Illicit Trade in Cultural Property' in "Art and Cultural Assets"

The European Court of Justice has ruled that the implementation by the UK of the Sixth VAT Directive was incorrect in allowing auction houses to charge VAT at a rate of 5% instead of the standard rate of 17.5% on their commission when selling defined categories of works of art held in the UK under temporary importation arrangements.

Import VAT is due at the discounted rate of 5% on the value of fine art, collectors’ items and antiques (as defined in the VAT Regulations) imported into the UK from outside the EU, subject to certain exemptions. The temporary importation regime allows sellers to import fine art, collectors’ items and antiques on a temporary basis for the purpose of their sale in the UK. In that case, no import VAT is due when the property is imported.

When it is sold, the buyer may export it outside the EU in which case no VAT is due subject to certain conditions. If the buyer decides to keep the property in the EU, he will effectively import the property into the UK and pay import VAT at the discounted rate on the hammer price. Until the decision of the European Court of Justice, when a British auction house sold works of art held under temporary