Taxation of Artwork Guide 2021
A comprehensive study from 26 countries across the world

The question: “What is art?” has been troubling humanity for centuries. The definition of art is debatable and subjective. The concept of art has changed over the centuries and the role of art has developed from aesthetic pleasure to investment objects today. There is no agreement and thus we are left with so many definitions and possibilities when talking about art and business. Contemporary art business is multi-disciplinary, combining legal, economic, political, technological and philosophical aspects of the art world.

The international art market is estimated to have turned over USD 64 billion in business in recent years. Considering its size alone, it is easy to see why the art trade has captured the interest of the investment community. Art is seen as an investment class in many circles and then again, for many, it is considered a disgrace that art is just another form of investment to capitalise on. Works of art can be viewed in multiple ways – they are both to be used by consumers and also give tremendous emotional pleasure at the same time. The value of artwork tends to increase over time, turning them into potential sources of capital gain and diversification. At the same time, art maintains the unique characteristic that it can’t be mass produced. Art seems to be an addictive and generic asset class which is proven by various types of current “trends” such as tokenization and fractional owning of art funds and artwork. Turning pure enjoyment of the artwork itself into fractional joy of holding the shares in hypothetical Picasso. Thanks to block chain based apps and platforms, viewing and buying art has become increasingly easy. Online auctions might not have the same energy and buzz as sparklingly catered offline events but investors would still be attracted to socially validating investments.

However, the changes in 2020 due to COVID-19 have been remarkable and have posed great challenges to the international art market. The latest Art Market 2020 report showed that the commercial galleries’ trade was down by 36% on average and auction sales had decreased, whilst online sales had increased by 37% and private sales have assumedly plummeted. The full effect of 2020 to the global art market is yet to be seen.

Although it can be said that sales are geographically concentrated in main markets like the US, UK and China, most countries have some sort of art market on their own.

In this respect you are holding in your hands a unique report on the taxation of artwork. Whilst there are publications available explaining artwork taxation in main markets – mostly the US and to some extent the UK and other European countries, a detailed report that covers European countries, the United States of America, Costa Rica, Uruguay, Brazil and also the United Arab Emirates, India, Pakistan, China and Vietnam is one of a kind. Several of these countries have tax systems as colourful and entertaining as their artwork, something that makes reading this report even more interesting.

There are several risks connected with investment into art which are unique to this specific investment class, such as physical damage, risk of ownership, authenticity, provenance and price volatility and taxation. Price volatility issues and the fact that art investments have become accessible to people who have previously felt priced out of the market turns the wealth tax application on art into a philosophical question.

Taxation can also have beneficial effects on collectors as there are tax advantages available for charitable investments into art. In some countries there are regulations in place that enable the paying of taxes in lieu in artwork. Tax questions are central in the art business, entailing remarkable financial risks such as wealth and inheritance taxes, income taxes and even simply incorrectly recorded VAT or sales taxes.

This Taxation of Artwork report deals with income, wealth and inheritance taxes, corporate owners of artwork, VAT and customs duties application. Hopefully, answers and a way forward can be found for questions such as: “Should inheritance or gift taxes be paid on my collection?”; “Should the artwork be obtained through a company or as an individual?”; “Will purchases or sales of artwork be subject to VAT?”; “Am I carrying out occasional or regular transactions with artworks?”; “Which taxes will be due on imported artwork?” from the standpoint of 26 countries.

The current report should contribute to the art transactions of collectors by helping them to navigate complicated tax issues around art investments. It should also be valuable reading not only for galleries, private museums, family offices, heirs and beneficiaries but hopefully also for art dealers, consultants, art fairs and artists alike.

WTS Global was established in 2003 and a dedicated WTS Global Private Clients Service Line was initiated in 2017. Members from this Service Line spanning 26 countries – including Hungary – contributed to this report.

As art markets continue to grow, WTS Global has taken the initiative to build dedicated expertise in this specific industry and to provide cross-border assistance to its private clients, corporate collectors, galleries, foundations and asset managers with regards to the taxation of artwork. This report is the first comprehensive study containing 26 country overviews from WTS Global member firms – including Hungary.

Please feel free to contact the relevant local contact person if you have questions regarding the content of the publication!

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