Brexit’s opportunities for EU art collectors
More than 6 months after the end of the transition period, the fog begins to lift on the uncertainties around the consequences of Brexit for EU art collectors.
The first months were dominated by the news of more red tape for art shippers , issues around importing and exporting cultural goods and new regulatory hurdles for the movement of artworks between the EU and the UK.
With time came a better understanding of the underlying issues, which will in turn reduce friction in the long term, but also a better understanding of the opportunities of the post Brexit period.
9 months after Brexit
January 2021 marks the date on which the United Kingdom officially severed all ties with the EU single market and customs union. The end of the transition period also puts a stop to free movement between the EU and the United Kingdom. It is now considered a third country, much like Switzerland or the United States.
The art market on both sides feared massive disruption due to the increased complexity in shipping, customs or taxation. 9 months later it seems however that this fear was mostly unfounded, as art shippers, art dealers and their customers adapted to the new normal.
As we will discover in this article, Brexit provides new opportunities for EU art collectors. First and foremost, the United Kingdom was and will remain an attractive fine art market for buyers, with an established art ecosystem and cheap currency. Buying in the UK now also comes with VAT advantages for buyers transferring artworks to the EU.
They will now be taxed at a reduced rate compared to art bought in their own countries. Third, the UK can now finally implement an independent set of rules and regulations for the art market, with possible advantages for EU art collectors.
Lastly, we also expect certain EU cities to benefit from Brexit by capturing parts of the EU business that was transacted in London before Brexit.
An attractive fine art market for buyers
According to the UBS & Art Basel Art Market Report, the UK still accounts for 20% of the global art market in 2020. It also states that the United Kingdom is expected to “retain its attractiveness as a global hub and location for top-tier sales, with the expertise, infrastructure, and relatively trade-friendly regulatory stance required”.
This attractiveness is increased by a significant fall of the exchange rate of the pound against other leading currencies, such as the Euro, as an immediate consequence of Brexit. This makes the UK a market for buyers looking for great deals, for example on contemporary art.
Advantages from changes in VAT rules for work of art
After the end of the transition period in December 2020, the UK has definitively left the Customs Union and the single market made up of all EU member states.
Shipping art from the UK to the EU now requires export and import formalities to be completed before an art collector in the EU can take delivery of their new artwork in the EU.
While this increases the administrative costs related to the transport, the buyer benefits from two aspects of the VAT rules.
On the UK side, the export reduces the VAT rate to zero and the buyer either does not pay VAT or can claim it back after providing the export documents to the seller. On the EU side, the buyer benefits from import VAT rates that are typically lower than regular VAT rates on art acquisitions, e.g. in Germany where art sales are typically taxed at 19%.
Fine Art is a mobile and portable asset and as such can be transferred relatively easily between countries and continents. Thanks to Brexit, EU art collectors are now able to participate in regulatory arbitrage and choose the least restrictive rules for their purchases.
One area of particular interest to art collectors are cultural goods licenses. These exist both for exports outside the EU but also for certain transfers between EU countries. The UK has a strong anglo-saxon tradition of low regulation. It could therefore prove easier to obtain an export license to ship an artwork from the UK to Germany than to obtain a certificate to transfer art from France to Germany.
Brexit also provides an opportunity for regulatory review and potential changes. One area where the UK can set itself apart is by restricting artist resale rights.
These rights are payable to living artists and their heirs on artworks resold on the secondary market. The UK has also chosen not to implement new EU legislation on the import of cultural goods, making it easier to buy and sell in particular antiquities over 250 years old.
A stronger European art market
After Brexit, the European Union, which according to the UBS & Art Basel Art Market Report accounts for 12% of global art trade, will need one or several new European art hubs.
Paris in particular has already positioned itself to be this new European champion by promoting its status as cultural center of the world, with a rich heritage of artists and art dealers It’s no wonder that many of the biggest international galleries have chosen the French capital as their new European headquarters; and that the most important auction houses are also expanding their presence here.
Other European cities such as Brussels, Madrid, Milan or Berlin will also surely be able to improve their attractiveness, especially with the benefit of free circulation of artworks inside the European Union.