Economics Commercial galleries Market Germany

German galleries block VAT increase

Dealers and even the country’s culture minister oppose a 12% tax rise on the purchase of original works of art

Even the German minister of culture, Bernd Neumann, opposed a rise in VAT on original works of art

The German federal association of galleries and dealers (Bundesverband Deutscher Galerien und Kunsthändler—BDGV) has, for the moment, won a major battle to keep VAT rates down on the purchase of original works of art.

The European Commission has been trying to raise German VAT tax on original works of art from 7% to 19% to bring it in line with higher VAT rates in the rest of Europe. The move is widely opposed by the art world as well as the German minister of culture, Bernd Neumann. The BDGV, working with cultural and economic policy experts as well as institutions, has been campaigning against this and recently blocked the approval process, making it unlikely that there will be a rise in the VAT this year.

The next federal assembly meeting is scheduled for 4 June, and members will again discuss the potential increase in VAT. If the members can’t agree then, it is likely that Germany will keep the reduced tax for another year. “We still can’t predict anything concrete,” says Thea Dymke, from the BDGV, “but this is what we are hoping for.”

The tax would not affect imports, which will still be subject to a reduced VAT rate of 7% if they are “original” and a full rate if they are editioned works, such as photographs or video. Primary market sales, between artists and buyers, will still benefit from the reduced rate of 7%, meaning that a collector would pay 19% for a work from a gallery, but only 7% for the same work bought directly from the artist. According to Sturm, “gallerists are worried about this point because the difference in price is notable. However, they hope the artists will show solidarity. Moreover, collectors usually buy from galleries because they are guarantees of quality, value and the importance of the artists on the market.”

Nina Koldi, the co-director of the Campagne Première in Berlin, however, points out that there will always be a difference in VAT rates between countries. During the most recent edition of the Arco contemporary art fair in Madrid, the gallery sold a sculpture that was hit by a 21% VAT tax. If the buyer had bought the same piece in the gallery in Berlin, it would have only incurred a 7% tax rate. Koldi says the tax rise will have a worse effect on smaller galleries, which are already suffering because of the financial crisis.

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Comments

23 May 13
11:2 CET

KEVIN GEARY, FOUNTAIN HILLS, AZ

High rates of VAT, especially on art, is a real disincentive to purchasing works. A 7% rate seems fair (if you accept the necessity of VAT in the first place on art sales). But 19 or 21% VAT could actually deter a sale, where a collector of limited means was planning to buy a work for say 1000 -2000 euros of a young or not too well-known artist, and to have nearly 200-400 euros added to the cost, could make the difference between a sale or no sale. I think it would be better if all EU countries came down in their rates on art to 7% instead of wanting Germany to increase their rates! And Germany's art market is fairly healthy compared to other countries in the EU where the higher rates apply. At the very top end, obviously, high VAT or "buyer's premiums" at auctions do not deter, but at the low and middling range, where most art is sold, then such a high rate of VAT becomes a severely depressive influence upon sales.

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