Why invest in art to save tax?
Just like a real estate investment, art is a wise investment. Investing in art allows you to maximize tax savings while making a smart investment. The acquisition and restoration of works of art or antique furniture, and the rental of musical instruments are some of the ways to benefit from a tax exemption.
Indeed, works of art are not included in the taxable base of the Impôt sur la Fortune Immobilière. Also, investing in works of art gives the right to tax exemption for individuals. The works of art eligible for tax exemption are defined by article 98A of the French General Tax Code.
These are the following works of art:
- paintings, canvases and photos of artists;
- antiques and precious furniture;
- sculptures and old documents.
All objects considered as “collection” are also taken into account, this concerns for example cars of collection.
Who can invest in art for tax purposes
Investing in works of art can be fiscally advantageous for a company, but also for individuals subject to the IFI (Impôt sur la Fortune Immobilière). Indeed, although being an investment mainly appreciated by companies, the tax exemption of contemporary art is also open to individuals.
Investing in art as an individual
If you pay IFI, acquiring art will be financially beneficial to you. Works of art are completely tax-exempt and therefore do not need to be reported on your IFI return. The capital gains tax on the transfer, by sale or by inheritance, can be reduced. In fact, works of art can be valued at only 5% of the inheritance.
Last but not least, works of art can be used to pay estate taxes. Called payment dating, this procedure allows you to pay your taxes with a work of art and benefit from a significant delay to meet your tax obligations. This delay is due to the fact that this administrative procedure can take up to three years.
Investing in art as a business
A company that invests in art can benefit from a more or less important tax reduction. Indeed, according to the law n° 2003-709 of August 1, 2003, the companies or liberal professions which buy original works of art of living artists, can deduct this expenditure from their industrial and commercial profits (BIC). The companies involved are :
- Those subject to corporate income tax
- Those subject to income tax in the category of BIC, non-commercial profits (BNC) or agricultural profits (BA).
The amount of the works acquired will be recorded in the fixed assets account in order to benefit from the tax reduction in equal fractions over five years. A company that keeps a work of art for five years will be offered a tax deduction of about 20%. However, the reduction can never exceed 5% of the company’s annual sales.
What are the conditions for tax exemption on the acquisition of works of art?
To benefit from a tax exemption for works of art, certain criteria must be respected:
- Establishment of an invoice: the invoice is one of the main conditions to take advantage of tax exemption through the purchase of works of art. Without this invoice, it will not be possible to benefit from any tax advantage.
- Original work by a living artist: Only contemporary works are taken into account in this tax scheme. The artist must be alive at the time of purchase of the work.
- Display of the work of art: Tax legislation requires that the works of art in question be displayed to the public for at least five years after their acquisition. It cannot be placed in a private office or in a place reserved only for the company’s clients, for example. The work of art may also be entrusted to a museum or placed on deposit with local institutions. The exhibition is not mandatory for individuals.
- Record the works on the company’s balance sheet: for a company, the deduction system requires that the deductible acquisition price be recorded on the balance sheet.
Investing in art to save tax: which intermediary to choose?
To choose a work of art in order to defiscalize, it is recommended for a company or an individual to be accompanied by a professional. Artistics isa team of professionals and enthusiasts, experts of the web and the contemporary art market. Online art gallery, lover of new talents and attentive to your needs, Artistics helps you to choose the work that suits your taste and your budget. If your goal is to invest in art for tax purposes, the Artistics online art gallery will inform you of the necessary requirements.