Tax treatment of breeding and dairy livestock in Personal Income Tax (IRPF)

The Directorate General of Taxes (DGT) has issued a relevant ruling for professionals carrying out livestock economic activities under the direct estimation method. The inquiry addresses the tax nature of animals intended for breeding or milk production and their accounting and tax treatment.

What the DGT has ruled

The advisory body determines that livestock intended for breeding or milk production constitutes depreciable tangible fixed assets. This implies that the expense derived from its depreciation is fully deductible for the calculation of the net yield of the activity.

In cases where the livestock is produced by the company itself, the DGT establishes that the depreciation base must be its production cost. This value is obtained by summing the following elements:

• The price of the raw materials used.
• Costs directly attributable to the process.
• Costs indirectly attributable to the process.

Furthermore, the resolution clarifies that said production cost must be considered as business income for the calculation of the net yield, in accordance with current regulations.

What it means for you

If you are a livestock professional paying taxes under the direct estimation method, this criterion confirms that you can treat production livestock as a long-term asset. This allows you to spread the cost of these animals over their useful life through depreciation, instead of recording the entire expense in a single fiscal year.

It is fundamental to maintain rigorous tracking of production costs, as these will determine both the value of the asset and the income that must be declared in the activity.

What you should do

It is necessary to ensure that the valuation of the livestock complies with the requirements of the General Accounting Plan and IRPF regulations. The composition of the production cost must be precisely documented, clearly differentiating between raw materials and direct and indirect costs. Since the valuation affects both the depreciation expense and the business income, correct accounting is essential to avoid discrepancies with the Administration.