Fatal for the French art market

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A new EU sales tax on art will dramatically increase the cost of art sales in France. It “will be fatal” for the country’s art market,” warns Thaddeus Ropak, founder of the global gallery brand of the same name. He is one of a growing legion of dealers, auctioneers and consultants who have taken up arms against this rule.

The directive aims to impose a sales tax on imports of goods, including works of art, at 20% for all EU members. It also implies the abolition of the “margin scheme”, widely used by French dealers, which reduces the amount of VAT paid on works of art.

The directive on sales tax on art was quietly passed by the European Commission on April 5, 2022, but only caught the attention of the wider art and antiques industry after the publication of the French financial daily Les Echos.

While this rule applies to all 27 EU countries, it will be particularly detrimental to the French art market.

It should be noted that the country is currently experiencing a renaissance in the art market: its share of global art sales has grown from 3% in 2001 to 7% in 2021, and now, according to the research company Art Economics, it accounts for half of the EU market.

The clear signs of this are:

  • mega galleries such as David Zwirner and Hauser & Wirth have recently opened outposts in their capital, Art Basel launching its Paris+ fair;
  • booming auction results totaled over $1 billion for the first time in France last year.

A key factor behind French art market success is that it charges the lowest art import duty in the EU at 5.5%. This number is significantly lower than other wealthy EU countries with established art industries such as Germany (19%), Spain (21%) and Italy (22%).

Before Brexit, the British import tax of 5% VAT was the lowest in the EU. But his exit from the union has made France “the only entry point for global players in the EU,” says Franck Prazan, director of Paris-based gallery Applicat. -Prazan.

France currently maintains this rate of 5.5% for sales of works of art imported into the country or sold by an artist to a gallery. The VAT rate of 20% theoretically applies only to profits earned from secondary sales.

EU member states have to implement the directive into their national legislation until January 1, 2025. But Prazan believes it will likely come into effect in France if not stopped by the end of 2023 under the next budget.

But there may still be hope. After a meeting with the French Ministry of Culture, CPGA President Marion Papillon says that “we have definitely agreed that low sales tax rates of 5.5% are mandatory to support the French art market. This is the only way to apply the new tax cut rules.”

In fact, if applied correctly and under the guidance of industry professionals, the new directive may even have some beneficial effects on the French art market. A spokesman for the French economy ministry said the EU directive “does not oblige us to review the reduced sales tax” applicable to works of art, and that the new rule in fact makes it possible to apply the current low sales tax.

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