Art market Magazine December 2013

 
ART AND THE LAW 
 
VAT on imports 
s part of the…
ART AND THE LAW

VAT on imports
s part of the finance act, French députés (members of parliament) were planning to raise VAT on imported art works from 7% to 10%. This measure raised
such an outcry in the world of the art market that a white paper – drafted by professionals and specialists in the matter (Jacques Fingerhut and Clare McAndrew) – was commissioned in France by the Syndicat National des Maisons de Ventes, the Comité Professionnel des Galeries d’Art, the Syndicat National des Antiquaires, the gallery owner Franck Prazan and the Chairman of Sotheby’s France, Guillaume Cerutti. In the end, the député Christian Eckert, General Rapporteur for the finance commission, proposed an amendment to the finance act whereby VAT on imports would be set at 5.5%, i.e. the rate in force before VAT was raised to 7%. As we know, VAT on imported artworks is a tax set by a European directive, designed to tax art works imported from countries outside the European Union. Each country in the EU can fix the rate they wish. (Britain, for instance, has set a rate of 5%.) This tax applies not only to the purchase price but also to

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purchasing commissions, and the transport and insurance costs incurred when importing the work. Professionals and private individuals wishing to acquire a work of art in the US for say $100,000, have to pay 7% on top, i.e. $107,000 at the current rate. The art market being competitive by definition, an excessive difference between two countries creates a competitive advantage de facto for the country with the lower rate. So if France had maintained the absurd idea of raising it to 10%, any art works imported would have gone through a country where the import cost was lower. Not only would France have lost almost all the revenue generated by VAT on imports, but a large proportion of the transactions arising from imports would also have passed via the UK. With this measure, France, which represented 5% of global sales, would purely and simply have disappeared from the international art scene. Fortunately, as with the inclusion of art works in the wealth tax, the political powers have listened to the arguments of the professionals. It should also be noted that the Assemblée Nationale have re-established the previous rate, i.e. 5.5%, now putting France back on

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an almost equal footing with the UK. To offset this provision, the Assemblée Nationale have unfortunately increased the tax on precious metals, which now goes up to 12.5
%, and the flat rate tax on works of art when sold by private individuals, which rises to 7%. In addition, exoneration from tax on sales of art works after twelve years of ownership is now envi-

saged after twenty-two years. Finally, it is to be hoped that the provisions for VAT on imports recently adopted by the Law Commission will be maintained in the next finance act. Fabien Bouglé Fabien Bouglé is an art asset management consultant with Saint Eloy Art Wealth Management.

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Photo Marie-Pierre Moinet

Art Market Magazine December 2013
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