Agriculture is e.g. other agricultural and forestry activities not considered as a separate movement. According to section 5 of the MVL, agricultural income is e.g. Rents on machinery, equipment, appliances, horses and other means of production, and Rents on the holding, its part and the building on the holding. In principle, the income of agriculture is e.g. rental of permanent dwellings and holiday Cottages on the holding, rental income from land and fishing waters, rental of hunting rights and rental of part of the forest holding for either forestry or other uses (e.g.telemasters, wind Farms). Rental income from a forest, forestry building or machinery in forestry equipment is agricultural income even when the actual agriculture is not practiced.
For the Rental Incomes
The rental income of holiday cottages on a farm can be either agricultural income or business income. Extensive cottage rental in the nature of accommodation, which is not essentially related to the agriculture carried out on the holding, is considered a business activity. In other situations, income is usually agricultural income.
- However, if the buildings on the farm have been included in the private economy from a source of agricultural income, for example in connection with the cessation of agricultural activities, the Income Tax Act applies to the taxation of rental income derived from them.
- If the land lease agreement concerns a gravel pit, peat bog or other soil extraction area, the income obtained from it is usually not rental income but income from the sale of soil materials. It is covered by a separate instruction on taxation of income from the sale of soil materials.
When calculating the net income of an agricultural tax year, the expenses incurred in acquiring and maintaining the income are deducted from the income received from agriculture in the tax year (Section 4 of the MVL). Agricultural income is divided into earnings and capital income in accordance with section 38 of the TVL. Here you need to calculate estimated taxes and have the best and precise results.
Rental income is capital income. Under section 29 (1) of the TVL, a taxable person has the right to deduct from his income the expenses incurred in obtaining or maintaining them, that is to say, the so-called natural deductions. Pursuant to Section 54 (1) of the TVL, a taxable person has the right to deduct from capital income the expenses arising from their acquisition or maintenance. However, under section 31 (4) of the TVL, deductible expenses are not the taxable person’s living expenses.
A Prerequisite for the deductibility of expenditure is that the expenditure has been incurred for the purpose of income acquisition or retention. Expenditure can be reduced only to the extent that it affects the rented part of the apartment or property. Expenditure is non-deductible subsistence expenditure to the extent that the apartment or property is used as a private dwelling or is in other private use.