VAT causes an exodus of Spanish galleries to France and Italy

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VAT causes an exodus of Spanish galleries to France and Italy

VAT causes an exodus of Spanish galleries to France and Italy

A work by the same artist—like Miquel Barceló, Juan Uslé, or Jaume Plensa, to name a few of the most sought-after—costs more if purchased in a Spanish gallery than in a French, German, or Italian one. There's no need to delve into esoteric issues. The reason is clear: the VAT applied in Spain to art purchases through galleries is 21%, while in Germany it's 7%, in France it's 5.5%, and in Italy less than a month ago it was lowered from 22% to 5%. Needless to say, in a global market, the effects of this gap are devastating. For more than a decade, the art world's struggle has been to bring the VAT rates in line with those of neighboring countries, but the government's lack of action is causing a mass exodus.

"Concern is paramount because what we're talking about is survival," says Idoia Fernández, president of the Consortium of Contemporary Art Galleries, who in recent months has noted a still-nascent but seemingly unstoppable phenomenon: the mass exodus of Spanish galleries to France or Italy so they can invoice their sales with reduced VAT and compete on equal terms with their European counterparts by opening a second location or office.

A work by Miquel Barceló, Juan Uslé or Jaume Plensa costs more in Spain than in France or Germany.

Those who have taken the lead remain cautious and, for the moment, prefer to remain anonymous. The phenomenon has only just shown its true colors. “It's the topic of the moment. In the last two months, every time I go to an opening or a fair, I meet gallery owners who tell me they're considering it, either alone or in association with other galleries, and I myself intend to study it seriously to see how feasible it is,” argues the president of the association, which brings together 120 galleries from across Spain and who, along with her sister Nerea, runs the NF/Nieves Fernández gallery in Madrid. “It seems more of an ideological issue than a revenue-raising one,” says Miguel Ángel Sánchez of the Barcelona-based ADN gallery, because “the art market in our country is worth around €300 million, meaning that with a reduced VAT rate, sales would increase and they'd collect more, but I think they see us as four rich people selling art to four other rich people.” Sánchez has a speakeasy in the Marais district of Paris, although he claims he only uses it for presentations and meetings with artists and collectors. "I haven't even considered it, mainly," he argues, "because my turnover is small, around one million euros a year, and I don't know if the bureaucratic hassle of opening a company to operate in France is worth it, but I understand why it should be done. It's our right, just like any other business."

Elmgreen & Dragsetl's work at the last Arco fair

Work by Elmgreen & Dragsetl at Helga de Alvear's stand at the Arco fair

Anadolu via Getty Images

"Are we crazy? Are they really forcing us to divert our energy into opening a market in Paris or Turin because we're losing customers here?" asks Carlos Duran of Senda, for whom "the big problem is not only that local customers are going abroad to buy, which is logical if they find it cheaper, but that international customers are no longer coming." No one dares to put figures on it, although everyone agrees that "France [with 5.5%] has done us a lot of damage this year. It's making our lives difficult," says Fernández. "Right now I can't compete with the two French galleries that represent Chiharu Shiota and Arnulf Rainer, artists I work with, and whose sales have already dropped significantly in recent months."

Spain is required to apply a rate of 21%, compared to 7% in Germany, 5.5% in France, and 5% in Italy.

Since 2022, a European regulation allows for a reduction in VAT on art sales to a minimum of 5%, but the Spanish government has yet to budge, according to industry insiders. “We have all decided that cinema and concerts will have a reduced VAT rate of 10%, and I think it's fair. The cultural sector is a fragile sector that needs protection. It doesn't matter if it's Taylor Swift and tickets are sold for 100 euros or if it's a Hollywood film, which doesn't need protection and the most obscene figures in the world are being handled. In those cases, no one asks who the viewers are. In contrast, in the art world, the opposite is assumed that the recipient is a rich person who has nothing better to spend their money on; a capricious person, no matter what tax they impose, will pay it. It's all very absurd,” concludes Fernández. According to data handled by the industry, 70% of the public in Spanish galleries is “a small and medium-sized buyer.”

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Quico Peonado, from Àngels Barcelona and president of the Arts Barcelona association, recalls that, despite accusations of elitism, “galleries are the only cultural industry with free access.” A paradigmatic case is that of Marc Domènech, with an exquisite program that includes artists such as Georges Noël, André Masson, and Henri Michaux, who complement and enrich the city's museum offering. “I don't know how I'm going to be able to continue defending these legacies,” he laments. “You have to sell off-market because clients will tell me, 'Great Marc, congratulations, how fantastic to be able to see these works here, but I'm going to go buy in France.' And I'll understand. I don't know how much longer I'll be able to continue taking risks.”

"It's a torpedo to the professionalization and growth of Spanish artists."

The lack of a reduced VAT rate on art not only harms gallery owners and collectors, but "is a real torpedo for Spanish artists, their professionalization, and their growth," says Idoia Fernández, president of the Consortium of Contemporary Art Galleries. She points to the contradiction that the 10% VAT rate that artists can apply is a problem. "What you're saying with that, the message you're sending, is 'don't exhibit in a gallery, don't have an agent to represent you, don't let them promote you, don't go professional...' It's as if you forced a writer to self-publish and sell their work from home to benefit from a 4% tax. Or if you charged a musician a 10% tax if they played in their garage but a 21% tax if they played at the Bernabéu. It's a fish biting its tail because, furthermore, as we gallery owners weaken, local artists are further harmed. Being represented by a gallery with a certain strength, a certain power, with capacity, isn't the same as being represented by a smaller, financially weaker one." A view shared by Quico Peinado, for whom the loss in revenue that the VAT reduction could represent for the government doesn't compromise any special services, and yet the return could be enormous: they can open more galleries, attend more fairs, hold more exhibitions. and, therefore, strengthen artists, many of whom wouldn't exist without a gallery behind them." Peinado rebels against the preconceived idea of ​​art as a market for rich speculators, "when in reality, I don't think there's anyone in Spain who speculates with that. Whoever wants a windfall has housing." In recent years, the French capital has regained its status as the European art capital, taking over from London, which has been losing ground due to Brexit and new tax conditions. As major international galleries open branches there, they seek out local artists and make them known worldwide, something that, according to experts, would happen in Spain if VAT were equalized. One of the Barcelona galleries based in Paris is Mayoral, which opened its doors six years ago, "but obviously at that time the motivation wasn't tax issues [reduced VAT was not yet in place] but rather the idea of ​​gaining visibility and positioning ourselves internationally," notes Jordi Mayoral, who insists that the current situation is harming an entire ecosystem.

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