The Game of Global Art Abitrage
Despite today’s globalization of art, international standards are rare and art policies vary from country to country often causing frustration among art collectors. The place from where you buy art can either lead to great savings or big payouts. Restrictions on exportation or hidden costs from taxes and customs can sour an exciting art purchase very quickly. Be a savvy collector and learn who’s naughty and nice before you play the game of “global art arbitrage”.
France is a bureaucratic and expensive place to buy art but the best art still tends to end up there. However, art buyers are required to pay a droit de suite, or an artist’s resale-rights levy owed to artists for works bought on the secondary market. This mandatory tax can fatten the final figure quite a bit. Buyers in France are also not allowed to pay cash on items over $3,900 at auction or otherwise (outside of France restrictions are slightly higher at $9,600 or more). Some French auctions don’t accept American Express cards either and if so, they charge an extra handling fee. In addition, absentee and phone bids require advance proof of identity and bank references. Relatively minor headaches but it all adds up to a migraine.
One of the best places to buy and sell art, Switzerland has earned tax haven status. Buying and exporting art there is hassle-free and there are no restrictions or additional taxes. VAT is also suspended on art that is brought into the country until it is sold. VAT only applies to goods that remain in the country and at 7.6% it is much lower than other EU country which can also be reclaimed by filing an exportation document, supplied by the seller with customs upon leaving the country.
There is also no obligatory droit de suite, or artist’s resale-rights levy as there is in the EU. Friendly customs officials who are open and trusting make it a pleasant experience and there are 16 duty-free ports around major cities including Zurich, Geneva and Basel. This gives dealers and collectors a place to store art in transit without having to pay taxes until goods reach their final destination.
With no sales tax, export duties or international trade restrictions, buying art in Hong Kong is a breeze. Furthermore, the HKG dollar is pegged to the US dollar at a rate of 7.8 H.K. dollar to 1 U.S. dollar, making auctions very American friendly and vice versa. Prices for Contemporary Chinese art have increased exponentially in recent years as more speculative buyers enter the market with fewer barriers to entry.
In contrast to its neighbor Hong Kong, China has formidable restrictions on export of art from China. No art dating before 1949, the date of the Communist Revolution can be sold.
Contemporary art is much easier to buy in Russia than antiques, especially those of cultural significance which is why the contemporary market has exploded this past decade. Private property is outlawed from exportation and if you buy an artwork more than 30 years old, you need to get an export permit which can take weeks. It will be flat out denied if it’s considered of any cultural importance. Most artwork ends up getting smuggled out of the country or taken away and given to state museums. Russian collectors, in general prefer to buy abroad due to a high 18% VAT attributing to the rise of Russian art buyers in international art hot beds like New York, London and Paris.
Many galleries from around the world want to do business in Brazil but think that the fiscal system has a “mysterious and convoluted tax system” that is detracting many would-be art buyers in protectionist Brazil. Gallery owner Renato Gouvea Jr and other Brazilian collectors are being held back from buying art due to heavy taxation that can add 50 to 70 percent to an artwork’s sales price (compared to 7-10% import duties for art in the U.S. and most other countries). Brazil’s heavy taxation is an effort to stimulate and protect its homegrown markets but wealthy connoisseurs and galleries attending ArtRio this year are complaining about the steep import tariffs on fine art that can almost double the price of pieces bought abroad, leading many collectors to simply walk away or leave their art outside the country. Gagosian Gallery mentioned the taxes are prohibitive and even, “medieval”.
Unfortunately, tariffs not only affect Brazilian art collectors, but they also affect the country’s cultural patronage because far fewer of the world’s best works are getting into Brazilian museums. Museums worldwide depend on art loans from private collectors but a culture of charitable support for the arts is virtually unknown in Brazil and government investment is lacking. Therefore, Brazilian art buyers and art lovers alike argue that, “Artists don’t benefit, collectors don’t benefit, the state doesn’t even really benefit and the Brazilian public certainly doesn’t.”
Some residents of Rio and Sao Paolo looking to buy art at ArtRio and Sao Paulo’s SP Arte fair however, found a way to become exempt from state import taxes only that was ratified by a Brazilian committee, but they will still have to pay federal duties which would lower import duties to about 15 percent.
Stay Tuned for Part II! More coverage of other countries to follow…
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