Small farm property relief

Small peasant property is defined as the mode of conducting agriculture in which the figure of the worker comes to coincide with that of the farmer, whose Farm is small in size and befitting at most the size of the farmer’s family.

In order to facilitate the aforementioned mode of land management, favoring it over industrial-type production, the legislature provided in favor of farmers, subject to verification of the possession of certain requirements, the applicability of tax benefits (l. 604/1954); benefits, moreover, recently confirmed by the 2014 Stability Law (l. 147/2013).

The relevant tax concessions were provided by the legislature – and applied – in order to encourage the formation or rounding up of small peasant property (Art. 1 l. 604/1954) and, therefore, in accordance with this rationale , the deeds affected by the aforementioned concessions are those that constitute or modify real rights over agricultural land, as provided for in Art. 1 of the aforementioned l. 604/1954, as amended.

It should also be noted that the facilitated regime, by virtue of the provisions of the same Art. 1 l. 604/1954, is also applicable to purchases for consideration of rustic houses not located on the property being sold, provided that the purchase of the rural building takes place at the same time as the purchase of agricultural land and is included in the same deed.

In order to qualify for the benefits, it is primarily necessary for the land in question to be qualified, according to existing land-use plans, as agricultural and for the applicant to hold the status of a professional agricultural entrepreneur (IAP) or direct farmer, which will have to be proven by showing the certificate attesting to enrollment in the relevant Inps social security and welfare management.

It is also required that the person who is a direct cultivator or professional agricultural entrepreneur directly, habitually and manually devotes himself or herself to the activity of cultivating the land for which the favorable tax regime has been applied, the mere possession of the aforementioned qualifications not being sufficient.

The requirement of habituality is, however, to be kept distinct from the character of principality of the conducting activity, since for the legislator the percentage of income derived from the cultivation activity is not relevant, but only the concrete and constant performance over time of the activity itself: the only data suitable to prove the creation of a lasting and effective relationship with the land.

Having verified the existence of the requirements of the regulations and concretely applied the favorable tax regime, in order to maintain it over time, the applicant will have to undergo an additional provision, inherent in the limitation of the fund’s disposition activities, failure to comply with which will result in the forfeiture of the tax benefits applied to the act.

The subsequent Article 7 of the same l. 604/1954 provides, in fact, for the forfeiture of the facilitated regime, with retroactive effects at the time of the stipulation of the deed where the applicant voluntarily alienates the fund or the partial rights over it acquired or, finally, ceases to cultivate it directly before five years have elapsed since the acquisition of the real right that is the subject of the facilitated contract.

The same consequence will also occur in the event of voluntary alienation or lease or use for other than the intended use of the rustic house, acquired at the same time as the farmland.

Article 11(2) of Legislative Decree May 18, 2001 no. 228 provides, finally, for the forfeiture of the preferential tax regime not only in the case of alienation for consideration of the land, but also in the case of early repayment of the loan taken out for the purchase of the land covered by the aforementioned regime.

Turning to the practical side, it should be noted that the aforementioned tax break provides for the applicability of registration and mortgage tax at the fixed rate and cadastral tax at the rate of 1 percent for all deeds of transfer for consideration in favor of direct cultivators or IAPs, concerning land and its appurtenances that are qualified as agricultural according to the regulatory plans in force.

In view of the above, and as a logical consequence of the rationale underlying the facilitated regime in question, deeds of transfer of agricultural land and appurtenances, in favor of individuals who do not fall into the category of small peasant property, will remain subject to ordinary registration, mortgage and caste taxes.

Attorney Chiara Roncarolo

Attorney Maurizio Randazzo