Tax Happy Hour: Taxation for Agriculture and Biological Assets – 19 November 2025

By attending this webinar you will gain the following competence

1. Overview of Agricultural Activities

Agricultural activities include the management of biological assets such as:

• Plants (e.g., crops, orchards, vineyards)

• Animals (e.g., livestock for meat, milk, wool, breeding)

These activities generate agricultural produce (e.g., harvested crops, milk, wool) that can be sold or further processed.

2. Biological Assets Defined

A biological asset is a living plant or animal. These assets undergo biological transformation—growth, degeneration, production, and procreation—which affects their value. Common examples include:

• Livestock (cattle, sheep, pigs)

• Perennial crops (grapevines, fruit trees)

• Forestry trees (timber)

3. Tax Treatment of Agricultural Activities

Tax laws and accounting standards vary by jurisdiction, but there are common principles:

a. Recognition and Measurement

Under International Financial Reporting Standards (IFRS), particularly IAS 41 – Agriculture, biological assets are:

• Measured at fair value less costs to sell, unless fair value cannot be reliably measured.

• Gains or losses from changes in fair value are recognized in the income statement.

b. Capital vs. Revenue

• Revenue income includes proceeds from the sale of crops, animals, or produce.

• Capital gains/losses may arise from selling long-term biological assets (e.g., orchards or breeding stock).

c. Depreciation and Amortization

• Biological assets with a limited useful life (e.g., dairy cows) are depreciated.

• Land used in agriculture is not depreciated but may be subject to capital gains tax on sale.

4. Special Tax Incentives and Deductions

Many governments provide tax relief for agricultural producers, such as:

• Accelerated depreciation for qualifying agricultural equipment.

• Exemptions or reduced rates on income from farming.

• Tax deferrals on the sale of livestock due to drought or disease.

5. Challenges in Taxation

• Valuation difficulties due to fluctuating market prices and biological uncertainties.

• Timing of income recognition, particularly for crops that take years to mature (e.g., vineyards).

• Record-keeping complexity, especially for mixed farming operations.

6. Conclusion

Taxation for agriculture and biological assets must account for the sector’s cyclical nature and biological processes. Understanding applicable tax rules, incentives, and accounting standards is essential for accurate reporting and tax compliance. Proper planning can also help optimize tax outcomes for agricultural businesses.