Art as an investment - what artists and collectors should know about taxes

Taxes can be tricky for people who work in the art trade. Time that with the help of the proven expert Peter Schmitz - managing director at Buhl Data Service GmbH - we illuminate the most important points.

For artists

Artists who live in Germany are subject to income tax if they achieve income from "self -employed or freelance work" or from "non -self -employed activity" than employees.

If you plan to become self -employed as an artist, you must also contact the tax office. Within a month after starting the business, you have to fill out a certain form and hand it in electronically - the "questionnaire for tax recording" . The questionnaire is also important with regard to sales tax.

Because they are asked about their sales assessment. This is important for the classification of sales tax as a small business owner or regular taxer.

At the tax office, they are managed under their personal tax identification number (IDNr.), Which was allocated to them by the tax office at their birth. The IDNr. Find previous income tax assessments or income tax certificates. If you don't find them at all, you can. Request at the Federal Center Office for Taxes.

If you are self -employed, you are obliged to submit an annual income tax return. In it, income from all types of income are added up and then taxed together. Only then - after further calculations, for example in the case of special expenses - does a tax payment or tax reimbursement arise.

If you are employed as an artist, you pay wage tax. This is deducted from your employer every month from your salary and sent directly to the tax office. At the end of a calendar year, you may be able to reclaim too much tax paid by submitting an income tax return to the tax office.

Tip: As an employed artist, you should definitely make a tax return . On average, 1,700 euros will be refunded by the tax office. With software , such as B. WISO tax , the tax return is possible for all types of income.

Losses at the beginning of independence

It is quite normal for you to make losses at the beginning of your activity, i.e. that your income is lower than your expenses. This is mainly due to the purchases that occur when founding, e.g. B. tools, materials, instruments or technical equipment.

If the determination of income from self -employed activity results in a loss, the tax office reacts with the so -called preliminaryity. In the explanation part of the tax assessment, for example:

The income from the self -employed activity is temporarily determined because the intention to make profits cannot yet be assessed. ”

This means that the tax assessment is sometimes not yet final and can be subsequently changed by the tax office.

The tax office accepts initial losses for a time. But not in the long run. It is important to know that the tax office looks at a longer period of time - usually for several years. Can the losses they had at the beginning? Or are there more and more expenses for you over the years?

After a few years, it turns out that their activity actually does not make profits and that they do not do anything to improve the situation, the tax office retrospectively reduces its losses and classifies artistic activity as a "hobby" or "hobby". Then it may be that you still have to tax taxes years later and also have to pay interest.

Your artist's existence develops well and you can sell your works

If you sell your work, you are subject to VAT. You have to issue invoices, identify the sales tax on it and then pay them to the tax office. As for VAT, there is a special regulation in Germany.

In principle, VAT in this country is 19 percent. However, there is also a reduced VAT rate of 7 percent to promote art and culture. You can use this reduced sentence as an artist,

• If you sell your art yourself
• If you grant or transfer usage rights to your works

At the same time, you can deduct the sales tax, which you have previously paid for all operating expenses. This is called input tax deduction. If you have paid more sales tax than taken, the tax office pays back the difference.

The sales tax liability also depends on the price category in which you sell your art. For the start, it can be good not to have anything to do with sales tax, i.e. to make use of the small business regulation.

Note: When gallery owners or art dealers sell works of art to collectors, 19 percent VAT will be charged.

What applies to new founders?

For new founders who do not have the previous year, it only depends on whether they are expected to exceed the sales limit of 22,000 euros in the current year, then they are released from VAT. The limit of 50,000 euros does not matter in the founding year.

If sales are actually higher afterwards, this has no consequences. You don't have to pay sales tax. In the “questionnaire for tax registration” mentioned above, you can also state that you want to completely do without the small business owner.

For collectors

Art and antiques are not passion, but also a valuation associated with tax benefits. This is of great tax importance, especially in the case of collections.

Holding time of at least one year

If you sell a work, you should pay attention to the speculation period of one year and keep the work of art for at least one year. If there is no whole year between buying and selling a work of art, the difference between the sales price and the acquisition price achieved must be taxed. Here, profits of up to 1,000 euros per year are tax -free.

The profit achieved is then subject to the personal tax rate, which is calculated based on the tax return. The taxes can be up to 45 percent. After the one-year period, the sale is tax-free-no matter how high the actual profit is.

It should be noted that the 1000 euro limit applies to all sales within one year. For example, if you have sold three paintings for 550 euros each, the total profit is taxable (1,650 euros minus the acquisition prices).

If you sell many pieces from your private ownership within a short time, the tax office suspects commercial trade- and then in addition to income- sales tax is also due. This can be the case from three sales within one year.

When does the one-year period apply?

You should keep an eye on the year speculative period when selling the following objects:

• Art objects (paintings, sculptures, graphics, etc.)
• Jewelry
• Antiques and classic cars
• Counting and stamp collections
• Gemstones and precious metals
• Gold coins and gold bars

Important: If you achieve regular income with a work of art, for example because it is awarded to a museum for money, the speculation period is extended to 10 years.

Is there intention to make a profit?

The systematic buying of art to make profits can also trigger tax liability. The decisive factor here is the intention to make profit: If you strive for a total profit over a longer period of time, the tax office is sometimes based on a commercial activity. It doesn't matter whether a business was actually registered.

If the intention to make a profit cannot be proven, the tax office usually evaluates this as a hobby or private asset management. The profits from this may have to be taxed on the basis of the speculation tax.

However, you can then assert any losses between purchase and sale within the year.