GALLERY ART & TOILES DU SUD

Tax deduction

A special deduction is available for companies that buy original works of live artists for public display or musical instruments for loan to performers. They may, under certain conditions, in particular if they are registered in a fixed asset account, deduct the purchase price from their taxable profit in an extra-accounting manner.

Affected companies

Whatever the activity of the company, the deduction concerns:

  • companies subject, automatically or optionally, to corporation tax (IS);
  • sole proprietors subject to income tax in the BIC category.

Works bought for resale and which are included as such in the company’s inventory (dealers, art galleries, or any company involved in art transactions) are not eligible for deduction.

Warning:

T
terms he deduction system requires the deductible acquisition price to be entered in a special reserve account on the liabilities side of the company’s balance sheet, which effectively excludes individual entrepreneurs in the NBC category, mainly the liberal professions, who do not have the option to create an account of this nature on the liabilities side of their balance sheet.

Terms

Original work of a living artist

To benefit from the deduction, the company must exhibit the work of art in a place accessible free of charge to the public or to the employees, with the exception of their offices, for 5 years (the period corresponding to the exercise of acquisition and the following 4 years).

The works concerned are:

  • paintings, paintings, drawings, watercolors, gouaches, pastels, monotypes, entirely executed by the hand of the artist;
  • engravings, prints and lithographs, drawn in limited numbers directly from planks entirely executed by hand by the artist, whatever the technique or material used, with the exception of any mechanical or photomechanical process;
  • productions in all subjects of statuary art or sculpture and assemblages, since these productions and assemblies are executed entirely by the hand of the artist, excluding articles of jewelery, goldsmith and jewelery ;
  • limited-edition sculpture fonts of 8 copies and controlled by the artist or his successors;
  • tapestries made by hand, based on original cartons provided by the artist, limited to 8 copies;
  • unique copies of ceramics, entirely executed by the artist’s hand and signed by him;
  • Enamels on copper, entirely executed by hand, limited to 8 numbered copies bearing the signature of the artist, excluding jewelery, goldsmiths and jewelery;
  • photographs taken by the artist, taken by him or under his control, signed and numbered in the limit of 30 copies, all formats and media combined.

To know :

Artisanal or serial productions are not original works.

The artist must be alive at the time of the 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 realized:

  • on the premises of the company, provided that they are actually accessible to the public or employees (it can not be a personal office, a personal residence or a place reserved for clients of the company for example);
  • at events organized by the enterprise or a museum, a local authority or a public institution to which the property has been entrusted;
  • in a museum to which the property is deposited;
  • by a region, a department, a municipality or one of their public establishments or a public institution of a scientific, cultural or professional nature.

The exhibition must be permanent (during the 5 years required), and not carried out during specific events (temporary exhibition, seasonal festival, in particular).

Regardless of the public exposure methods adopted by the company, the public must be informed of the place of exhibition and its access to the property. The company must therefore communicate the appropriate information to the public, by attractive indications on the site of the exhibition and by any promotional means adapted to the importance of the work.

How to deduct

The acquisition price of the artwork or the instrument may be deducted extra-bookable from the taxable result of the acquisition exercise and the following 4 years, in equal fractions (ie 1 / 5th each year).

The basis of the deduction is the cost price of the work or instrument, which corresponds to the original value (that is, the purchase price plus any incidental costs and less recoverable VAT). Expenses incurred on acquisition, which are not included in the cost price (in particular commissions paid to intermediaries), are excluded from the deduction base; they are immediately deductible.

The deduction thus made for each financial year is capped: it can not exceed the limit of 5 ‰ (per thousand) of the turnover excluding tax, minus the total of the payments made under patronage. If the fraction of the purchase price can not be fully deducted in respect of a year, the unused surplus can not be carried forward to be deducted in a subsequent year.

For companies subject to corporation tax (IS) or income tax on BICs, the sums must be deducted from the result of the exercise:

  • on the table No. 2058-A (cerfa No. 10951), line XG, when the enterprise falls under the regime of the normal real;
  • in Table 2033-B (Cerfa No. 10957) when it is placed under the simplified tax regime.

Since this deduction is in the nature of a management decision, this means that any deduction not made by the company in respect of a year is definitively lost.

The enterprise must enter an amount equal to the deduction to a special reserve account, which is shown on the liabilities side of the balance sheet.

This sum must be reintegrated extra-accounting to the taxable result in case of:

  • change of assignment (the work is no longer exposed to the public or the instrument is no longer lent);
  • the assignment of the work or instrument (the asset is released from the fixed assets);
  • deduction from the reserve account (the deduction of all or part of the sums allocated to the special reserve account entails a reinstatement of the sums deducted from the taxable profits at the standard rate).

The company may make a provision for depreciation, when the depreciation of the work exceeds the amount of the deductions already made.

Reference texts

Tax deduction

Tax Definition of Works of Art

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