Taxation of the transfer of works of art

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As the value of works has increased considerably , owners are increasingly vigilant about the taxation that will be calculated in the event of transfer or export. When selling – or exporting – a work of art, the seller has a choice regarding the taxation of the capital gain retained , whether this is determined or not determinable.

The tax base is subject, in principle, i) to the flat-rate tax of 6% to which is added the Contribution to the Reimbursement of the Social Debt (hereinafter “CRDS”) at the rate of 0.5% or, on option, ii) under the common law regime of capital gains from transfers of movable property.

Submission in principle to the flat rate tax of 6%

Article 150 VI of the General Tax Code (hereinafter “CGI”) provides that in principle, transfers for valuable consideration of precious metals, jewelry, works of art, collectibles or antiques are subject to a flat-rate tax proportional to the transfer price .

This flat-rate tax is calculated while the actual capital gain is not determined. The rate of this flat-rate tax is set at 6% for the sale of jewelry, works of art, collectibles or antiques.

In addition, if the seller or exporter is domiciled for tax purposes in France, CRDS at the rate of 0.5% is also due. The overall tax rate then amounts to 6.5%.

• Scope of application for the transfer of works of art

This flat-rate tax applies to individuals, tax residents of France, who sell or export jewelry, collectibles, antiques or art. However, only sales or exports whose transfer price or customs value exceeds €5,000 are subject to the flat-rate tax. Transfers and exports whose transfer price or customs value does not exceed €5,000 are exempt .

Furthermore, transfers made for the benefit of museums bearing the “Musée de France” label or museums of a local authority, public libraries and archive services are also exempt.

Concerning the territorial scope, operations taking place in France or in another member state of the European Union are subject to the flat-rate tax. Article 74 S bis appendix II of the CGI specifies that a transfer is deemed to have been carried out in the State in which the property is physically located on the day of the transaction.

Consequently, the transaction carried out by an individual tax domiciled in France, relating to property which has always been located in a state outside the European Union does not fall within the scope of the flat-rate tax but falls under the tax regime. taxation of capital gains on movable property.

• Determination of the tax base

The tax base, on which the flat-rate tax is calculated, corresponds to the transfer price or the customs value – and not to the actual capital gain.

Consequently, the commission paid to an intermediary acting in the name and on behalf of the seller or buyer cannot be deducted from the transfer price.

• Taxation terms.

In principle, the tax due in application of the flat-rate tax is borne by the seller and paid by him. However, as an exception, in the event of the intervention of an intermediary established for tax purposes in France or, in the absence of an intermediary, if the purchaser is subject to value added tax (hereinafter "VAT") in France, the flat-rate tax must be paid, through the intermediary or the purchaser subject to VAT.

Payment of the tax is made at the time of filing the declaration ( printed 2091-SD ). This declaration must be filed within one month of the transfer.

The option for the common law tax regime for capital gains on movable property

The CGI provides the possibility for the seller who does not wish to be subject to the flat-rate tax to opt for submission to the common law tax regime for capital gains on movable property.

The exercise of this option by the seller is subject to the possibility for the seller to justify, alternatively, either the date and price of acquisition of the property, or that it has been held for more than twenty-two years.

Once exercised, the option is irrevocable. Under this regime, capital gains realized by individuals, on the occasion of the transfer of movable property as part of the management of their private assets, are subject to taxation at the rate of 19%, to which are added social security contributions at a rate of 17.2%.

• Scope of application for the transfer of works of art

Individuals carrying out a transfer of movable property as part of the management of their private assets, fiscally transparent partnerships, as well as racehorse co-ownerships. Optionally taxable property under the common law tax regime is all movable property or rights relating to movable property.

As an exception, furniture, household appliances and motor vehicles cannot be subject to this regime and, on the other hand, goods other than precious metals whose transfer price does not exceed €5,000.

Only taxpayers domiciled in France for tax purposes are subject to this tax.

• Determination of the tax base

As part of the exercise of the option, the capital gain on the sale made by the seller is subject to income tax at the rate of 19% and social security contributions at the rate of 17.2% (i.e. a total of 36.2%).

• Taxation terms

The amount of the capital gain on sale is reduced by a reduction whose rate is set at 5% per year of ownership beyond the second, i.e. a total exemption from the capital gain after twenty-two years of ownership. .

The acquisition costs, and in particular the commission of an intermediary, as well as the restoration or repair costs, are an increase in the acquisition price, and correspondingly a deduction from the capital gain on sale.

Any transfer costs may also be allowed as a deduction from the transfer price.

• Declaration and payment

In principle, it is the responsibility of the seller to spontaneously file with the tax office of his domicile, a declaration of capital gains on the transfer of movable property accompanied by the corresponding payment, within one month of the transfer. This declaration is made using form no. 2048-M-SD .

An individual who sells a work of art will have to think carefully before subjecting the sale price to the flat rate tax of 6.5% or opting for the personal capital gains regime. This choice must be made taking into account all parameters such as the acquisition price of the work, its sale price, its holding period as well as any costs borne by the seller.