VAT on agricultural products: when to apply the 10% reduced rate

Determining the applicable VAT rate in the marketing of products intended for agricultural activity is a critical aspect for the correct invoicing of companies in the sector. A recent binding ruling from the Directorate General of Taxes (DGT) has delimited the necessary criteria to access the reduced rate.

What the DGT has resolved

The issue raised focused on determining which VAT rate should be applied to the supply of specific spraying products. The DGT has established that, for a product to benefit from the 10% reduced rate, it must meet two concurrent conditions:

• Suitability for professional use: The good must be capable of being used directly, habitually, and suitably in agricultural, forestry, or livestock activities. This suitability is determined by its technical characteristics, its condition, and its packaging.
• Specific classification: The product must fit strictly into the categories of fertilizers, organic waste, conditioners, amendments, herbicides, or pesticides.

If the product has a mixed use that includes gardening, or if it does not fall into the aforementioned categories, the administration requires the application of the 21% general rate.

What it means for you

For companies marketing products for agricultural spraying, this resolution establishes a clear boundary between the 10% rate and the 21% rate. It is not enough for the product to be marketed in an agricultural environment; its technical nature and purpose must be oriented exclusively toward the professional activities described in the regulations. The presence of domestic or gardening uses invalidates the application of the reduced rate.

What should be done

It is necessary to analyze the technical data sheet and the packaging of the products being marketed to ensure that their use is strictly agricultural, forestry, or livestock. Correct classification is fundamental to avoid tax contingencies arising from the application of a tax rate lower than the one required by law. It is recommended to assess each product individually according to its composition and commercial destination.