Art and VAT in Norway
Knut Einar Rishovd
by Knut Einar Rishovd
This article is a short introduction to the VAT treatment of art in the form of paintings, sculptures and other physical objects considered to be art.
The originators sale of art is exempt from VAT. The exemption is extended to include any intermediary involved in the sale, if the sale is in the name of the originator. The intermediary is also exempt from VAT on his services related to such transactions. There is also an exemption from VAT in connection with exchange of art between museums. All other sales of art are subject to VAT.
Physical persons are exempt from charging VAT on sales on items used privately or for purposes that did not give the seller the right to deduct VAT on the item when it was purchased. The basic message is that the sale of art from a physical person is exempt from VAT.
Art purchased for resale on a commercial basis is subject to VAT but only on positive margins between sales price and purchase price.
The fun start when the art is bought by a legal person in the form of a company. If the object is bought directly from the originator or an intermediary acting on behalf of the originator there will be no VAT on the purchase. Neither will there be VAT on a purchase from a physical person.
Since all sales of art are subject to VAT, the assumption is that VAT should be calculated on the sale based on the full price of the object. The government would then collect VAT on the initial purchase price and any profit earned. Since the result is unreasonable, one of the four big audit firms asked for a ruling from the tax authorities in connection with a major sale of art.
The tax authorities responded very recently that the sale should be invoiced without VAT, since the art had been used for purposes where the company was not allowed to reclaim VAT in connection with the purchases of the items in the collection. Their conclusion is that companies can invest in art and sell it without VAT as long as it is not considered to be trading of art objects.
The ruling was related to the sale of an art collection bought with the intention of earning money on the collection. The company had owned the collection for more than 10 years. The tax authorities have not presented a clear definition of when purchases are for trading or for investment, so there is a risk if multiple objects are bought and sold over a relatively short period of time.
Revisjonsfirmaet Flattum & Co AS is a continuation of an audit firm founded by Sven Flattum in 1991. Their services include auditing, tax advisory, accounting, payroll services, consulting and forensic accounting. Flattum partners and staff have extensive experience in all industries and with enterprises of all sizes. Furthermore, they have substantial experience in working with international companies. Their goal is to protect their clients' interests in the best way possible within the limits of the law. They are proud of having a stable and competent workforce on all projects.
Knut Einar is a State Authorised Public Accountant, Lawyer, PMPPartner with Flattum & Co. His areas of expertise include Audit, direct and indirect tax, project management and consultancy in connection with strategy, acquisitions, mergers and demergers, restructuring and operational procedures.Contact Knut Einar.
GGI member firmFlattum & Co. Oslo, NorwayT: +47 22 98 21 20
Advisory, Auditing & Accounting, Tax, Corporate Finance
