Germany slashes VAT on art sales to 7%

The German government will cut value-added tax (VAT) for art sales to a reduced rate of 7%, meeting a long-standing demand of dealers who said they suffered a disadvantage relative to competitors in other countries under the current rate of 19%.

The cabinet approved the reduction, which takes effect from January 2025, as part of a package of tax law changes at a meeting yesterday.

“The reduced rate is an important signal, particularly in difficult times, for the art market and the cultural contribution made by galleries,” said the culture minister, Claudia Roth, in a statement.

Germany had a reduced VAT rate of 7% on art sales until 2014 but was forced to scrap it and impose the general VAT rate of 19% on dealers because art was excluded from a list of goods and services eligible for reduced rates in a European Union directive. Only artists could apply a reduced rate of 7% on direct sales.

A new directive passed in 2022 permitted reduced rates of VAT—no lower than 5% of the full price of an item—for specified goods and services deemed to “pursue objectives of general interest,” among them “supply of works of art, collectors’ items and antiques”. Countries are required to align national laws with the new directive by the end of 2024.

The Bundesverband Deutscher Galerien und Kunsthändler (BVDG), the dealers’ association, has been pushing for the reintroduction of the reduced 7% rate for the past 10 years. It says the imposition of the 19% rate caused the art market to stagnate and galleries to close, and deterred people from opening new ones. The culture ministry said the reduction in the rate “eliminates imbalances in taxation and strengthens Germany’s art market, including on an international level.”

The BVDG welcomed the change, saying it will help the German art market. “It increases its competitiveness and makes it fit for the future,” the association said.