Tax Deduction for Works of Art: How to Reduce Your Taxes with the Acquisition of Works of Art
Many business leaders are unaware of a very advantageous tax provision: beautifying their premises by installing works by living artists, while reducing their corporate tax.
The Benefits of Art Leasing
Art leasing allows you to rent a work for a fixed period and acquire it at the end of the contract by paying a residual share.
Ultimately, this type of financing allows companies and liberal professions to acquire, in a simple and progressive manner, works of art for their work spaces while reducing their taxes.
Please note that leasing works of art is, by nature, a rental charge, so it does not affect the company's borrowing capacity.
3 Reasons to Decorate Your Business with Artwork
- Strengthen Your Image: Develop a high-end image with your customers, suppliers, partners, etc.
- Reduce Your Taxes: Monthly rents are deductible from IS (Companies) or IRPP (Liberal Professions) (article 238bis AB of the CGI)
- Spread Your Costs: Renting allows you to spread the cost of purchasing the work over several years (13 to 48 months)
- Buy at a Lower Cost: Start a Contemporary Art Collection!
Companies Concerned by the Tax Exemption of Works of Art
Today, all companies based in Metropolitan France can benefit from an art leasing contract.
Liberal professions can also set up a leasing , whether you are subject to income tax or corporation tax , BNC or BIC, the tax treatment is the same: the rents will be deducted from the taxable income in both cases.
VAT Exemption for Works of Art
The acquisition of works of art can benefit from a VAT exemption . Indeed, according to article 261, 7, 1° of the General Tax Code (CGI), transactions of works of art carried out by living artists, or during the first transfer, are exempt from VAT.
This exemption also applies to transactions of works of art on the secondary market. So, when you invest in a work of art for your business, you do not have to pay VAT on the purchase amount.
VAT Rates on the Sale of Works of Art
The VAT rate on the sale of works of art is set at 5.5%, in accordance with article 279 bis of the General Tax Code (CGI).
This reduced rate applies to the sale of works of art, whether old or contemporary. Thus, when you sell a work of art , whether to an individual or a company, you apply a VAT rate of 5.5% on the sale price , which can be a financial advantage for buyers.
The Patronage Law:
When purchasing a work of art, a professional can deduct 20% of the purchase price of a work of art from their tax base over a period of 5 years, up to a limit of 0.5% of the company's annual turnover.
Furthermore, original works by living artists are excluded from the professional tax base.
The Criteria to Respect to Deduct Tax from a Work of Art
→ Buying Contemporary Art and Works by Living Artists: Only contemporary works are taken into account in this tax system. Indeed, the artist must be alive at the time of purchase of the work.
→ Exhibiting your Works in a Public Place: For at least 5 years , i.e. the depreciation period of the work concerned by the leasing, it must be exhibited in places accessible to the public , welcoming the company's staff, customers and collaborators.
In short, it cannot be placed in a private office or in a place reserved only for the company's clients, for example.
→ Enter the Works in the Company's Balance Sheet: The deduction system requires that the deductible acquisition price be entered in the company's balance sheet. On the other hand, the works cannot be purchased to be resold quickly.
In fact, they must be capitalized in the company's accounts. They will therefore be deducted in equal fractions each year for 5 years (up to a limit of 0.5% of turnover).
Starting a Corporate Art Collection
✓ Start Small: When we talk about art in business, we inevitably think of Pinault, LVMH, Société Générale and other large companies that have built up collections worthy of the greatest museums over the years.
But you don't need to accumulate a large number of works to have an impact! In fact, a single work is enough, placed in a prominent place such as the reception hall or the manager's office.
There is no need for the work of art you acquire to be expensive . On the contrary, you can start with carefully selected works, but within affordable budgets, starting from a few hundred or thousands of euros.
✓ Set yourself a Guideline: As soon as you acquire more than one work, it is appropriate to question yourself on a notion of common thread, a guideline in your choices. This line could, among other things, express one of the company's values that you wish to share with your employees, prospects, customers, etc. Or choose a theme in affinity with the activity of your company.
For example, architecture for a construction company, portraiture for a consultancy firm, or landscape for a company working in the environmental field...
✓ Consider Commissioning Works: When a company wants to express very specific values, or simply adapt the dimensions of the work to the space it has available, commissioning works can be the right solution. There is not necessarily an additional cost compared to a work already completed. However, you have to be prepared to wait a little (a few weeks,
