Fine Art Shipping

The taxation of works of art

Bérénice Robaglia

Daniel Cohen

Taxation of works of art in France

Whether you are an art lover, a collector or a professional, the purchase and sale of works of art are operations subject to taxation: VAT, customs duties, capital gains tax... Here is a reminder of French taxation on the subject. Value added tax (VAT) is only a version of a consumption tax, a tax charged to consumers when they purchase a good or service. The idea behind VAT is to tax value added at every stage of production, from the raw materials stage through manufacturing and wholesale to final sale. Business owners charge and collect VAT from their customers and then remit it to the government when filing their tax returns. So, as the owner of a gallery or auction house, you can consider yourself a VAT intermediary. You simply pass it on from the consumer to the tax authorities. The VAT model exists throughout the EU, as well as in many other countries around the world (about 120 more!). Although the EU shares uniform VAT rules, each Member State has its own rates. For example, Germany's VAT rate is 19%, while France's is 20%. In general, EU VAT rates vary between 17% and 27%. But the rate also depends on the type of goods you are selling, for example "reduced rates" for works of art and antiques.

VAT on exports of works of art

In the case of an individual

The sale abroad of precious metals, jewellery, works of art, collectors' items or antiques are subject to a flat-rate tax proportional to the transfer price (or the customs value), due at the overall rate of 6.5% for sellers having their tax residence in France. A sale of such objects below €5000 is exempt from the tax. Persons who do not have their tax residence in France are also exempt, but must be able to justify a previous import, a previous introduction or an acquisition in France. The following are also exempt: Transfers to museums, public libraries and public archives; Temporary exports; Sale or export by artists of their own works when they have owned them continuously since their creation; Sales of objects worth more than €5000 that have been owned by the seller for more than 23 years...

In the case of a company

French (and more broadly European) companies that export to Europe or outside the EU are exempt from VAT and customs duties (you do not have to declare the VAT as an exporter, it is your customer, the importer, who will have to pay the taxes and customs duties). The same applies to deliveries between European countries: no VAT or customs duties. However, when you export goods, you must provide documents proving that the goods have been transported outside the EU. To do this, you must present the proof of exit (ECS de sortie) to your tax authorities. This will enable you to recover the VAT you paid on a previous related transaction that led to the export (this may depend on the nature of your business, and your turnover, for more details here).

VAT on imports of works of art for EU countries

The tax must be paid by the person designated as the actual recipient of the goods on the import declaration. Whether the entity is a business or a private individual, it will, in any event, have to pay VAT if it imports a good from a third country. This amounts to 5.5% of the commercial value of the work + transport costs to the point of entry into the EU (CPT or CIP value) + duties and other taxes if any (if art, antiques or works of art) or 20% if it's another product (design for example). There is no customs duty within the EU. When the importer is a business, the VAT paid on importation can be recovered. The gallery may also opt for a VAT margin scheme: by this option galleries can request that VAT be collected only on the profit margin they make. In this case, however, they lose the right to deduct the VAT paid on the purchase price of the work. Where it is not possible to determine the purchase price of the work transferred, galleries may, under certain conditions, calculate the margin on a flat-rate basis, deducting 30% of the sale price of the work before tax. As the individual buyer is not subject to VAT, he will not be able to deduct it: it is therefore an additional cost for him which is added to the price of the work.

Within the framework of the transport tax

In the case of an individual

A private individual does not pay any VAT on the transport of his works of art for export, on the other hand for import, a private individual may have to pay 20% VAT from one European country to another European country (i.e. if the collector buys a work of art in Germany and imports it into France). In the case of an import from a non-EU country to his residence in France (e.g. from NYC to Paris) he will only pay VAT on the French part of the transport. For non-European countries there is no VAT to pay on the import (i.e. if a French citizen imports a work from the USA he will not have to pay anything).

In the case of a company

If the company is European and imports work from a European country or not, it will have to pay 20%. Since 1 January 2015, businesses benefiting from the single local clearance procedure (PDU) can opt to declare the VAT due on imports on their turnover declaration. For your intra-Community acquisitions, you must enter the applicable VAT on your regular VAT return, together with the rest of your taxable transactions.