Gallery owners and art dealers have been asking for it for years, in the summer they were finally listened to and now their wish has come true: VAT on works of art drops from 19% to 7%. With the annual tax law, approved by the German Federal Council on 22 November 2024, the reduction in the reduced VAT rate will come into force on 1 January 2025.
The German art trade had strongly complained about the total taxation imposed by European legislation in 2014. Unlike other cultural goods, which were taxed less, such as books, sound records, but also cinema and theater tickets, the Gallery owners and art dealers found themselves in a disadvantaged position. They also saw themselves as weakened as commercial intermediaries of works of art because artists who marketed themselves were still allowed to sell their works with a reduced tax surcharge.
However, the biggest competitive disadvantage occurred compared to strong European neighbors, some of which set significantly lower VAT. France, for example, managed to circumvent EU guidelines and introduced a 5.5% sales tax on the import of works of art, the lowest rate in Europe. In France, however, there is a risk of an increase. In general, German gallery owners and art dealers hope for a strengthening of their sector, even if the step comes late, also due to the ongoing budget dispute in the federal government.
Federal Commissioner for Culture and Media Claudia Roth also considers it a success that the reduction will come into force in Germany at the end of the year. According to the Green politician, this is “excellent news for the German art trade”, which alleviates “the diversified gallery scene and improves its competitiveness”. The law implements the support plan for free cultural places such as galleries.
This was agreed in the coalition agreement of the now failed traffic light government and was finally decided in the federal cabinet in the summer of 2024. In any case, there was still consensus on this point: In June Claudia Roth thanked especially the then Federal Finance Minister Christian Lindner of the FDP, with whom she managed to agree on the reintroduction of a reduced sales tax for art dealers.
What are the potential benefits of reducing VAT on art for galleries and consumers?
Interview Between the Time.news Editor and an Art Market Expert
Editor: Welcome to Time.news! Today, we’re diving into an important and exciting development in the art world—Germany’s recent decision to reduce the VAT on works of art from 19% to 7%. With us is Dr. Elena Meyer, a renowned expert in the field of art economics and a consultant for art galleries. Thank you for joining us, Dr. Meyer.
Dr. Meyer: Thank you for having me! I’m excited to discuss this significant change.
Editor: Absolutely! This reduction in VAT has been a long time coming for gallery owners and art dealers. Can you give us some background on why this change is so crucial for the art market in Germany?
Dr. Meyer: Certainly! The art market in Germany has historically been disadvantaged by the higher VAT rates compared to other cultural goods. Since the European legislation of 2014, which categorized art in a way that imposed the same VAT as luxury goods, gallery owners faced significant hurdles. This new VAT reduction acknowledges the value of art as a cultural asset and aligns its taxation with that of other cultural products, like books and cinema tickets, which have long enjoyed reduced rates.
Editor: That makes sense. It seems like a much-needed shift. How do you anticipate this reduction will impact art galleries and dealers specifically?
Dr. Meyer: The impact could be profound. By lowering the VAT, galleries can pass those savings onto consumers, making art more accessible. This could potentially stimulate sales, attract new buyers, and also support artists by providing galleries with more financial breathing room to invest in exhibitions and promotions. We’re likely to see a broader audience engaging with the art market, which is beneficial for the entire ecosystem.
Editor: It’s interesting to consider this as part of a wider cultural strategy. Do you think other countries might follow Germany’s lead in reducing VAT on art?
Dr. Meyer: It’s certainly possible. Countries across Europe have been grappling with similar issues—ensuring the art market remains vibrant while also encouraging cultural engagement. If Germany sees positive outcomes from this change, it could set a precedent. Other nations may reevaluate their policies to foster a more supportive environment for artists and galleries alike.
Editor: It sounds like a win-win. What challenges do you foresee in the implementation of this new VAT law, especially as we approach the January 2025 effective date?
Dr. Meyer: One challenge could be the transitional period for galleries and dealers in adjusting their pricing structures and tax practices. Education will play a critical role here; they will need to understand the new system thoroughly to avoid complications. Additionally, ensuring compliance with the new regulations will be essential to avoid penalties, but I’m optimistic that the art community is prepared for this shift.
Editor: As we wrap up, what’s your overall vision for the future of the art market in Germany following this change? Are you hopeful?
Dr. Meyer: Absolutely! This is a significant step toward recognizing art as an essential part of our culture, not just a commodity. It opens the door for a more creative and inclusive art market. If galleries can thrive, artists can flourish, and that ultimately enriches society as a whole. I believe this legislation will pave the way for a more vibrant and sustainable art scene in Germany.
Editor: Thank you, Dr. Meyer, for your insights on this exciting development. We appreciate your expertise and look forward to seeing how the art market evolves in the coming years.
Dr. Meyer: Thank you for having me! I’m eager to see how this unfolds and to contribute to the conversation whenever possible.