VAT increase for farmers and growers starting in 2025

The reduced VAT rate for agricultural goods will be abolished as of January 1, 2025. For products such as livestock, seed potatoes, and grains not classified as food, the VAT rate will increase from 9% to 21%. According to the government, the current rate is inefficient and aligns with the discontinuation of the agricultural scheme in 2018. The decision requires farmers and growers to adjust their business operations.

Impact on livestock, grains, and other goods

The measure applies to various categories of agricultural products, including animal feed, flax, straw, and seeds. The higher VAT rate also covers animals intended for agricultural production and goods used for breeding agricultural livestock. In practice, this means farmers will need to apply the higher VAT rate when buying and selling livestock and related products. While this change does not directly affect net results, according to advisory firm ABAB, it does alter the way VAT is calculated and remitted.

Pre-financing and VAT filings

One key consideration is the pre-financing of VAT. Farmers will pay VAT on purchases but can only reclaim it after the filing period. For those filing quarterly, this means waiting up to three months for reimbursement. ABAB suggests that farmers consider switching to monthly VAT filings, depending on their financial circumstances. Farmers must also notify their buyers about the increased VAT charges.

The change highlights the importance of careful administrative and cash flow management for agricultural entrepreneurs. Advance planning and professional advice can help mitigate the impact of the VAT increase effectively.

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