Taxes and Accounting for Hazelnut Growers in the United States: A Comparative Analysis Based on EU Research¶
Research-grounded draft (sources cited) — adapt to local context
Article adapted to the United States (Oregon), based on Croatian/EU research literature (see Sources). Figures come from the cited studies and are indicative for the United States (Oregon): verify local equivalents with USDA, FSA, state Departments of Agriculture (e.g. Oregon), OSU Extension, Oregon Hazelnut Commission.
Tax treatment is one of the few factors that directly alters the net profitability of a hazelnut orchard, independent of agronomic performance. Two farms with identical yields and sales prices can end the year with significantly different "net" incomes simply because one operates under a simplified tax regime while the other maintains full business books. This article explains key decisions for hazelnut producers, adapting insights from European literature to the United States context, specifically Oregon.
Starting Point: What the Literature Says About Hazelnuts¶
In the collection of professional literature on hazelnuts, tax treatment is described briefly but consistently. Graduate and final works on orchard economics (e.g., analyses of OPG Balog) note that a "farm is liable for tax payment when placing products on the market for profit," that farms generally do not pay profit tax until revenues exceed a certain threshold, and that "if entering the VAT system, it is necessary to keep business books, calculate VAT, and include it in the price of products and services" [1].
It is important to highlight a critical caveat: these sources originate from 2018 and cite a threshold of 85,000.00 kn and "70 kn state stamps" for registration in the Register of Agricultural Holdings [1]. These are outdated amounts (in Croatian kunas, before the introduction of the euro and before regulatory changes). Current thresholds and amounts are noted below in euros. The rule is old, the numbers are new — use only valid amounts.
The FADN manual (Farm Accountancy Data Network) confirms that a farm, when registering, chooses one of the tax systems: income tax, profit tax, or "outside the tax system", with a separate field for VAT [6]. This is precisely the structure of decisions we elaborate here.
Three "Statuses" of a Farm in Hazelnut Growing¶
Before discussing figures, it is useful to distinguish three typical legal/tax positions of a hazelnut producer:
| Form | Who chooses it | Accounting | Typical income/profit tax |
|---|---|---|---|
| Farm outside the tax system | Small producer below threshold | Minimal | Does not pay income tax from this activity |
| Farm / Craft — Flat-rate taxpayer | Small to medium-sized farm | Simple (sales book) | Flat-rate tax according to turnover class |
| Farm / Craft — Income or LLC/Corp — Profit | Larger orchards, processing, VAT payers | Business books (double-entry) | Income tax or profit tax based on actual results |
For most new hazelnut orchards (first 4–6 years without yield, when income is only subsidies), the status "outside the tax system" or flat-rate is realistic. Only upon entering full yield (e.g., 300+ kg/ha kernels and sales revenue) does the farm approach thresholds that mandate income and/or VAT [3].
When a Farm Must Enter Income Tax¶
A farm that sells its own unprocessed agricultural products (fresh or simply dried hazelnuts in shell) becomes a tax payer only when annual proceeds from that sale exceed a threshold of approximately 10,685 EUR. Below this threshold, the sale of own unprocessed products does not create an obligation to issue invoices or income tax from independent activity.
Important exception: as soon as a farm sells processed products (e.g., hazelnut cream, roasted and packaged kernels, pralines, hazelnut oil), the obligation to issue invoices and tax treatment arises regardless of the amount of revenue. Processing pulls the farm into a "serious" tax regime earlier than raw material sales alone.
Flat-rate Income Tax¶
If a farm enters income tax, the simplest option for smaller producers is flat-rate taxation. Flat-rate is allowed as long as annual proceeds do not exceed 60,000 EUR (upper limit of flat-rate, aligned with the VAT threshold). Tax is not calculated from actual profit but from the prescribed flat-rate base according to the turnover class, at a rate of 12% (plus surcharge/depending on local authority), and is paid quarterly.
Approximate flat-rate classes for 2025 (informational — check valid Ordinance and decision of your municipality/city):
| Annual proceeds (EUR) | Flat-rate base (EUR) | Annual tax @ 12% (EUR) | Quarterly (EUR) |
|---|---|---|---|
| 0 – 11,300 | 1,695 | 203.40 | 50.85 |
| 11,300 – 15,300 | 2,295 | 275.40 | 68.85 |
| 15,300 – 19,900 | 2,985 | 358.20 | 89.55 |
| 19,900 – 30,600 | 4,590 | 550.80 | 137.70 |
| 30,600 – 40,000 | 6,000 | 720.00 | 180.00 |
| 40,000 – 50,000 | 7,500 | 900.00 | 225.00 |
| 50,000 – 60,000 | 9,000 | 1,080.00 | 270.00 |
The advantage of flat-rate is predictable, low cost of accounting and tax. The disadvantage: tax is paid even in a bad year (drought, drop, frost in flowering), because it is not calculated from actual results but from turnover.
"Real" Income or Profit¶
Above 60,000 EUR turnover, or when a farm has large costs (orchard establishment, irrigation, mechanical harvesting, dryer), it is often more profitable to pay income tax based on business books (taxed income = proceeds minus expenses) or switch to profit tax (LLC/Corp). Then actual costs and depreciation are recognized, which in the investment phase of an orchard can give a more tax-favorable picture, but requires proper double/simple accounting [6].
Contributions: Often a Larger Cost Than Tax Itself¶
Contributions for pension and health insurance for the holder of a farm are often a larger annual expense than the tax itself, so they must be included in profitability. Obligation depends on the date of registration and tax status:
- Farms registered before Nov 1, 2010 are generally not obliged to pay contributions (can voluntarily).
- Registered Nov 1, 2010 – Jul 1, 2013: obligation for pension if agriculture is the only/main occupation and there is no other insurance.
- Registered after Jul 1, 2013: obligation for both pension and health, under the same conditions.
The amount of monthly contribution increases with tax status (informational, according to older publications — amounts are adjusted annually, check current base):
| Group | Status | Indicative monthly contribution |
|---|---|---|
| 1 | Below threshold (non-taxable) | lowest class |
| 2.1 | Flat-rate taxpayer | middle class |
| 2 | Income tax payer | higher class |
| 3 | Profit tax payer | highest class |
Key message: a holder for whom the farm is the main activity and has no other (e.g., employment) insurance must count on full contributions. Those already employed or retired usually have a different (or no) obligation status — this significantly changes the calculation of net profitability.
Entering the VAT System¶
From Jan 1, 2025, the threshold for (mandatory) entry into the VAT system is 60,000 EUR of deliveries in the previous calendar year (previously 40,000 EUR). While turnover is below this threshold, entry into VAT is voluntary.
What entering VAT means for a hazelnut producer:
- Obligation to keep business books, calculate and declare VAT, and include VAT in the price.
- Right to deduct input tax — this is the main motivation for voluntary entry in the investment phase: VAT on seedlings, fencing, irrigation systems, tractor, harvester, and dryer can be deducted, which in years of large investments reduces the effective cost of equipment.
Practical rule: those who plan large investments in equipment and sell mainly to other VAT payers (buyers, processors, trade) often benefit from voluntary entry into VAT. Those who sell directly to end consumers (farm gate, fair) and have few investments are usually better outside the VAT system because they avoid increasing the product price by the amount of VAT.
Invoicing and Digital Reporting¶
Invoicing determines how sales are recorded and invoices are issued. Rules are currently changing significantly through Digital Invoicing 2.0 (Law on Invoicing, NN 89/25), which introduces mandatory eInvoices and eReporting.
Framework for farms:
- Direct sale to end consumers of own products — on own farm and "at markets and open spaces exclusively at stalls and benches" — remains exempt from the obligation to issue invoices and digital reporting. This is important for usual hazelnut sales at fairs and "from the threshold."
- An invoice must be issued for sales to legal entities, institutions, and other payers, for processed products, and when the farm is a VAT payer.
Deadlines for Digital Invoicing 2.0 (informational):
| Date | What happens |
|---|---|
| Dec 31, 2025 | Preparation: selection of IT solution / provider and registration |
| Jan 1, 2026 | Farms in VAT system: issuance and digital reporting of eInvoices in B2B/B2G; payers also digitalize consumer sales |
| Jan 1, 2027 | All farms (including outside VAT) issue and receive eInvoices |
For farms outside the VAT system, the Tax Administration offers a free application MIKROeRačun for issuing, receiving, and digital reporting of invoices and legal record keeping — thus obligations can be resolved without paid software.
Supplementary Activities of Farms and Processing Limits¶
Hazelnuts are ideal for higher price class finishing (roasted kernels, cream, oil, pralines), so processing is a common way to increase income per hectare. However, processing own products on a farm falls under supplementary activities which have their own rules and limits:
- Supplementary activity (including processing) must be registered and performed alongside basic agricultural production, usually predominantly from own raw materials.
- There are upper limits of income from supplementary activities within a farm; if exceeded, the activity must be transferred to a craft or commercial company. (The FADN manual requires entry of "estimated percentage of working time spent on supplementary activities," showing that they are tracked as a separate part of business.) [6]
- As soon as there is processing, the obligation to issue invoices arises regardless of the amount, and the product enters the food safety and labeling regime.
Mandatory Labeling for Processors¶
A hazelnut processor must pay attention to regulations on food safety and labeling. Specific figures here are informational and depend on the market and regulations, but general requirements include:
- Product declaration: name, ingredients, net quantity, shelf life, storage conditions, producer/farm data, and batch/lot.
- Allergens: hazelnut is one of the prescribed allergens (tree nuts) and must be highlighted on the label — this applies even when it is an ingredient of another product.
- Registration/approval of processing facility with the competent authority; in literature, for subsidy payment, a "valid Decision of the competent authority on registration of the processing facility" is explicitly required, and for processing services by a third party — an invoice for the performed service and the decision of that facility.
- For organic processing — certificate and control by an authorized body, with appropriate labels; recall, in one analysis (OPG Hobolić) the annual cost of organic certificate and inspection was about 350 + 152 kn (informational, old amounts).
Practical Recommendations and Common Mistakes¶
- Do not use old kuna thresholds. Amounts from literature (85,000 kn, 70 kn stamps) no longer apply; current thresholds are in euros (≈10,685 EUR for invoice obligation for unprocessed products, 60,000 EUR for flat-rate and VAT).
- Include contributions, not just tax. For a holder for whom the farm is the main activity, contributions are often a larger cost than tax; check your obligation status according to registration date and other insurance.
- Consider voluntary VAT in the investment phase. In years of large investments (planting, irrigation, harvester, dryer), input tax deduction can significantly reduce effective cost — especially if you sell to other payers.
- Processing changes everything. As soon as you make cream, oil, or packaged kernels, invoice obligations arise regardless of amount, supplementary activity limits, facility registration, and full labeling (including allergen "tree nuts").
- Prepare for Digital Invoicing 2.0 in time. By the end of 2025, select a solution (or MIKROeRačun), and eInvoice obligations begin in 2026/2027. Direct sales from the threshold and at stalls remain exempt.
- Do not pay flat-rate blindly in a bad year. If yields dropped due to frost, drought, or drop, and turnover remains, flat-rate is still paid; with large fluctuations, consider income based on actual results.
Gallery¶
Sources¶
- LIBERTAS MEĐUNARODNO SVEUČILIŠTE aba5bacb (2018)
- Tehnološka i ekonomska obilježja uzgoja lijeske (2018)
- PDF EKONOMIJA I PODIZANJE NASADA LIJES c0774a45 (2021)
- smart scrape 1176666.Diplomski rad Andrej Odori 22583646 (2018)
- PRAVILNIK O PROVEDBI IZRAVNE POTPORE POLJOPRIVREDI I IAKS MJERA RURALNOG RAZVOJA (2015)
- SUSTAV POLJOPRIVREDNIH KNJIGOVODSTVENIH PODATAKA (FADN – Farm Accountancy Data Network) PRIRUČNIK za popunjavanje računovodstvene 2023 (2023)
- Tehnološka i ekonomska obilježja uzgoja lijeske CORE 18f10547 (2018)