Vertical farming and hydroponic cultivation: agricultural income moves indoors

Vertical farms and hydroponic cultivation: how building-based agricultural taxation is changing

Agriculture is no longer confined to traditional fields and greenhouses. Thanks to hydroponics, aeroponics, and vertical farming technologies, it is now possible to grow vegetables, herbs, and young plants in industrial warehouses, repurposed storage facilities, and fully controlled environments.

This technological evolution, however, raises a fundamental question for investors: how is a vertical farm located inside a building taxed?

The answer is important because taxation can affect the overall financial return of the project. The cost of the system, energy prices, productivity per square meter, the property value, and the tax treatment all contribute to determining the investment's viability.

With Legislative Decree No. 192 of December 13, 2024, the legislator introduced a significant change to the Consolidated Law on Income Tax (TUIR): the new letter b-bis) of Article 32, paragraph 2, recognizes certain plant production activities carried out in specific properties registered in the land registry as agricultural income.

This change directly affects anyone planning to establish a vertical farm, an indoor hydroponic system, or an agricultural production facility in a building previously used for industrial or commercial activities.

However, beware: not all indoor cultivation qualifies automatically for agricultural income treatment, and the land registry classification is not always the most tax-efficient. It is necessary to check the technical requirements, land registry category, production area, applicable tax regime, and the project's financial characteristics.

In this guide, we analyze how the regulations work, the conditions that must be met, a numerical example, and the factors to consider before investing in a professional soilless cultivation system.

1. What is agricultural income, and why does it matter for vertical farms?

Agricultural income is the component of the average ordinary income of land attributable to the working capital and organizational labor used in agricultural activity, according to the definition in Article 32 of the TUIR.

When determining the taxable income, it does not necessarily correspond to the profit actually earned by the business. The tax base is determined by applying land registry criteria and the specific provisions provided for the case in question.

This mechanism can be particularly relevant for businesses that use capital-intensive agricultural technologies.

A vertical farm, for example, may be characterized by:

• multi-level shelving that multiplies the cultivable area compared to the ground footprint;

• LED lighting for plant growth;

• hydroponic systems with nutrient solution recirculation;

• temperature, humidity, and ventilation control;

• sensors and automation systems to manage irrigation, nutrients, and environmental conditions;

• year-round scheduled production.

Under these conditions, the amount of product that can be obtained depends on the system's configuration, the crops grown, the production cycles, the available light, and the target market, not just the land area.

A facility can therefore generate significant revenue while occupying a relatively small area. The tax rules must take this particular production arrangement into account without eliminating all limits or requirements.

The shift from land-based agriculture to indoor cultivation

Before the reform, Article 32 of the TUIR included, among other cases, the production of plants using fixed or mobile structures, even temporary ones, provided that the production area did not exceed twice the area of the land on which the production was based.

This approach was suitable for many traditional greenhouses and agricultural structures, but it was less straightforward to apply to production carried out entirely inside buildings without a direct productive connection to the land.

The new letter b-bis) expanded the scope by introducing a specific option to treat certain plant production activities carried out in properties registered in the building land registry as agricultural income.

The regulatory reference is Legislative Decree 192/2024, available on Normattiva.

2. Which vertical farms and hydroponic systems may qualify?

Article 32, paragraph 2, letter b-bis), of the TUIR identifies specific conditions for plant production activities carried out using properties registered in certain land registry categories.

The specified categories are:

• C/1: shops and stores;

• C/2: warehouses and storage premises;

• C/3: workshops for arts and crafts;

• C/6: garages, car parks, and similar premises;

• C/7: enclosed or open sheds;

• D/1: factories;

• D/7: buildings constructed or adapted for special industrial needs;

• D/8: buildings constructed or adapted for special commercial needs;

• D/9: floating or suspended buildings secured to fixed points on the ground, private toll bridges, and similar structures, according to the land registry classification;

• D/10: buildings used for productive purposes related to agricultural activities.

The presence of one of these categories is a requirement that must be verified, but it is not sufficient on its own to make the rules applicable.

The actual characteristics of the activity, the cultivation system used, and other requirements provided by the regulations and the clarifications issued by the tax authorities must also be considered.

Indoor hydroponics

In hydroponic cultivation, plant roots receive water and nutrients through a nutrient solution, with or without inert substrates, depending on the system used.

Cultivation can be organized using NFT channels, ebb-and-flow systems, drip irrigation, grow beds, tanks, or vertical towers.

If carried out inside a property registered in one of the permitted categories, this solution may be relevant for letter b-bis), provided that the other applicable requirements are also met.

Multi-level vertical farming

Vertical farming is particularly relevant to this provision because it allows multiple production levels to be stacked in the same building.

A warehouse with a floor area of 1,500 m² could accommodate four cultivation levels of 1,500 m² each. In a theoretical example, the total production area would therefore be 6,000 m².

From a tax perspective, it is essential not to confuse the area occupied by the building with the area actually used for plant production.

The measurement must be verified by applying the criteria relevant to the specific configuration and taking into account the stacked levels. It is incorrect to automatically calculate the production area by looking only at the floor plan.

Aeroponics and other advanced systems

Aeroponic systems and other soilless cultivation technologies may also require a specific analysis.

The assessment must distinguish between the technology used, the nature of the property, and the actual production configuration. It is not prudent to assume that any indoor system automatically qualifies simply because it uses sensors, artificial lighting, or automation.

For this reason, before purchasing a building or ordering equipment, it is useful to define the technical project and subject it to the appropriate land registry and tax checks.

3. The area limit: why it matters in vertical farming

One of the central elements of the new rules is the relationship between the production area and the reference agricultural area.

Letter b-bis) of Article 32 states that the area used for production must not exceed twice the reference agricultural area identified according to the regulation provided by the law.

The transitional regime provides specific criteria while the provisions are being implemented.

According to the transitional rules of Articles 28 and 34 of the TUIR, the land income and agricultural income are determined using the highest provincial land tax rate currently in force, increased by 400% and applied to the area of the land registry parcel on which the property is located.

For the purposes of the transitional regime, the operational reference to the area of the land registry parcel therefore takes on a decisive importance.

A simple example

Suppose we have a warehouse located on a land registry parcel of 2,000 m².

In the example considered, the reference area is 2,000 m², and the corresponding limit of twice that area is:

2,000 × 2 = 4,000 m².

If the vertical farm has four production levels of 1,500 m² each, the area used for production is:

1,500 × 4 = 6,000 m².

The comparison therefore highlights:

Element	Area
Land registry parcel	2,000 m²
Limit equal to twice the reference area	4,000 m²
Multi-level production area	6,000 m²
Excess area in the example	2,000 m²

The excess portion must be treated according to the specific tax rules provided by the regulations.

It is important to emphasize that the example describes the transitional regime and does not replace the verification of the implementing provisions and their applicability to the individual property.

4. How is the agricultural income of a vertical farm calculated?

The most delicate aspect of the rules is that the income recognized for tax purposes does not necessarily correspond to the financial result of the system.

The legislator has provided transitional rules to determine the land income and agricultural income of the production carried out in the properties covered by letter b-bis).

In particular, Article 28 of the TUIR governs land income, while Article 34 contains the provisions relating to agricultural income. Pending the definitive rules provided by the law, the land tax rates are used according to the transitional mechanism.

For land income, there is also a minimum limit: the determined value cannot be lower than the land registry rental value attributed to the property, according to the applicable provisions.

This particularity can significantly change the tax result when a system is established in a building with a high land registry rental value.

Land registry rental value and actual profitability

Imagine two systems with similar production characteristics, but installed in different buildings.

The first property may have a relatively low land registry rental value. The second could be an industrial warehouse with a significantly higher rental value.

Even if the systems generated the same operating margin, the tax treatment linked to the building could be different.

For this reason, the land registry rental value should not be considered a mere administrative figure to be checked after making the investment. It is a variable to be analyzed in the preliminary phase, along with the cost of the property, the adaptation works, and the installation costs.

A project may be technically sound and commercially attractive, but present a tax result different from what was initially expected.

5. Practical example: a vertical farm in an industrial warehouse

Consider a theoretical case useful for understanding how the transitional rules work.

A simple agricultural company purchases a warehouse registered in category D/1, with a land registry rental value of 14,000 euros, located on a 2,000 m² parcel.

Inside, an indoor hydroponic system is established with four cultivation levels of 1,500 m² each, for a total of 6,000 m² of production area.

The company grows microgreens and herbs for sale. After harvesting, the products are washed, cut, and packaged.

For the example, assume that the highest provincial land tax rate is 300 euros per hectare for land income and 140 euros per hectare for agricultural income.

First step: area verification

The parcel measures 2,000 m², or 0.20 hectares.

In the example's transitional framework, the production area limit is 4,000 m².

The vertical farm, however, has a production area of 6,000 m², with 2,000 m² exceeding the limit.

Second step: land income

Applying the transitional mechanism to the assumed land tax rate yields:

• Provincial rate: 300 euros per hectare.

• 400% increase: total rate of 1,500 euros per hectare.

• Applied to the 0.20-hectare parcel: 300 euros.

• Revaluation according to the coefficients provided in the example: 702 euros.

The resulting value is lower than the land registry rental value revalued by 5%:

14,000 × 1.05 = 14,700 euros.

In the example, the land income is therefore determined by assuming the value of 14,700 euros, applying the rule that prevents it from falling below the revalued land registry rental value.

Third step: agricultural income

Applying the same mechanism to the assumed agricultural tax rate of 140 euros per hectare:

• Rate increased by 400%: 700 euros per hectare.

• Applied to the 0.20-hectare parcel: 140 euros.

• Revaluation according to the example's coefficients: 309.40 euros.

The value of 309.40 euros represents the agricultural income calculated according to the assumptions adopted in the example.

Fourth step: excess area

For the portion of production that exceeds the limit, the income contributes to forming the business income according to the rule provided by Article 56-bis of the TUIR.

In the case considered, the excess is 2,000 m². Applying the example's proportional criterion, with a reference agricultural income of 140 euros:

140 × 2,000 / 2,000 = 140 euros.

The business income component related to the excess area therefore amounts to 140 euros in the illustrated assumptions.

Summary of values

Tax component	Assumed amount
Land income	14,700.00 €
Agricultural income	309.40 €
Business income related to the excess portion	140.00 €
Total of the considered components	15,149.40 €

These values are for illustrative purposes only and depend on the assumptions and coefficients adopted. They do not constitute a tax calculation automatically applicable to a real-life case.

However, the example highlights a fundamental principle: the income attributable to the cadastral income of the property can have a much greater impact than the other components considered.

A company with a highly productive plant could therefore find itself reporting a fiscally determined income based on criteria other than the economic margin obtained from the sale of vegetables.

6. Is it always advisable to choose the cadastral regime?

Not necessarily.

The cadastral determination may be attractive for certain agricultural activities, especially when the resulting tax outcome is lower than that which would emerge from other methods of determination permitted by the regulations.

However, in vertical farms, the entire economic structure of the investment must be assessed.

The main variables to examine are:

• purchase price or rental fee of the building;

• cadastral income of the property;

• investments in shelving, hydroponic channels, pumps, and recirculation systems;

• LED lighting and related energy consumption;

• climate control, ventilation, and humidity control;

• labor, seed, nutrient, and maintenance costs;

• actual production yield and number of annual cycles;

• selling price and commercial channels used;

• tax treatment of the portion of production exceeding the limits.

The comparison must be carried out on a case-by-case basis. It is necessary to estimate the actual economic result, check the applicable tax rules, and assess whether alternative methods of income determination are available, including any options provided for by the regulations.

It is not correct to assume that the cadastral regime is always more favorable simply because the activity is agricultural or uses innovative technologies.

The role of cadastral income in choosing the warehouse

Before purchasing or leasing a property, it is advisable to obtain at least the cadastral survey, the cadastral income, the floor plan, and the parcel data.

This information can be compared with the preliminary production project to check whether the surface area, cadastral category, and other requirements are compatible with the applicable regulations.

The comparison must take place before committing significant capital: changing buildings after designing the plant can lead to additional costs and delays that are difficult to recover.

7. What happens if the warehouse is rented?

The distinction between ownership and leasing is important.

Article 36, paragraph 3.1, of the TUIR establishes that properties used directly for the plant production activities contemplated by letter b-bis), when not leased, are not considered to generate building income under the relevant regime. The specific tax provisions provided for by the regulation apply to these activities.

If, however, the warehouse is leased, the owner continues to report the building income according to the rules applicable to their position.

The agricultural company using the property, for its part, must determine the income derived from the activity carried out and assess any business component related to the excess area.

It follows that the choice between purchasing and renting a warehouse should not depend solely on initial financial availability.

The following should be compared:

• capital required to purchase the property;

• rental fees and contract duration;

• costs of adapting the structure;

• cadastral income and tax consequences;

• flexibility required to expand or reconfigure production.

A lease agreement can reduce the initial real estate investment, but it must also guarantee a duration and conditions compatible with recovering the investments made in the plant.

8. Harvesting, processing, and packaging: how are subsequent activities classified?

A vertical farm is not necessarily limited to producing plants and vegetables.

The company can carry out post-harvest operations, such as sorting, washing, cutting, storage, packaging, and marketing.

These activities must be analyzed separately from plant production, because their tax treatment depends on the regulations on related agricultural activities and the conditions that allow for their classification.

Legislative Decree No. 148 of August 7, 2026, introduced amendments to the regulations governing agricultural companies, also addressing the coordination of provisions relating to related activities and the productions obtained using the properties contemplated by letter b-bis).

For projects involving the sale of processed or packaged products, it is therefore necessary to check the regulations applicable to the tax period concerned, the connection requirements, and the conditions provided for by the regulations.

From an operational point of view, it is advisable to clearly distinguish:

1. primary production obtained through cultivation;

2. operations carried out on harvested products;

3. any processing;

4. marketing of finished products.

This distinction is also useful for estimating the margins of each phase, identifying the necessary equipment, and calculating the actual cost of the sold product.

The regulatory reference for updates is the Legislative Decree 148/2026, available on Normattiva.

9. The main mistakes to avoid before setting up a vertical farm

Tax regulations represent only one part of the preliminary work required. There are some mistakes that can compromise both the correct classification of the activity and the economic sustainability of the project.

Mistake 1: considering any indoor plant as agricultural

The fact that a crop is grown indoors is not sufficient to guarantee the application of agricultural income.

It is necessary to check the cadastral category, the requirements of the cultivation technique, and all other provided conditions.

Mistake 2: measuring only the floor area

In vertical farms, the production area can be much larger than the ground footprint.

The project must clearly state the number of levels, their extent, and the areas actually intended for cultivation.

Mistake 3: ignoring cadastral income

The value of the cadastral income can become a determining component of the tax base.

Checking it before purchase allows for the comparison of different real estate solutions and helps avoid tax forecasts based solely on production profitability.

Mistake 4: designing the plant without doing the math

A system that produces many kilograms of vegetables is not automatically profitable.

The investment must be assessed by comparing productivity, selling prices, energy, labor, maintenance, real estate costs, and tax treatment.

Mistake 5: overlooking excess areas

When the production area exceeds the applicable limit, the excess component must be treated according to the provisions of the TUIR.

Overlooking stacked levels can lead to an incorrect calculation of the area and the fiscally relevant income.

Mistake 6: confusing technical design with tax advice

The plant configuration, production area, and building characteristics are essential data for conducting the tax assessment.

However, the final calculation of income, the classification of the company, and the submission of tax returns must be verified by a tax accountant or a tax professional competent in agricultural matters.

Collaboration between the designer, entrepreneur, and tax consultant makes it possible to reduce uncertainties before investing.

10. Checklist: what to check before investing in a vertical farm

Before starting an indoor hydroponic or aeroponic cultivation project, it is advisable to gather the data necessary for an initial feasibility analysis.

Verification area	Question to ask
Property	Is the cadastral category among those permitted by letter b-bis)?
Cadastre	What are the cadastral income and the parcel area?
Cultivation	Which technique is used, and what are its characteristics?
Surface area	How many production levels will be installed, and what is their total area?
Production	Which species will be grown, and what are the expected cycles and yields?
Market	Who will buy the products, and at what indicative prices?
Energy	What are the expected energy consumption levels for lighting, pumps, and climate control?
Property	Is it preferable to purchase or lease the building?
Taxation	Which income determination regime is applicable, and what result does it produce?
Organization	How will harvesting, packaging, logistics, and sales be managed?

This check does not replace professional obligations, but it makes it possible to reach the design phase with more precise information and more realistic economic assumptions.

11. Why technical and economic design must proceed together

The sizing of a vertical farm directly influences its profitability.

For the same building surface area, changing the number of levels, the distance between crops, the lighting system, or the type of plant can change the amount of product obtainable, the energy requirements, and the operating costs.

A multi-level system increases the production area, but requires checking accessibility, air distribution, light uniformity, water management, and ease of harvesting.

A recirculating hydroponic system can reduce nutrient solution waste compared to a non-recirculating system, but it requires the correct sizing of pumps, tanks, and control systems.

Artificial lighting makes it possible to schedule production independently of natural light availability, but it can become one of the main cost items. Its cost-effectiveness must be assessed in relation to the crop, photoperiod, equipment efficiency, and energy price.

For this reason, it is not enough to purchase the equipment and place it in an available building. A professional project must integrate cultivation, plants, structure, energy consumption, labor, market, and tax aspects.

The most prudent sequence consists in defining the product to be produced, estimating the market, identifying the property, sizing the system, calculating the investment, and comparing different economic scenarios before making the main purchases.

12. How to assess a soilless cultivation project

Anyone assessing a vertical farm, a hydroponic greenhouse, or a professional soilless cultivation plant should start with some concrete questions.

Which crops are intended to be produced? What volume of sales is realistically achievable? Will the activity be aimed at wholesale, restaurants, organized distribution, or internal consumption by a commercial facility?

The answer influences the type of plant, the degree of automation, and the production configuration.

Aromatic herbs and cut salads, for example, have different requirements compared to fruit plants or crops with longer production cycles. They change the distance between plants, lighting, climate management, harvest frequency, and packaging methods.

The property must also be assessed in relation to the activity. A warehouse may have an apparently adequate surface area, but require interventions for electrical supply, drainage, water distribution, ventilation, or environmental condition control.

Finally, the actual economic cost-effectiveness must be analyzed, including taxes and any costs related to the portion of production that exceeds the limits of the agricultural regime.

The result is a more realistic assessment of the investment and a better basis for deciding whether to proceed, modify the project, or choose a different technical solution.

Conclusions: the vertical farm is designed before investing

The possibility of classifying certain plant productions carried out in buildings as agricultural income is an important change for the development of soilless agriculture in Italy.

The new letter b-bis) of Article 32 of the TUIR opens interesting prospects for vertical farms and for entrepreneurs who want to convert existing properties into technologically advanced agricultural facilities.

However, the concrete application of the regulations requires attention. The cadastral category, production area, cultivation levels, property income, transitional regime, and the possible presence of excess production must be analyzed together.

The tax assessment must also be integrated with an economic analysis: an efficient production technology does not guarantee an adequate return on invested capital on its own.

For this reason, it is essential to do the math before setting up the plant, rather than checking sustainability only after purchasing the building and installing the equipment.

Are you assessing a vertical farm or a professional hydroponic plant?

On Acquaponica.shop, you will find systems, equipment, and solutions for hydroponic cultivation and soilless agriculture, with the possibility of exploring the requirements of your project before defining the investment.

Whether you are thinking of converting an industrial warehouse, creating a controlled-environment vegetable production, or expanding an existing agricultural activity, the starting point is to understand which system is suitable for your crops, the available spaces, and the production objectives.

Contact us through Acquaponica.shop to talk about your project. We can explore the technical requirements, assess the possible plant configurations, and identify the equipment to consider for the development of your activity.

Before purchasing, we design the solution and analyze the numbers: it is the most concrete way to turn an idea of innovative agriculture into a conscious investment.

Regulatory references and further information

• Legislative Decree December 13, 2024, No. 192 – Normattiva.

• Legislative Decree August 7, 2026, No. 148 – Normattiva.

• Agenzia delle Entrate – Schedule A: land and rules for the declaration.

Disclaimer: This article is for informational and educational purposes only. The tax treatment of a specific vertical farm depends on the characteristics of the project, the tax laws applicable for the relevant tax period, and any implementing provisions. Before making investments or filing a tax return, you should consult a qualified tax professional.