Family Farm – new opportunities or challenges?
It is no longer required to be a legal entity for registration of 4-group single tax payer. Since August 15 this year the opportunities of farmers – natural persons have been considerably expanded, but under one condition. It should be a family farm.
Further – more.
The new Law No. 2497-VIII dated 07.10.2018, in force since August 15, 2018 amended the tax law and other laws relating to the activities of farms.
What has changed?
First, a new constituent document – a contract (declaration) of the establishment – has been defined. From the title, it follows that in the case of farm registration by one individual – the constituent document is the declaration. In case of family members involved it a contract.
Unlike the contract, the declaration does not require a notary’s certification.
Registering a family farm by a natural person requires submitting of additional document to the state registrar: a contract or declaration on the establishment of a family farm. The said document must be submitted for any “family” farm, regardless of whether it is established by one person or together with family members.
The relevant information about the natural person – family farm will now be in the Unified State Register.
If earlier, the search in the Register does not allow establishing the fact of establishing a family farm, now such information should be displayed.
Now the main thing – taxes and support.
Until the adoption of the law, private entrepreneurs were blocked access to the 4-group of single tax payers due to the lack of coverage of tem by the term “agricultural producer”. We remind you that the 4-group is those who pay the tax not from income or profit, but from the area of land.
Since August 15, 2018, the concept of “agricultural producer” has been changed and now it includes natural persons.
The list of the 4-group is divided into two categories:
- legal entities with a share of agricultural production for the previous reporting year 75% (nothing has changed here);
- natural persons which carry out activities exclusively within the limits of a farm and fulfill a number of requirements in aggregate:
- engaged only in the cultivation, feeding of agricultural produce, its harvesting, fishing, processing, sale;
- carry out activities (except delivery) at their tax address;
- do not hire employees;
- the farm is formed by the family members of the natural person in the understanding of the Family Code (part 2 of Article 3);
- all the lands owned/used have an aggregate area of at least 2 and no more than 20 hectares.
In addition, the law provided such family farms with a new form of support – an additional payment of a part of the single social contribution for members of the family farm from 90% for the first year to 10% during the 9-10 years after registration.
The said support is possible only if the head of the farm pays the other part of the contribution, and the Cabinet of Ministers must determine the terms of its provision.
You can pay a tax on land area and receive an additional payment for a part of the single social contribution if you register a family farm in the form of a natural person based on a contract (concluded with relatives and a notary certified) or a declaration (the form is simple written).
The list of family members should be checked in the Family Code. These are any persons living together and having a common life connected with mutual rights and obligations.
This is a marriage – even if they live separately, but only for valid reasons. The non-exclusive list of such “valid” reasons include education, work, treatment, care for children or parents. So far, it remains unknown how and who need to prove this reasons.
Children and parents are always family members, regardless of the fact of living together.
It is forbidden to hire employees, and land should be from 2 to 20 hectares, including land owned and leased by the chairman and members of the farm.
It is worth paying attention to the obligatory implementation of the production and processing of natural, grown, caught or fed agricultural products at the tax address.
How profitable will be a family farm with the entry into force of this law, the time will show. However, the steps towards its development are welcomed.
In addition, if necessary, register a farm or get other information on the legal aspects of agribusiness – we are always ready to help!
associate in Attorneys at law “Bachynskyy&partners”,
assistant attorney of Andriy Kavchuk, the head of
corporate law and compliance practice