On 26 June, the government council approved a bill to apply a reduced VAT rate of 8% to transactions involving works of art, collectors’ items and antiques. Until now, the rate was 17%.
This reform proposal was put forward by Lafa (Luxembourg Association for Art Galleries & Practitioners) and VAT Solutions, a company specialising in VAT matters, which successfully led discussions with the ministry of culture and the ministry of finance to highlight the importance of this measure for the art market sector in Luxembourg.
It is also a consequence of European Union Directive 2022/542, which aims to standardise VAT rates across the 27 member states. However, this directive could have had negative consequences for the art market in Luxembourg, as its rigid application would have led to “an increase in VAT on imports and sales of works of art, which would have made the latter much more expensive, deterring buyers and reducing local sales in galleries and fairs,” explains Lafa in its press release. This would have had repercussions on gallery sales and reduced tax revenues.
By proposing VAT of 8% on works of art, Luxembourg is moving closer to the level of VAT in its neighbouring countries, which is 5.5% in France, 6% in Belgium and 7% in Germany. This will be possible once the sale of works of art, collectors’ items and antiques is included in annex A of the VAT law.
Now that the draft reform has been adopted by the government council, it will follow the usual legislative process. The new 8% VAT rate should be applicable from 1 January 2025.
This article was first published in French on . It has been translated and edited for Delano.