European VAT on Works of Art
On 12 June 2025, the Court of Justice of the European Union (CJEU) issued its first conclusions in a case concerning the VAT regime applicable to the resale of works of art, specifically, whether a gallery can apply the margin scheme when the artist sells the works through a company (Case C‑433/24).
The Margin Scheme for Art
In VAT matters, the resale of works of art, second-hand goods, collectors’ items or antiques can benefit from a special VAT regime known as the margin scheme. Under this scheme, the reseller (such as an art gallery) only pays VAT on the profit margin, not on the full resale price. This regime, however, is strictly regulated. Initially, it was only available where the work of art had been acquired directly from the artist or their heirs. Since January 2025, this condition no longer applies: the margin scheme is now limited to artworks purchased without a reduced VAT rate, in line with Directive (EU) 2022/542.
The Dispute: Scope of the Conclusions on the Former Regime
In the case at hand, a French gallery (Galerie Karsten Greve) made an intra-Community acquisition of several paintings of a British artist, not directly from the artist in his personal capacity, but from a UK-based company in which he is a partner. The French tax authorities denied the application of the margin scheme, arguing that the initial sale was not carried out by the artist himself. The gallery was therefore subject to VAT adjustments for the year 2014.
After its claims were rejected by both the administrative court and the Paris administrative court of appeal, the gallery filed an appeal with the Conseil d’État, which referred a preliminary ruling request to the CJEU. On 12 June 2025, the CJEU issued the Advocate General’s conclusions, confirming that the margin scheme may be applied even when the artist sells through a company, provided that two conditions are met:
- The artist retains sufficient decision-making power within the company over the sale of the work;
- A substantial portion of the income from the sale directly or indirectly benefits the artist’s estate.
This flexible interpretation reflects the reality of the art world, where many artists operate through legal entities.
In France: Margin Scheme or 5.5% Reduced Rate?
Directive (EU) 2022/542 of 5 April 2022, transposed into the French Tax Code, prohibits the combination of a reduced VAT rate with the margin scheme.
Since 1 January 2025, France is applying a 5.5% reduced VAT rate on works of art, whether sold directly by the artist or their heirs, or resold by galleries, provided the margin scheme does not apply. The option to use the margin scheme is not possible anymore.
The 5.5% rate also applies to imports and intra-Community acquisitions of artworks, except where the seller in the Member State of dispatch or transport is under the MSE VAT exemption scheme or already applies the margin scheme. In such cases, the acquisition in France does not qualify as a taxable intra-Community acquisition.
Since the 5.5% reduced rate cannot be combined with the margin scheme, the standard rate of 20% applies to any resale under that scheme.
The margin scheme remains mandatory when the acquisition is made from:
- a non-taxable person;
- a person under the VAT exemption scheme;
- a reseller who has applied the margin scheme.
It is, however, possible to opt out of the margin scheme on a case-by-case basis, in order to apply the 5.5% reduced rate on the full resale price.
This trade-off between reduced rate and reduced base (margin) has become a key strategic choice for art market professionals.
It is also worth noting that the 30% flat-rate margin scheme, which previously applied to artworks where the purchase value could not be determined, was abolished as of 1 January 2025.
VAT on Works of Art in Other EU Member States
In Italy, the current VAT rate is 10% for works of art sold directly by the artist (primary market), and 22% for sales on the secondary market (resales by galleries or dealers). Although a first reform attempt failed in 2024, a new proposal is under discussion to lower the rate to 5%, with the aim of revitalising the Italian art market and aligning with practices in other European countries, such as France (5.5%) and Germany (7%).
In Summary
The CJEU’s conclusions of 12 June 2025 provide a more flexible interpretation of the former margin scheme, allowing its application when the artist sells through a company, under certain conditions. Meanwhile, France has clarified its VAT rules (see BOFIP comments of 14/05/2025): the margin scheme is now reserved for purchases made without a reduced rate, and sales applying the 5.5% VAT rate are excluded from the margin scheme. Italy is also considering a major fiscal shift. These developments reflect a broader European effort to reconcile VAT rules with support for artistic creation.
