Tax deduction for the purchase of works of art
Verified 18 novembre 2020 - Directorate for Legal and Administrative Information (Prime Minister)
A business that purchases original works from living artists for public display may deduct the acquisition price from its taxable income. This is also the case for the purchase of musical instruments to be lent to artists. However, these works or instruments must meet certain conditions.
Which companies are involved ?
Corporation subject to corporate tax (either outright or optional)
Individual enterprise subject to income tax in the category of BIC
The mechanism of the deduction requires the deductible acquisition price to be recorded in a special reserve account as a liability on the company's balance sheet. This mainly excludes the liberal professions, which do not have the option of creating such an account on their balance sheet liabilities.
What are the works and instruments that allow deduction ?
Original work by a living artist
To qualify for the deduction, the company must exhibit the work of art in a place accessible free of charge to the public or to employees, except in their offices, for 5 years. This period corresponds to the acquisition year and the following 4 years.
The works concerned are:
Works purchased for resale are included in the company's inventory (dealers, art galleries, or any company involved in art transactions) and do not qualify for the deduction.
Craft or series productions do not constitute original works.
The artist must be alive at the time of purchase of the work. The company must be able to justify the existence of the artist at the date of acquisition.
The exhibition of the work can be carried out in the following places and situations:
The exhibition must be permanent (for the required 5 years), and not carried out on the occasion of ad hoc events (temporary exhibition, seasonal festival, in particular).
Regardless of the conditions of exposure to the public adopted by the undertaking, the public must be informed of the place of exposure and its possibility of access to the property. The company must therefore communicate the appropriate information to the public. It must do so by attractive indications at the place of the exhibition and by any promotional means appropriate to the importance of the work.
The office space in which the work is displayed cannot be a personal office, a personal residence or a place reserved for the company's customers only, for example. Exposure to these premises does not allow access to the tax deduction.
To qualify for the deduction, the company must undertake to lend the musical instrument free of charge to the performers who request it.
The company must be able to justify this commitment by demonstrating that it has informed the potentially affected performers of its loan offer:
How do I make the deduction ?
The acquisition price of the work of art (or the instrument) may be deducted without an accounting record from the taxable profit of the acquisition period and the following 4 years. This is done in equal parts, or 1/5e (20%) each year.
The basis of the deduction is the cost price of the work or instrument, corresponding to the original value. The original value corresponds to its purchase price, plus any incidental charges and minus the recoverable VAT.
The additional costs, paid upon acquisition of the work of art or instrument (for example, commissions paid to intermediaries), are directly deducted from the total taxable income before tax is calculated. They are not included in the deduction base.
The amount is deductible up to €10,000 or 5 per (per thousand) of turnover excluding tax where the latter amount is higher, less the total payments made in respect of patronage.
If the portion of the acquisition price cannot be fully deducted in respect of a year, the remaining surplus is lost. It cannot be carried over to be deducted in a future year.
For enterprises subject to corporate tax (IS) or income tax in respect of BIC, the sums must be deducted from the result of the financial year:
Any deduction not made by the enterprise in respect of a year shall be definitively lost.
The enterprise must record an amount equal to the deduction in a special reserve account, which is recorded as a liability on the balance sheet.
In the following cases, this amount must be reintegrated in an extra-accounting manner to the taxable profit:
An enterprise may make a provision for depreciation where the loss of value of the work exceeds the amount of deductions already made.
The ceiling €10,000 shall apply to payments made in the course of financial years ending on or after 31 December 2019.
Reference texts :
Tax Definition of Works of Art
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