The contemporary art is in fashion and also, it is a good asset to invest. According to the experts at Saisho, a platform for investment and training in contemporary art, 2022 it’s going to be a good year for this type of art that has seen strong growth in demand in 2021.
Perhaps you like this type of art and you are thinking of buying not only to invest, but to bring life to the walls of your companies. and you might wonder how the investment in art is taxed when it is a company that acquires it: is there any type of tax relief?
“Taxation is the same, whether they are SMEs or large companies, with the exception of the tax rate that corresponds based on the particular characteristics that the company could have. Whether it is at an investment level or simply as a decorative item, works of art will be taxed in corporate income tax at the time they are transferred for the difference between the sale price and the acquisition price. The corresponding tax rate of the company would be applied to that difference, but as a general rule it is 25% “, they explain in Saisho.
Is there any kind of tax incentive to invest in these assets? Unfortunately not. “In Spain there is no type of tax aid to invest in these assets, they do not appear in the list of deductions for investments approved by the different laws that determine the taxation of corporate tax “they clarify.
As in Spain, in other neighboring countries, “We do not find significant incentives for the acquisition of works of art that materialize in tax rebates. The income derived from the transfer of works of art is usually taxed at the general tax rate applicable to the company”. comment Elizabeth Hidalgopartner of International Tax & Transactions Services of EY. “Such is the case of United Kingdom (19%), Germany or France (25%) and, in general, there are no deductions or special regimes applicable to highlight. However, some countries such as Luxembourg provide for a system of deferral of the profit obtained, subject to certain conditions, among others, that the work of art must have been kept for more than five years”explains this expert.
What’s more, “sales of this type of goods (works of art) are also subject to indirect taxation (VAT, or equivalent tax) in other jurisdictions such as the United States, and in EU countries”, recalls the EY expert. Some jurisdictions do apply reduced VAT rates if certain conditions are met, such as France and Italy.
The exception, UK
«As an exception to the above, we find the case of the United Kingdom, a jurisdiction that regulates an exemption from said tax as long as the sale of works of art is not part of the business activity carried out. Also, this jurisdiction provides for a tax rate of 5% on VAT on imports from other countries. On the other hand, as in Spain, in many countries there is no Wealth Tax for legal entities, as is the case in the United States, United Kingdom, Germany or Italy, so the possession of the work of art does not determine greater taxation. “As an exception, we would find the case of Luxembourg, where there is a tax on the assets of companies, which can have a dissuasive effect on investment in works of art”Hidalgo points out.
If the person who invests is a natural person, he or she would pay the Personal Income Tax (IRPF) and if he or she does not carry out an economic activity related to the works of art, he or she will pay tax at the time they are transferred for the difference between the sale price and the acquisition price considered as a capital gain, to which the corresponding tax rate would be applied.
This rate can range from 19% to 26% depending on the amount of profit obtained. Nor would there be any tax aid for individuals for investing in this type of asset. “In some of the jurisdictions mentioned throughout this article, other types of tax incentives are established in the context of foundations and the Anglo-Saxon figure of the trust (trust), which can result in tax benefits depending on the way they are structured”Hidalgo concludes.
