Art and European VAT

Works of art which are imported or supplied by their creator, his successors in title, or a taxable person other than a taxable dealer who acquired the art in one of the ways mentioned above, may be taxed under the reduced VAT rate (Article 12, sub 3c Sixth VAT directive). This tax incentive is very important for artists as they sell a lot of their work to customers who are not taxable and for whom the reduced rate therefore means a real price difference. For example, in 1995 artists in the Netherlands sold 77% of their uncommissioned, and 69% of their commissioned work to private persons, municipalities and government institutions. But what is art? This question has kept art historians, art sociologists and art critics, to name only a few, busy for quite a while. Up to now they have not been able to come up with a general answer which is independent of time or place. For contemporary art it has been even more problematic to define the borders of what is and what is not art. This makes it remarkable that Annex I to the Sixth VAT directive provides for a detailed and closed definition of works of art. In this article I will examine some problems this definition has caused. I will also give some recommendations to change this definition and the way it is applied. The Resale right directive can prove to be useful in this respect