Taxation in the
circulation of artworks

The art market is configured not only as a cultural and professional sphere for artists and curators, but also as a significant economic sector, capable of attracting the interest of investors, collectors, institutions, and professionals. However, the tax and regulatory framework governing its dynamics is heterogeneous at the international level, with significant differences from one legal system to another. In this context, a comparative analysis proves essential to identify opportunities and address the challenges that characterize cross-border operations in the art world.

In an effort to provide a comprehensive overview, several of the most relevant countries — both European and non-European — have been examined in order to understand how different legal and tax systems relate to the circulation, ownership, and transfer of works of art.

Section prepared by Studio Lombard DCA

Individuals

In China, capital gains arising from the sale of artworks are taxed as ordinary income, with progressive rates ranging from 3% to 45%, depending on the total annual income. However, occasional or non-habitual sales may not be subject to taxation.

Legal Entities

In China, the standard Corporate Income Tax rate is 25%. Nonetheless, reduced rates are available for specific categories of enterprises:

15% for high-tech enterprises that meet certain criteria;
10% for designated companies in the software and integrated circuits sectors, following a five-year tax exemption period;
5% for small and low-profit enterprises that comply with defined requirements.

Art galleries and market operators that meet the necessary conditions may benefit from these preferential rates.

Moreover, art galleries and art market participants are permitted to deduct expenses directly related to their business activities, including:

Costs of purchasing and selling artworks;
Preservation and restoration expenses;
Sales and gallery commissions;
Transportation and insurance costs;
Marketing and promotional expenses.

Comparison Between Natural and Legal Persons: From a Tax Perspective, Who Benefits More from the Ownership and Sale of Artworks?

In general, in China, the ownership and sale of artworks tend to be more tax-efficient for legal entities—particularly in the case of high-value collections or commercial activity within the art sector.

Legal entities such as companies or foundations may operate under more favorable tax regimes, including tax exemptions or reductions available in specific zones (such as Free Trade Zones), where artworks can be stored, bought, or sold without the immediate application of VAT or customs duties. Additionally, a corporate structure allows for artworks to be managed as business assets, enabling the deduction of operational expenses and more efficient handling of capital gains.

Conversely, for private individuals, the Chinese tax system can be particularly burdensome. VAT on art sales may reach up to 13%, and there is no clear distinction between earned income and capital gains. Furthermore, tax authorities have tightened controls in recent years, and private collectors may face scrutiny if they move high-value artworks without proper documentation.

Taxation on Inheritance and Donations

At present, there is no inheritance or gift tax in force in China, though a legislative proposal is under discussion, with possible implementation by 2026. Donations to public charitable institutions are deductible up to 12% of annual income. Registered galleries and market operators may deduct operational expenses linked to their business activities.

Special Tax Provisions for Trusts and Foundations

In China, the regulatory framework governing trusts is relatively recent and is based on the Trust Law of the People’s Republic of China, which came into effect in 2001. Unlike in Anglo-Saxon countries, where trusts are often used as tools for estate or succession planning, in China they are employed almost exclusively for commercial and investment purposes.

From a tax perspective, trusts in China are largely tax-transparent, meaning they are not considered separate taxable entities. Taxation falls directly on the settlor or the beneficiaries, depending on how the trust is structured. However, there is a significant exception: collective investment trusts, which are common in the financial sector and are instead taxed according to the rules applicable to corporations, with all the related tax implications.

Regarding foundations, the Chinese system distinguishes between two main types: public foundations, which operate with charitable purposes open to the public, and private foundations, usually established and funded by individuals or companies. Both must be registered with the Ministry of Civil Affairs to operate legally and, if compliant with regulatory requirements, may benefit from tax exemptions on certain types of donations and income.

Despite these benefits, the tax treatment is rather cautious: for example, businesses can only deduct donations up to 12% of taxable income. Furthermore, all foundations must demonstrate that they carry out strictly non-profit activities and are subject to a stringent regime of control and transparency, which includes inspections, regular audits, and reporting obligations.

Sale within national borders

VAT for the sale of artworks

13%

VAT reduced
to 3-6%

if the seller is the artist and meets the requirements

VAT on Domestic Transactions

In China, the standard VAT rate on sales is 13%. However, reduced rates (3%–6%) apply to sales by registered artists, depending on the artist’s tax status and the nature of the services rendered.

Specifically:

A 3% rate applies to small-scale taxpayers—individuals or businesses with annual revenue under RMB 5 million. These taxpayers, however, cannot deduct input VAT.
A 6% rate applies to general taxpayers for “modern services,” including cultural and creative services. Artists registered under this category and offering qualifying services may benefit from this reduced rate.

VAT and Customs Duties on Cross-Border Transactions

Sale outside national borders

VAT on the importation of artworks

13%

The export of artworks is strictly regulated

In China, the importation of artworks is subject to customs inspection and the application of VAT. The standard import VAT rate is 13%, calculated on the taxable value, which includes the purchase price, customs duties, and any other applicable taxes.

There are some exceptions. For example, temporary imports for exhibitions or donations to cultural institutions may qualify for tax exemptions or relief.

By contrast, the export of cultural goods is highly regulated. Artworks over 50 years old may be subject to export restrictions, particularly if deemed significant from a historical or cultural standpoint. Exporting such items requires special authorization from the relevant authority, primarily the State Administration of Cultural Heritage. Some items may be deemed non-exportable if classified as part of the national cultural heritage.

Tax Incentives for Patronage

In China, donations to public cultural institutions are deductible up to 12% of taxable income (pursuant to Article 9 of the Corporate Income Tax Law), provided they receive prior approval from the tax authorities.

Anti-Money Laundering

As of 2025, China will implement its revised Anti-Money Laundering Law (RPC AML 2023 revision), introducing mandatory identity verification requirements for art dealers and penalties for non-compliance.

Regulatory Updates

China has introduced a reduced VAT rate of 5% on certain imports. In addition, the Cultural Gifts Scheme and margin regime (HMRC VAT Notice 718) have recently come into effect.

Taxation in the circulation of artworks

Taxation in the
circulation of artworks