The French art market will continue to benefit from a reduced VAT rate

S. Dum. / Les Echos First

Antique dealers, gallery owners, auction houses, and artists will continue to benefit from a 5.5% VAT rate after 2025, according to our sources. However, they will no longer be taxed solely on their margins in the event of a resale.

The French art market can breathe a sigh of relief. The fiscal upheaval that threatened its current momentum will not materialize. At the very least, the impact will be far less severe than French artists, antique dealers, art dealers, and auction houses had feared.

Since the beginning of the year, these stakeholders have been publishing numerous op-eds in the press and voicing their outrage on social media. The cause of this anger—unprecedented for the sector—was the overhaul of the favorable VAT regime from which the art sector in France had been benefiting. Until now, sales of paintings, sculptures, antiques, and other such items were subject to a 5.5% VAT rate at the time of the first sale or upon importation from a country outside the European Union. The resale of these items, however, was taxed at the standard VAT rate of 20%, but only on the seller’s profit margin—not on the entire sale price.

But this preferential treatment no longer meets Brussels’ requirements. “A 2022 VAT directive requires us to bring our VAT regime for sales of works of art, collectibles, and antiques into compliance,” explains a spokesperson for the office of Economy Minister Bruno Le Maire. The new European rule, which must be transposed into French law by January 1, 2025, forces Paris to choose: either maintain a reduced VAT rate or continue taxing the margin rather than the sale price. It is impossible to keep the current “cheese and dessert” approach.

A dynamic to preserve

After intense discussions with stakeholders in the art market, the government has decided to maintain a reduced VAT rate of 5.5%, according to our information. Starting in 2025, this rate will continue to apply to first sales as well as to imports from outside the EU. It will also apply to resales of works of art, but on the entire selling price rather than just the margin. The change will certainly penalize resales with lower margins (less than 38%). But it is the lesser of two evils.

Ever since an article in *Les Echos* highlighted the issue last February, French art market players have feared above all that the French Ministry of Finance would opt to align the art sector with the standard 20% VAT rate. This would have effectively quadrupled the sector’s tax burden. In a highly competitive market, France risked losing its position as the world’s fourth-largest art market.

Over the past twenty years, France had made a comeback—growing its share of the global art market, valued at $65 billion in 2021, from 3% to 7%. Although still far behind the United States (43% of the market and a favorable tax rate of 8.875%), China (20% of the market and no tax), and the United Kingdom (17% of the market with a 5% VAT rate), the country was demonstrating remarkable momentum. Brexit had enabled it to begin closing the gap with London and to become the gateway for artworks into Europe, to the point of accounting for half of all sales in the European Union.

Signs of this strong performance have recently multiplied. Alongside private foundations (the Pinault Collection, the Vuitton Foundation, etc.), prestigious international galleries (Gagosian, Zwirner, Hauser & Wirth, etc.) have set up shop in Paris; the Swiss art fair Art Basel has replaced FIAC at the Grand Palais; and the British auction house Bonhams has acquired the Cornette de Saint Cyr auction house to establish a foothold in the French market…

A Year Ahead of Schedule

To avoid stifling this burgeoning movement in its infancy, the government decided against imposing heavier taxes on it. “After several months of consultation, we decided, together with Rima Abdul-Malak [Minister of Culture, Ed.], to opt for the only truly viable option: the one that will allow France to remain at the center of the global art market,” Bruno Le Maire explained to *Les Echos*. He is banking on the fact that public finances will not suffer as a result of this choice, thanks to the growth of the art market—whether through the sale of artworks or related activities such as logistics, restoration, and insurance…

This government decision will be the subject of an amendment to the 2024 budget bill, which will be presented next week. This will give the sector one year before the new rules take effect. “This decision, if adopted by Parliament, will allow Paris to remain the most attractive of Europe’s capitals for the art market,” Culture Minister Rima Abdul Malak told *Les Echos*. “It will foster the vibrancy of the French art scene and the dynamism of our cultural model, which relies as much on the strength of public institutions as on that of private actors.”

Thank you to Laurent Schwarz of Galerie Place des Arts, who keeps us regularly informed about the art market.