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 Germany, as a general rule, the sale of a work of art by a private individual is exempt from income tax. Taxation applies only if the sale takes place within a holding period of one year or, if the artwork was used to generate income, within ten years.

If the individual in question acts as a professional art dealer (main criteria: independent and repeated activity, profit motive, market participation), the gains from the sale of the artwork are subject to income tax (with progressive rates ranging from 0% to 45%, plus a solidarity surcharge of 5.5% for high-income earners) and trade tax (with rates varying from 7% to 31.5%). In such cases, the individual may generally deduct all income-related expenses, and losses may be carried forward if they cannot be offset in the same year.

Legal Entities

In Germany, profits from the sale of artworks must be taxed as ordinary corporate income with corporate income tax (15%), plus the solidarity surcharge (5.5%) and trade tax (with rates ranging from 7% to 31.5%). Expenses related to the sale are generally tax-deductible.

As of January 1, 2025, the VAT rate on the sale of artworks in Germany has been reduced to 7%, in line with EU regulations that allow reduced VAT rates for goods and services of cultural interest.

In the case of non-profit foundations, tax benefits are available regarding corporate income tax and trade tax. For instance, if a foundation is recognized as a charitable organization (gemeinnützig), it may be exempt from corporate income tax and trade tax. However, these exemptions do not apply automatically: the foundation must pursue public interest purposes, such as the promotion of culture, and its activities must comply with German tax regulations.

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

In Germany, private ownership may confer the advantage that the sale of an artwork can be tax-exempt, while a corporation is always subject to taxation.

Taxation on Inheritance and Donations

In Germany, inheritances and gifts are taxed in the same manner.

Tax rates and exemptions depend on the degree of kinship:

For transfers to spouses: tax exemption of €500,000; rates vary from 7% to 30% depending on the value transferred;
For transfers to children: tax exemption of €400,000; rates from 7% to 30%;
For transfers to grandchildren by grandparents: tax exemption of €200,000; rates from 7% to 30%;
For transfers to great-grandchildren and beyond: tax exemption of €100,000; rates from 7% to 30%;
For transfers to ascendants (parents or more remote), siblings, nephews/nieces (from uncles/aunts), step-parents, parents-in-law, and divorced spouses: tax exemption of €20,000; rates from 15% to 43%;
For transfers to other beneficiaries: tax exemption of €20,000; rates from 30% to 50%.

The taxpayer is the heir in the case of inheritance, and the donee and donor in the case of a gift.

As regards artworks, exemptions exist under specific conditions (e.g., in the case of goods considered to be of public interest).

For tax purposes, artworks are valued at their market value.

Special Tax Provisions for Trusts and Foundations

In Germany, the transfer of assets via a trust does not entail tax advantages. The final distribution of trust assets to beneficiaries is subject to German gift tax, and the applicable tax class is determined based on the relationship between the settlor and the beneficiary. In the case of a non-transparent trust, the least favorable tax class applies (exemption of €20,000 and rates from 30% to 50% depending on the value transferred).

German law provides significant tax benefits to non-profit organizations that directly pursue public interest purposes—including artistic and cultural activities—and meet specific requirements qualifying them as tax-exempt. These organizations are exempt from corporate income tax, trade tax, inheritance, and gift taxes. Non-profit foundations also benefit from tax advantages regarding inheritance and gift taxes.

VAT on Domestic Transactions

Sale within national borders

VAT for the sale of artworks

In Germany, the standard VAT rate is 19% and generally applies to the sale of goods and services, including artworks. However, the tax treatment of transactions in the art sector includes certain exceptions and special regimes.

Until 2014, artworks benefited from a reduced 7% VAT rate, which was subsequently limited to sales made directly by artists or their legal heirs. As of January 1, 2025, Germany has reintroduced and extended the reduced 7% VAT rate also to sales by galleries and professional dealers. This measure was adopted to align German regulations with tax practices in other European countries and to strengthen the competitiveness of the German art market.

To benefit from the reduced VAT rate on posthumous sales, the artwork must be sold by a legally recognized successor (e.g., a universal heir). Otherwise, the standard rate applies.

Dealers who purchase artworks from non-VAT-subjects (such as private individuals or small-scale entrepreneurs) may apply the so-called margin scheme. In this case, VAT is calculated only on the gross margin (i.e., the difference between the selling and purchase price). However, for artworks imported from third countries and subject to the 7% VAT rate, the margin scheme will no longer be available as of 2025. In such situations, VAT will be applied to the full selling price, but the dealer may deduct the VAT paid upon purchase.

VAT and Customs Duties on Cross-Border Transactions

Sale outside national borders

VAT on the importation of artworks

Exports are generally exempt from VAT

In Germany, the importation of artworks is subject to a reduced VAT rate of 7%. Cross-border transactions entering or leaving the European Union may trigger import or export taxes. Cross-border sales within the EU and to third countries are VAT-exempt if certain formal requirements regarding documentation and accounting are met.

For exhibitions held abroad on a temporary basis, it is important to be able to prove that the artworks transported to and from the exhibition are the same items, in order to avoid import/export sales tax.

Exports and intra-Community supplies are VAT-exempt.

Tax Incentives for Patronage

In Germany, donations to tax-exempt organizations are deductible for both individuals and corporations. Contributions by natural persons or corporations can be deducted up to 20% of their respective taxable income for income tax, corporate income tax, and municipal trade tax purposes.

For corporations, a deduction of up to 0.4% of the sum of revenues, wages, and salaries is an alternative basis for calculating the maximum deductible amount. Donations exceeding the deductible limit may be carried forward to subsequent fiscal years. Furthermore, an individual donor may deduct up to €1,000,000 for a donation to a foundation that qualifies as tax-exempt. The deduction may be taken in the year of the donation and/or spread over the following nine years.

Anti-Money Laundering

In Germany, under the Geldwäschegesetz (GwG), galleries and art dealers are subject to anti-money laundering obligations for transactions exceeding €10,000.

Regulatory Updates

In Germany, as of January 1, 2025, the VAT rate applicable to the sale of artworks will be reduced from 19% to 7% (Bundestag, Fiscal Measures 2024–2025).

Taxation in the circulation of artworks

Taxation in the
circulation of artworks