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 the United Kingdom, capital gains on artworks are subject to Capital Gains Tax (CGT) with rates up to 28%, which can be reduced to 24% for higher incomes. Additionally, there are exemptions for items valued below £6,000. Meanwhile, artworks held for personal use (i.e., not for commercial purposes) may be exempt.

Legal Entities

In the United Kingdom, companies pay Corporation Tax at 25% if profits exceed £250,000. Businesses with profits up to £50,000 continue to benefit from a reduced rate of 19%, while those with profits between £50,000 and £250,000 are subject to an intermediate rate applied through the "marginal relief" mechanism.

Deductions are allowed for costs directly connected to trading activities.

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

In the United Kingdom, the tax treatment of artworks presents an interesting balance between individuals and legal entities, but with some advantage for the latter, especially when art is managed as a patrimonial or investment asset.

For individuals, taxation largely depends on the type of transaction and the value of the artworks. When a private collector sells an artwork, they may be subject to Capital Gains Tax (CGT), with a rate up to 20%, depending on income. In some cases, if the artwork is classified as a chattel (a movable item of value), partial or total tax exemptions may apply, but only within certain economic limits. There is also a tax reduction in case of donation to recognized entities, such as public museums, though access to these benefits remains rather selective.

On the other hand, legal entities—particularly trusts, foundations, or investment companies—have a more sophisticated tax toolkit. For example, they can use the roll-over relief mechanism, which allows deferral of taxation on gains by reinvesting in other artworks. Another very relevant instrument is the Acceptance in Lieu Scheme, through which artworks can be transferred to the State in exchange for a reduction in inheritance tax—a solution often adopted by noble families or historic collectors.

Moreover, London’s position as one of the main hubs of the global art market offers legal entities a strategic advantage: the possibility to operate in a highly structured environment where galleries, auction houses, and professional services are fully integrated with the legal and fiscal needs of those dealing with art as capital.

Taxation on Inheritance and Donations

In the United Kingdom, Inheritance Tax applies at a rate of 40% on the estate portion exceeding the exemption threshold of £325,000 per individual. Exemptions exist for transfers between spouses and for donations to registered charitable organizations.

Special Tax Provisions for Trusts and Foundations

The United Kingdom trust system is quite complex and is based on three main types, each with different characteristics and tax regimes.

The first is Bare Trusts, where the beneficiaries are considered the outright owners of the trust assets. Consequently, they are taxed directly on the income generated by those assets, as if they owned them personally.

Another common form is the Interest in Possession Trust, where the beneficiary has the right to receive income generated by the trust assets for their lifetime (or for a specified period). In this case, income is taxed directly on the beneficiary, with rates generally around 20% for interest and 7.5% for dividends, barring specific exceptions.

Finally, there are Discretionary Trusts, which grant trustees broad discretionary power to decide if, when, and to whom to make distributions. This type of trust is subject to heavier taxation: income from interest and other profits can be taxed up to 45%, while dividends incur a rate of 39.35%. However, when income is actually distributed, beneficiaries may receive a tax credit for tax already paid by the trust.

Regarding foundations, English law does not provide an equivalent to continental law foundations as autonomous legal entities. However, so-called charitable trusts exist, used for philanthropic or charitable purposes. These benefit from a favorable tax regime: they are generally exempt from income tax and capital gains tax. To enjoy these exemptions, however, they must be registered with the Charity Commission and comply with specific transparency and reporting obligations.

Sale within national borders

VAT for the sale of artworks

20%

VAT on Domestic Transactions

In the United Kingdom, the standard VAT rate is 20%. Retailers can opt for the margin scheme, which allows VAT to be applied only on the profit margin, rather than on the entire sale price, as stated in VAT Notice 718. This is particularly advantageous for the trade of used artworks or those purchased from private individuals.

VAT and Customs Duties on Cross-Border Transactions

Sale outside national borders

VAT on the importation of artworks

Except for temporary admission, which allows importing them without immediate payment of VAT and duties

Exports

are generally exempt from VAT

In the United Kingdom, when importing works of art, the VAT rate applied is generally reduced to 5%, much lower than the standard rate of 20%. Additionally, there is a scheme called “temporary admission” that allows the importation of artworks without immediately paying VAT and customs duties, provided that these are re-exported within four years. This system is designed to support the art market and facilitate the temporary entry of works into the country.

Regarding exports, artworks sold to countries outside the United Kingdom are generally exempt from VAT. Naturally, to benefit from this exemption, it is essential to provide adequate documentation proving the actual export of the goods.

Within the United Kingdom, sales of works of art are subject to the standard 20% rate, but the so-called margin scheme is often applied. This allows retailers to tax only the profit margin instead of the entire sale price, a measure that particularly benefits the trade of used works or those purchased from private individuals.

Finally, it should be noted that after Brexit, the United Kingdom introduced stricter customs rules, making careful and precise management of documentation essential for all import and export operations.

Tax Incentives for Patronage

In the United Kingdom, the Cultural Gifts Scheme allows individuals to obtain a tax deduction of 30% of the donated artwork’s value, and companies 20%, provided the donation is made to recognized public entities. This scheme is established under the Heritage Act 2009.

Anti-Money Laundering

In the Unied Kingdom, art market operators are subject to stringent anti-money laundering regulations under the Money Laundering Regulations 2017, updated in 2019 and 2020. These provisions require Know Your Customer (KYC) obligations for all transactions equal to or exceeding €10,000, along with mandatory registration with HM Revenue & Customs (HMRC).

Art Market Participants (AMP)—such as galleries, art dealers, and auction houses—must:

Conduct a risk assessment of their business and apply customer due diligence measures;
Register compulsorily with HMRC as supervised entities for anti-money laundering purposes;
Appoint a compliance officer and a nominated officer responsible for suspicious activity reports;
Ensure staff training on AML regulations;
Report any suspicious activity to the National Crime Agency (NCA).

Regulatory Updates

In the Unied Kingdom, starting May 14, 2025, AMPs will also need to comply with new reporting obligations related to financial sanctions, further expanding the scope of controls and responsibilities. This regulatory evolution confirms the UK’s intention to maintain high standards of transparency and traceability in the art market.

Taxation in the circulation of artworks

Taxation in the
circulation of artworks