VAT special regime compensation does not count as income for Personal Income Tax (IRPF)

The Directorate General of Taxes (DGT) has issued a relevant ruling for holders of agricultural, livestock, or forestry activities who pay taxes using the objective estimation method for Personal Income Tax (IRPF). The inquiry focused on determining whether compensations derived from the special VAT regime for agriculture, livestock, and fishing should be counted as income to calculate the income volume limit that allows remaining in said regime.

What the DGT has resolved

The DGT has ruled that, for the application of the objective estimation method, the volume of income must not include the compensation from the special VAT regime for agriculture, livestock, and fishing. This criterion is based on current regulations, highlighting that for the 2025 tax year, it has already been established that such compensation is not counted among the taxpayer's income. Regarding the possibility of applying this criterion in the 2026 tax year, the Administration indicates that it is not possible to issue a definitive response, as the corresponding order has not yet been processed.

What it means for you

If you are a holder of an agricultural, livestock, or forestry activity using the objective estimation method, this criterion has a direct impact on your ability to maintain this taxation regime. Since these VAT compensations are not counted as income, the total income volume used to determine whether you exceed legal limits will be lower than it would be if such amounts were included. This prevents the receipt of these compensations from forcing you to abandon the objective estimation regime due to excess income.

What you should do

It is necessary for affected taxpayers to analyze their current tax situation and the regulations applicable to their activities. Since the application of this criterion for the 2026 tax year will depend on the processing of the corresponding order, it is fundamental to monitor the specific regulations governing income volume for upcoming tax periods. Each situation must be assessed individually to ensure compliance with the limits established in current regulations.