TAX EXEMPTION FOR:

• COMPANIES:

Article 238 Bis AB:

“From January 1, 2002, companies that acquire original works of living artists and register them as fixed assets can deduct from their taxable income for the year of acquisition and the four following years, in equal installments, an amount equal to the acquisition price.”

This tax deduction applies to the taxable business profits of companies.

“To benefit from this deduction, the company must exhibit the acquired work in a place accessible to the public or its employees, except for its offices, during the year of acquisition and the following four years.”

The artworks purchased by the company must be displayed to the public within its premises (waiting room, reception hall, etc.) for a period of five years.

PURCHASE

Original works by living artists can now be deducted from the taxable income of companies. This deduction is applied in equal installments over a period of five years, including the year of acquisition and the following four years.

However, it cannot exceed 5 ‰ (per thousand) of the turnover for each year, reduced by the total deductions mentioned in Article 238 bis AA of the CGI, and must be recorded in a special reserve account on the liabilities side of the balance sheet. The artwork is considered as a fixed asset and must be displayed in the premises for a period of five years (Article 238 Bis AB of CGI).

EXAMPLE

If your company generates a turnover of €350,000, it can deduct up to 5/1000 of this amount, or €1,750. If your company acquires a work of art for €1,500:

• The first year, the deduction will be €1,750/5 = €350,

• Then the same amount will be deducted for the following four years,

• And finally €100 will be deducted in the fifth year, totaling €1,500.

Thus, for a painting purchased for €1,500, you can spread this deduction over 5 years.

Article 238 Bis:

“Payments eligible for a tax reduction of 60% of their amount, subject to a limit of 5 per thousand of turnover, are made by companies subject to income tax or corporate tax.”

The tax exemption for artworks requires a maximum deductible amount of 0.5% of the company’s turnover.

• INDIVIDUALS:

Exemption from ISF (Wealth Tax)

Works of art are not subject to the Impôt de Solidarité sur la Fortune (ISF, Wealth Tax). They do not appear in the ISF declaration, and the sums dedicated to their acquisition are not taxable. This fiscal measure applies to all types of works of art.

Exemption from Capital Gains after 12 years

The purchase of a work of art is exempt from capital gains tax after 12 years of ownership. A 10% reduction is granted each year beyond two years of possession; thus, the normal capital gain of 27% dissipates after 12 years.