We remind you that until last year the threshold for the transition of PFAs to the real system was 100,000 euros, but it was modified by OG 16/2022 and reached 25,000 euros.
However, the limit of 100,000 euros applies again this year (2023), for income relating to 2022.
The amount of the limit for the transition to the real system by individuals who obtain income from self-employed activities for which the net income is determined on the basis of income rules and who in 2022 have registered a gross annual income greater than the equivalent in lei of the amount of 100,000 euro.
Please note that the limit of 100,000 euros for the transition to the real taxation system refers to income from self-employed activities imposed on the basis of the income norm, which are provided for separately in Law no.227/2015 on the Tax Code, from income from agricultural activities, forestry and fish farming.
According to Article 103(1) of the Tax Code, Income from agricultural activities comprises income obtained individually or in a form of association, without legal personality, from:
a) cultivation of agricultural crop products;
b) the exploitation of vineyards, orchards, fruit bushes and the like;
c) the rearing and exploitation of animals, including from the exploitation of products of animal origin, in their natural state.
According to paragraph 28(1) and (2) of the Implementing Rules of the Tax Code, (1) In application of Article 103 of the Tax Code, income from agricultural activities carried out individually or in a form of association without legal personality, established on the basis of income rules, is subject to taxation according to the provisions of Chapter VII of Title IV of the Tax Code, regardless of the form of organisation of the activity. Income from agricultural activities subject to taxation on the basis of income rules in accordance with the provisions of Article 106 of the Tax Code includes income from the cultivation of land, breeding and exploitation of animals, held in any capacity, including those taken on lease.
Income from agricultural activities referred to in Article 103 paragraph (1)(a) to (c) of the Tax Code, for which income rules are laid down in accordance with Article 106 of the Tax Code, is taxable regardless of whether or not proof is provided that the products have been used.
Therefore, income from agricultural activities taxed on the basis of income rules is included in Article 103(1) of the Tax Code under income from agricultural activities and not under income from self-employed activities.
We stress that the only exceptions to the determination of net income on the basis of agricultural income rules are those provided for in Article 104 of the Tax Code and which concern income from forestry and fish farming, income from agricultural activities obtained from exploitation other than in the natural state and income from agricultural activities for which there is no obligation to establish agricultural income rules.
The income from agricultural activities referred to in Article 103(1) of the Tax Code may be qualified as income from self-employed activities if the products are used in a manner other than in their natural state, being subject to the taxation rules specific to the category of income from self-employed activities (Article 104(2) of the Tax Code). Agricultural plant products obtained after harvesting are considered in their natural state.
In addition, income defined in Article 103(1) of the Tax Code for which there is no obligation to establish income rules is taxable income and is subject to taxation according to the provisions of Chapter II – Income from self-employed activities. In this case, the annual net income is determined in the real system, based on the accounting data, according to the provisions of Article 68 of the Tax Code, taxpayers having the obligation to complete the Tax Register.
For these incomes, the taxation rules of income from self-employed activities are applicable, for which the net annual income is determined in real system, based on the accounting data according to Article 104 paragraph (3) of the Tax Code.
In conclusion, income from agricultural activities, i.e. from the cultivation of agricultural crop products, for which agricultural income rules have been approved and which are valued in their natural state, cannot be subject to the provisions relating to the obligation to switch from the determination of net income from self-employed activities determined on the basis of income rules to the obligation to determine the annual net income in the real system for the situation where the gross income from self-employed activities exceeds EUR 100,000.
Thus, taking into account the above-mentioned aspects, for income from agricultural activities taxed on the basis of agricultural income rules, the obligation to switch to the real system of taxation does not apply if the threshold of 100,000 euro is exceeded, this threshold being applicable only to income from self-employed activities.
Legal basis:
– Tax Code (approved by Law no.227/2015, published in the Official Gazette no.688 of 10.09.2015), with subsequent amendments and additions;
– Methodological Norms for the application of the Tax Code (approved by Government Decision no.1/2016).