Whether you are an heir, an investor and/or a collector, besides your passion for the artworks you own we recommend that you take an interest not only in the steps needed to maintain their value but also in the regulatory aspects pertaining to them, especially regarding taxation.
Louis Henri de Meuron, 1868-1949 (CH).
Shore of Lake Neuchâtel, (1911).
Oil on wood (65 x 78 cm).
How to ensure that artworks hold their value?
Apart from the renown of an artwork’s creator, factors that determine the value of an artwork are a.o. its traceability and documentation. It is therefore highly recommended to keep an inventory of past transactions and any renovations that have been made, together with all the necessary documents.
When should the tax aspects be analyzed?
Tax matters should be considered while you hold title to an artwork and also before making any transaction concerning it.
In Switzerland, when you hold an artwork, an important issue is to determine whether it forms part of your household property, which in such case makes it exempt from wealth tax. The main criterion here should be how the work is used and not its value. However, there are no clear legal provisions in this regard and most cantons tend to consider that an artwork is taxable when it is expensive.
The Canton of Geneva is the only canton that provides in its tax legislation that artworks of art displayed in a taxpayer’s home (decorating items) are household property and thus tax-exempt. To the contrary, artworks which are stored in a free port or a safe are taxable.
If a work is taxable, appraising its tax value is a complex issue. There are no uniform directives in this area, which on the other hand provides scope for discussing with the tax authorities. It should be noted that the insured value is not decisive when it comes to taxation.
What to look out for in a transaction
Prior to any transfer of ownership for consideration (e.g. by sale), you should analyze how the transaction will be treated by the tax authorities. If you are a Swiss taxpayer and the work is part of your private wealth, in general any realized capital gain is tax-exempt. In some cases however, the capital gain could be taxed, for example if the transaction is deemed to arise from your business activity.
If the transfer takes place free of charge, for example in the case of a gift or a legacy, it should also be reviewed beforehand. Some cantons such as Neuchâtel and Vaud levy gift or inheritance tax on gratuitous transfers to direct descendants even if the artwork has not been liable to wealth tax. An exemption can be granted if the work is transferred to a public-interest foundation.
What other regulations should be considered in a transaction?
Given the special nature of these assets, intermediaries in sales transactions (auction houses and galleries) are required to perform special controls on all the transaction related information and a detailed inventory is therefore necessary.
How can Bonhôte Services SA help you in this area?
We offer services related to the analysis and the planning of transactions involving artworks, whether it concerns a sale, a donations or a bequest. We also establish and keep inventories and provide administrative services such as organizing transports and managing insurance needs.
To appraise the value of artworks we collaborate with independent experts such as curators and art historians.
Eugène Louis Boudin.
Pasture near Honfleur
Oil on canvas (40.8 x 55.1 cm).