Work of art and precious metal definition
What does “working art” definition recover?
According to French and European laws, working of art recovers notably the following elements:
- Pictures, collages, and similar decorative plaques, paintings and drawings, completely created by hand by the artist, excluding drawings for architectural, engineering, industrial, topographical, etc. purposes, hand-decorated manufactured articles, lithographs, prints and other articles of statuary art.
- Original engravings, prints and lithographs produced directly in black and white or in color, of one or a limited number of copies, directly executed by the artist, regardless of the technique or material used.
- Original sculptures or statuary art and copies produced in limited numbers, directly and personally by the artist or under his or her responsibility, regardless of the material used.
- Tapestries and wall textiles made by hand, on the basis of original plans provided by artists, provided there are produced in a limited number.
- One-off copies of ceramics, produced entirely by the artist and signed by him or her.
- Enamel on copper, made by hand, single-layer or multi-layer, limited number of copies, signed by the artist.
- Photographs taken by the artist, printed by him or under his authority, signed and numbered, with a circulation up to 30 copies, all formats and supports combined
What does “precious objects” definition recover?
Under French law, « precious objects » often refer to items like precious metals (gold, silver, platinum etc..), jewelry and precious stones, antiques, artifacts, and potentially other high-value items.
Who the Tax Applies To
In the context of the sale of works of art, the fixed tax applies to private individuals, associations and all entities that sell works of art, collectors’ items or antiques and that are not subject to corporate or income tax. Tax applies only to French tax residents, non-residents are (except in certain specific situations) exempted from tax on work of art and precious metal selling.
Work of art and precious metal taxation
According to French Tax Code, sales of works of art are subject to a fixed rate tax calculated on the basis of the sale price. Tax is based on the actual sale price of the object. For a French tax resident, the rate of this tax is 6% with the addition of 0.5% CRDS, bringing the total tax rate to 6.5%. Tax rate rises to 11,5% for precious metal selling.
The flat-rate tax is specifically designed to tax capital gains generated by private individuals on the sale of works of art. It applies only to individuals who sell works of art as part of their private assets. Individual sellers can opt for the capital gains tax on movable property when they file their tax return, provided they can prove the date and purchase price of the sold object. In such a case, individual sellers can benefit from a 5% annual deduction, provided that they own the sold object for at least two years at the date of the selling. Therefore, no tax is due after a 22 years owning period.
Tax Benefits and Exemptions
Works of art sold for less than €5,000 are not subject to the flat-rate tax. Similarly, sales made for the benefit of museums or libraries are exempt.
Potential Professional Taxation?
If works of art are the subject of several purchase and resale transactions, the French tax authorities may consider that this is a commercial activity carried out by a professional (art dealer) so capital gains must be taxed under French tax scale. It is therefore essential to verify that the seller is acting as a collector and not as an individual art dealer to determine how the selling is taxed.
Consequences for unreported commercial activity
If a person claims to be a collector but actually engages in a commercial activity as an art dealer (considering the frequency and amounts of transactions), he could be automatically subject to industrial and commercial profits taxation, and incur a 80% surcharge for clandestine activity.
How to secure my situation regarding French art tax regime?
If the seller plans to make several successive purchases and resales of works of art, it is recommended to submit a request for a tax ruling, in order to obtain an official answer from the tax authorities (which would then be enforceable against the administration) on whether or not the flat-rate tax should apply to the given situation.
A rescript request must contain a clear, exhaustive and honest presentation of the actual situation, so that the tax authorities can give their opinion on the question raised with sufficient accuracy. The tax authorities normally have three months in which to respond to a rescript request.
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MFL registered lawyers remain at your disposal should you have any queries or needing assistance regarding taxation of working art or to prepare a tax rescript. MFL will provide you with the best lawyers to handle your situation and secure your interest.