Art fair aqusitions and VAT

As usual, with Art Basel Miami Beach going to its end, many clients ask, if and how much import tax for their aquisitions will apply, if bringing them back to Europe. Some of them were promised by the selling gallery that no import tax will be due at all, as the purchased art work "originally comes from the EU and can be reimported free of any import charges". 
Unfortunately,  I very often have to disappoint them with my answer.

Let me shortly explain how it works and why doesn't it work the way clients expect it.

Here some general rules for invoicing the VAT between the EU countries (applies to VAT payers of course):

1) a sale within the EU is in customs' terms not an export. It is subject to VAT!

2) if the buyer is another EU-VAT payer, like another gallery, the invoice may be issued net and the transaction has to be declared in the so called quarterly recapitulative statement. Sounds terrible, I know :) but means just that the finance authorities in the buyer's country are informed about this purchase and that this purchase will be taxed in the buyer's country of tax residence, with the local VAT rate.

3) if the buyer is a private person, like an art collector, the ivoice should be issued with VAT, according to the rate valid in the seller' country.

4) regardless of the purchaser being a private person or a company, if a sale between an EU seller and an EU buyer takes place at a fair held outside the EU (like all editions of Art Basel), the acquired art works are seen by the customs as third-country goods and are as such subject to import VAT upon return. Taxation cannot be legally avoided that way! 

The advantage of  fair aquisitions is the import VAT rate that is usually much lower than of the regular sales VAT. In Germany it is 19% and 7%, so the difference may be considerable. Still, please note, that faking fair sales to lower the VAT amount payable by your client is encouragement / contribution to tax evasion and as such not quite legal :)

As for the famous "tax-free reimportation", it is commonly practised indeed but possible mostly for the actual owner/exporter of the art works or in cases, in which a non-commercial character of such imports is proven and comprehensible for authorities (like a temporary travelling exhibition).

Of course there are may cases in which a tax free reimport by the buyer "somehow" worked, mostly due to negligence of individual customs officers...but still - it was definitely not correct :) Generally, the customs check reimport docs much much more thorough than all other ones, as they are well aware of tax fraud practises.

Wish you luck with your return shipments and I'm warming up for all the "charming" Miami imports and reimports awaiting me very soon :)

Art Basel Miami Beach

Keep calm! Calmness is the cradle of power :)

Like every year, agents' and galleries' November is dominated by preparations for Art Basel in Miami Beach. Even though the fair is officially open to the public 4 days long, it actually lasts app. 10 days, including unpacking, installing, VIP viewing, deinstallation and packing for the return transport. For agents and galleries involved, the project "ABMB" lasts app. a month.

Every shipment coming to the show from abroad requires cooperation of agents on both sides. Foreign agents, in charge of exporting and re-importing of the art works, who serve many galleries at once, often send a representative to support their clients on site. Receiving agents on the US end, like e.g. Masterpiece, Dietl or Atelier 4, usually open their temporary offices directly at the fair and coordinate incoming shipments together with the exhibitors. 

They also set the deadlines for arrival, which due to a high congestion risk at MIA airport and Miami sea port, are up to 3 weeks (!) in advance of the official opening. Foreign agents are obliged to observe these deadlines; consequently, all preparations involved in an outgoing shipment need to be planned accordingly earlier. That is why, already at the end of October we, European agents, have to stress our clients to take final decisions on the to-be-shipped volumes. Our apologies :)

After it has been decided which works are going to be exhibited, their packing has to be checked and, if necessary, extra crates have to be fabricated. When final dimensions of packages (so called colli) are known, it is time to book sufficient freight hold by a chosen airline. As, not quite surprisingly, all freighters going to Miami at the end of November are pretty full of art, it is advisable to book the priority option, especially, if the volume is large. Otherwise, an offload and - as a result - a delay may occur. This year the situation is exceptionally unfavourable: due to the threat of Lufthansa cargo staff's strike, the demand on freight hold by other airlines grew suddenly a great deal – and so did the rates.

The next step are packing lists and shipping invoices for customs purposes. To make your customs broker's life easier, works listed on a fair proforma should be sorted by technique, have net values given in one currency and if available, images or at least inventory numbers. Works which are not in free circulation in the EU or have already been sold, should to be documentated on separate proformas or commercial invoices. Still, if possible, all the works travelling ot the fair, should be sent on one AWB only – then the US bond and user fees, that are usually maximal anyway, apply only once.

As it is not known, which of the works will be sold and which will return, a temporary export seems to be the most favourable option. If it is done correctly, unsold works can be re-imported smoothly and tax free after the fair. On the other hand, the POE (proof of export), even if temporary, is usually respected by tax authorities as long as the value on the commercial invoice (issued afterwards) matches the one declared on the fair proforma.

Please note that tools, like drills, nails or hammers, and booth equippment, like a carpet or stool, have to be declared on the shipping invoice as well! 

A very useful hint: don't ever pack your electric screwdriver into a wooden crate, for which you need a screwdriver to open :) ! Pack you tools in a flight case or any box that can be opened by hand! You wouldn't believe, how often and to how much renowned galleries this mistake happens :) 

After all is set and done, the volume is delivered to the airport. The usual practice is to consolidate services for diverse clients (transports to the airport, handling, booking of freight hold) to keep the costs possibly low.

Now you, as the representant of your gallery, have to board your plane, land safely and conctact the US agent on the other end to receive your shipment at the fair and start arranging your booth. 

I wish you fun and success in Miami Beach, so that in the best case you bring only the tools and chairs back :)