Posted: 03 Feb. 2022 4 min. read

Is the sale of a private art-collection subject to VAT?

Overview

In principle, the one-time disposal of artwork does not constitute a taxable transaction from a VAT point of view. However, private collections are often sold in several tranches. In case of repeated transactions tax authorities usually assume that the transactions are taxable for VAT purposes and treat the collector as taxable person. This results in significant consequences for the collector:  VAT is assessed for the sales, often retroactively for several years. In a recent case the Administrative High Court dealt with this issue and provided guidance to prevent unpleasant surprises in the course of tax audits.

Facts of the case

Over a period of 20 years, a collector had established a furniture collection with more than 230 pieces of furniture. Due to a lack of storage space as well as a lack of liquidity the collector handed over the collection to an antiques dealer in one go. The antiques dealer was instructed to sell the collection in its own name but on the account of the collector.

Even though the collection was handed over to the antiques dealer in one go, tax authorities assumed repeated transactions and assessed VAT. The tax authorities justified its view with a special rule concerning commission transactions laid down in VAT law. The rule foresees that the delivery of the collector (principal) to the antiques dealer (commission agent) is carried out at the same time as the antiques dealer sells the furniture to a third party. As the antiques dealer sold in several tranches, also the collector carried out repeated transactions. Due to the repeated transactions tax authorities assumed taxable transactions for VAT purposes. Consequently, the transactions of the collector were subject to VAT.

Decision of the Administrative High Court

The Administrative High Court outlines that for the assessment whether there is a taxable or a non-taxable transaction all circumstances and facts of the individual case have to be taken into account. The mere exercise of ownership does not constitute a taxable transaction. Also, the number as well as the volume of sales taken separately are not decisive. The crucial point is whether the distribution is managed actively or not by the collector.  Characteristics are, for example, participation in the market through advertising, scheduled activity or the maintenance of business premises.

In the present case, there  was only one commission agreement with only one commission agent in place and no other active steps of the collector concerning distribution were taken. Therefore, the Administrative High Court qualified the disposal of the collection as the management of private assets. Hence, the transactions of the collector are not subject to VAT.

Conclusion

With regards to a collection, the Aministrative High Court states for the first time that repeated sales of private assets alone do not constitute taxable transactions from a VAT point of view. The disposal of a collection with the help of a commission agent, selling it in his name but on behalf of the collector, does not trigger any VAT obligations for the collector. However, if a collector undertakes active steps in order to boost distribution, a taxable activity is established. In practice, this will often be the case, if instead of a commission agent an art intermediary is hired and the collector enters into negotiations with potential buyers. In a nutshell, even in the light of the latest jurisdiction the disposal of a collection should be well structured and planned from a tax point of view.


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Mag. Wilfried Krammer

Mag. Wilfried Krammer

Director BPS | Deloitte Österreich

Wilfried Krammer ist Director bei Deloitte. Als Steuerberater verfügt er über langjährige Erfahrung in der Beratung von Familienunternehmen und Tochtergesellschaften von multinationalen Unternehmen. Er unterstützt Unternehmen mit maßgeschneiderten Lösungen im Rechnungswesen. Dies geschieht durch Outsourcing der Buchhaltung und Lohnverrechnung, Co-Sourcing sowie dem Einsatz seines Teams vor Ort beim Klienten. Darüber hinaus hat er einen speziellen Beratungsschwerpunkt im Gemeinnützigkeitsrecht, insbesondere in Kunst & Kultur, Sport und im Sozialbereich.