Are artworks luxury items?

Jun 25, 2024 | Art Word, Services

The EU opens up to reduced VAT for the art sector. Which countries will seize this opportunity?

For decades, the main market for art in Europe was the British one, thanks also to low taxation.

However, following Brexit, the UK’s share of the global art market has plummeted to its lowest level in the last ten years and is likely to continue declining.

Until now, however, artworks were considered luxury goods and thus excluded from the list of products and services that could benefit from reduced VAT rates in Europe.

The new EU directive, approved on April 5, 2022, extended the possibility of reducing VAT to the “supply of works of art, collectors’ items, and antiques,” which can therefore no longer considered luxury products, at least at the European level, but goods and services deemed to “pursue objectives of general interest.”

The goal is to establish a single VAT system at the European level and achieve a true single market, while still allowing member states the right to determine their own rates nationally.

Naturally, there is also the aim of favoring the art market, which has global players whose dynamics transcend individual states. It is a substantial market. In 2023, sales reached a total of $65 billion.

France was the first to reduce taxation, seeking to take advantage of Britain’s weakness, now penalized by Brexit (even though this circumstance remains sort of taboo and is rarely mentioned in the UK) and by marginalization and consequent import/export procedures.

The results were immediately visible, with the increase in contemporary art galleries in Paris, as well as the rise in local sales by Sotheby’s, which will open a new luxurious headquarters, and Christie’s, both owned by French shareholders, while Sotheby’s London has announced dozens of layoffs. Even the main international art fair, Art Basel, has inaugurated an edition in the French capital.

Starting from the end of December, the rate on all transactions in France will be only 5.5%, still lower than the practically 6% rate applied until now.

Germany has also recently announced its intention to apply reduced VAT on art. The value-added tax for art sales will go to the reduced rate of 7% from January 1, 2025, and Germany expects a market revival.

In Italy, currently, the sale of art goods is subject to a 22% rate, the highest percentage in Europe. The rate is reduced to 10% only when the import and sale are carried out directly by the artist or their heirs.

Italian operators thus find themselves in a substantially disadvantaged position, and the current tax regime compromises the commercial attractiveness of this country. Italy’s share of the global art market is less than 1%.

The forecast of the reduced rate would involve the entire marketing process of a work of art, from the artist’s studio to the gallery sale, directly and in terms of impacts favoring the art market.

On the contrary, if Italy does not proceed with the adoption of the reduced rate for the entire art sector, the artist’s rate would also increase to 22%, thus further reducing market opportunities for artists in Italy.

In other countries, the importance of the art market for their internal economy is recognized, and they facilitate trade flows and exchanges while ensuring, at the same time, the likely fiscal transparency of the system.

The current Italian government has included the VAT cut to 7% in the package of changes to the tax legislation. In the country that for many is synonymous with art and beauty, we hope that unjustly ideological logics will not prevail.

This could also help us to reduce VAT on our services.

Anna Pelagotti
Anna Pelagotti

on the cover: Padrinosauro Duke of Dinosauria by Hogre for the collettive Dinosauria 2024. – Street Level Gallery – Firenze