity.

Example 2.

On April 1, Mr. Witold purchased 200 chickens, which he then sold on April 18. Due to the non-compliance with the minimum period of keeping other slaughter poultry (minimum 6 weeks), its activity cannot be considered as special sectors of agricultural production and is subject to taxation as non-agricultural economic activity.

Taxation rules for special departments of agricultural production

Income from special departments of agricultural production can be determined in two ways. The first is the same as in the case of non-agricultural economic activity. The second one is based on the use of estimation standards.

The first method depends on the taxpayer's keeping of tax books, i.e. a tax book of revenues and expenses or an accounting book. This method gives the taxpayer the opportunity to show tax deductible costs and determine the amount of tax based on the actually obtained income. Such income is then the difference between the revenues shown in the book and the costs of obtaining them, additionally increased by the value of the increase in the herd of animals at the end of the tax year compared to the state at the beginning of the year and decreased by the value of losses in the herd during the tax year. Taxpayers may pay income tax on the income determined in this way according to the tax scale or using the 19% flat rate. Taxpayers are also required to pay self-calculated advances without the request of the tax office.

Example 3.

Mr. Roman runs a special department of agricultural production consisting in breeding piglets. On January 1, 2016, his herd consisted of 240 heads. In 2016, it generated revenues from this activity in the amount of PLN 15,000 and costs in the amount of PLN 13,000. On December 31, 2016, his herd consisted of 250 animals. The value of one piglet is PLN 200. The tax base is as follows: 15,000 - 13,000 + (250-240) x 200 = 4,000 PLN

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On the other hand, the second method of determining income, using estimation standards, is provided for taxpayers who do not keep tax books. In this case, the income depends on the area under cultivation or the size of the breeding herd. The amount of these standards is announced annually in the ordinance of the Minister of Finance. Taxpayers who choose the method of determining income in question are required to submit a PIT-6 declaration to the competent tax office by January 20 of a given tax year. On the other hand, those who start running special departments of agricultural production must do so within 7 days from the date of its commencement. In the case of estimated income, the advance payment is made by the tax office in the decision issued. It takes into account the estimated standards from the regulation and the size of the crop and breeding declared by the taxpayer.

Example 4.

Mr. Roman runs a special department of agricultural production consisting in breeding piglets. On January 1, 2016, his herd consisted of 240 heads. He decided to determine the income based on estimation standards. In the case of piglets, the standard is PLN 16.76 per animal. The tax base is as follows: 240 x PLN 16.76 = PLN 4022.40.

The final settlement of income from special departments of agricultural production takes place by April 30 of the year following the tax year on the PIT-36 form.