Home Law What is the Definition of Agricultural Income in Turkish Taxation System?

What is the Definition of Agricultural Income in Turkish Taxation System?

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Income derived from agricultural activities is also subject to the PIT. The term “agricultural activity” means any activity performed in land, sea, lakes and rivers in forms of cultivating, planting, breeding, fishing, hunting and etc. For tax purposes, persons who engaged in such activities are referred to farmers.

Agricultural earnings of farmers shall be taxed by the way of deduction over the proceeds as provided for in Article 94 of this Law. Earnings of farmers exceeding the dimensions of size of exploitation specified in Article 54 or the earnings of the farmers owning a reaper thresher or a motor vehicle of the same nature or more than two tractors up to the age of 10 years shall be taxed by determining their earnings according to the actual procedure (according to agricultural operations accounting or if they wish, according to the balance sheet principle). The farmers whose earnings are not taxed according to the actual procedure shall not submit tax return for such earning. However, the income derived from operation of reaper thresher, or any sort of motor vehicle, or more than two tractors up to age of ten that belong to the farmer but not included in the records of the agricultural exploitation, shall be taxed according to provisions relating to commercial earnings.

Gross revenue arising from agricultural activities consists of the following elements:
– Sales revenues earned from selling every kind of agricultural products produced, purchased or obtained in other ways including the products remained from the previous years,
– Proceeds received in return of using agricultural machinery and equipment in the agricultural works of other farmers,
– Sales revenues derived from the selling of items expensed previously,
– Insurance compensations received for the products damaged before or after they were produced,
– Revenue arising from the selling of the fixed assets (except immovable used in agricultural activities).

On the actual basis, the following expenses are deducted from the gross revenue to reach taxable income for the year:
– Expenditure incurred for supplying fertilizers, plants fodder, chemical products and like for farming,
– The price of livestock, agricultural products and other items purchased for resale,
– Payments made to persons employed on the farm for services, under the name of remunerations, premium and other,
– Expenses incurred for food, medical treatment and medicines for the workers, their insurance premiums,
– Expenses incurred for the operation and maintenance of farming installations, machinery, equipment and vehicles (fuel, lubricating oil, electricity, spare parts etc.) and their repair,
– The depreciation set aside according to the Tax Procedure Law,
– Payments made for means of production obtained on hire or paying its price,
– General expenses for the realization and maintenance of the agricultural earnings.

a) Interest on money borrowed for and spent on the farm,
b) Taxes, charges and levies paid, provided they are concerned with the farm,
c) Travelling and residential expenses concerning the farm in proportion with the importance and volume of business (provided they are limited to the duration and necessity of the voyage,
d) Rent paid for the farm,
e) Other expenditures in general.

– Damages and compensation paid on the ground of an agreement or verdict or ordered by the law, provided they are concerned with the farm,
– In case of sale of economic assets subject to depreciation (excepting immovable used for agricultural production) the loses calculated according to Article 328 of the Tax Procedure Law,
– Total amount of depreciation and fifty percent of the expenses on the vehicles included in the business enterprise and used for also personal and family requirements,
– The products of the farmers carried forward from the past years and which are subject to taxation on the basis of actual assessment procedure shall be valued and shown as expenditures at the average cost of production stated in Article 45 of the Tax Procedure Law.

Source: Revenue Administration

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