After 10 years: Reduced VAT rate for galleries and art dealers is returning

The German Cultural Council announces a major cultural policy success and thanks Minister of State for Culture Claudia Roth. The reintroduction of the reduced VAT rate for galleries and the art trade after 10 years has been successful.

Federal Cabinet adopts Annual Tax Act 2024

Today, the German Federal Cabinet formally adopted the 2024 Annual Tax Act , a significant step for the future of the tax system in Germany. However, even beforehand, the German Cultural Council, as the highest representative of federal cultural associations, drew attention to an important concern (see draft Annual Tax Act 2024: Great disappointment for the art market).

As recently as May, he criticized the fact that the Federal Ministry of Finance's original draft did not include a reduced VAT rate for galleries and the art trade . This fact met with considerable incomprehension and sparked discussions about tax incentives for the art world.

Claudia Roth's final commitment crowned with success

The German Cultural Council subsequently asked Minister of State for Culture Claudia Rothto intervene in the final stages and lobby the Federal Minister of Finance for a reduction in the VAT rate for galleries and the art trade. This initiative was successful. The German Cultural Council extends its sincere thanks to Claudia Roth for her efforts and congratulates her on this significant cultural policy achievement.

The head of the German Cultural Council, Olaf Zimmermann, stated the following in a press release from the Cultural Council:

The reintroduction of the reduced VAT rate for the art trade from January 1, 2025, is a significant success in cultural policy. It was a subject of lengthy debate. After the necessary conditions were established at the EU level, implementation in Germany was now the next step. Claudia Roth deserves credit for securing a majority within the Federal Government before the matter was even addressed by the Cabinet. Thank you!.

Looking back

Art is a cultural asset. And in Germany, it is subject to a reduced VAT rate of 7%. This measure is intended to promote the cultural landscape and facilitate access to art for all citizens. Unfortunately, in 2014, the tax reduction for the commercial sale of artworks in Germany was abolished, contrary to the long-standing political principle of supporting the cultural sector through tax breaks.

This decision was influenced by a 2006 EU directive that Germany was compelled to implement in order to avoid infringement proceedings by the European Commission. This abolition led to significant imbalances and burdens for galleries, which are now fully taxed.

Compared to artists, whose works continue to be taxed at a reduced rate, and other cultural goods and events such as books, concerts and theatre performances, which are also taxed at only 7%, galleries were now at a disadvantage.

This artificial competitive disadvantage put German galleries under particular pressure in international comparison. Countries like France, Switzerland, England, and New York have lower VAT rates for the art market, which resulted in German galleries being exposed to unfair competition.

The consequences of this decision were fatal: Many small and medium-sized galleries have had to close since 2014, which was not only tragic for the affected gallery owners, but also led to a lack of new talent in the German art market.

Even before the outbreak of Covid-19, German art trade associations vehemently demanded a return to the reduced VAT rate of seven percent, which was valid until the end of 2013.

The significant financial burdens and challenges facing the art market in Germany urgently required a solution, which has now fortunately been found.

Joachim Rodriguez y Romero

Owner and Managing Director of Kunstplaza . Publicist, editor, and passionate blogger in the fields of art, design, and creativity since 2011. Graduated with a degree in web design from university (2008). Further developed creative techniques through courses in freehand drawing, expressive painting, and theatre/acting. Profound knowledge of the art market gained through years of journalistic research and numerous collaborations with key players and institutions in the arts and culture sector.

www.kunstplaza.de

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