Taxpayers affected by the new solidarity levy on wealth are beginning maneuvers to gradually reduce the tax burden they are expected to pay over the next year. One of the formulas they opt for, as explained by various offices and accountants, is the acquisition of works of art. Because for these assets, as with the wealth tax, there will foreseeably be a number of exemptions that will allow the tax assessment base to be reduced by several tens of thousands of euros. “We believe that the new wealth tax will maintain the current inheritance system,” explain the experts interviewed, who do not wish to be quoted. Therefore, it is reasonable to assume that these exceptions will be replicated in the new figure.
For its part, the Treasury confirms that while the tax is still in development, it will most likely be inspired by the original tax, so the elements that make up the tax base in Patrimony should be retained. It should be remembered that the new number was born to neutralize the 100% bonuses applied by several autonomous communities in heritage.
Investing in works of art to reduce the tax burden of the rich has several options. As explained by Luis Rodríguez-Ramos, Fiscal Partner at Ramón y Cajal Abogados, there are a number of inventoried and cataloged assets that qualify for a full exemption as long as they meet a number of price and age requirements.
Therefore, for the purposes of applying the exemption, a painting, sculpture, drawing, engraving, lithograph or similar object is considered to be an art object provided it is an original work and is catalogued. Antiques that are more than 100 years old and whose original properties have not been changed in the last century also have this tax advantage. Of course there are certain limits regarding the value of the goods.
For example, images and sculptures priced below EUR 90,151.82 are exempt from tax as long as they are less than 100 years old. If this period is exceeded, the paintings are limited to 60,101.21 euros and the sculptures to 42,070.85 euros. The long list includes collections of books or musical instruments under 42,070 euros and carpets or tapestries that do not reach 30,050 euros. Certain furniture, archaeological objects, as well as pottery, glass and porcelain are also exempt.
According to Elisa Hernando, CEO of Arte Global and Redcollectors, these are amounts that allow these taxpayers, for example on pictorial works, to reduce the tax burden while investing in artists with “medium projection and appreciation for the future.”
However, there are other formulas for those goods whose price is much higher. The wealth tax, Rodríguez-Ramos continues, “offers exemptions for works of much higher value.” In these cases, it is sufficient if the owners leave them to foundations, museums or cultural institutions for public exhibition. “The contract must last at least three years, but can also be extended for longer,” explains Rodríguez-Ramos. In addition, it is not necessary for the work to be exhibited permanently: “It is enough that it is deposited”. It is likely that this requirement would also be retained in the new tax.
The expert reminds that last year the Supreme Tax Directorate positively resolved the request of an owner of various contemporary works of art who wanted to put them in a foundation for at least three years and save the corresponding share of wealth tax.
risks
The acquisition of works of art also entails tax risks, as Alejandro del Campo, lawyer and tax consultant at DMS Consulting, remembers. Those items not exempt from wealth could be considered “unproductive assets” for the purposes of the maximum joint taxation of wealth and income tax, a limit that adds the ratios of both taxes to reduce the final bill.
He points out that the Supreme Court has already held “that works of art are unproductive assets, so no inheritance fee reduction is applied to the value of those who are not exempt from inheritance, even if it means that more than 60 must be paid % of the income earned”, the intended limit.
details
The new wealth tax is to come into force before December 31, with the aim of making the first payment in June 2023 on the assets declared in 2022. At least that is the goal of the Treasury, which goes on to detail considering that its articles will be included in the decree that will promote the new tax on the extraordinary benefits of banks and big energy companies that will see the light of day in a few days becomes.
The tax was specifically designed to neutralize the 100% bonuses applied to inheritance by various autonomies governed by the PP. It affects a net worth of more than three million euros and is deducted at 100% in the regions where the initial tax is levied, so in practice it is only applicable in Madrid, Andalusia and Galicia, the three regions that do have an impact will subsidize the wealth tax in whole or in part.
First, the executive said the tax would affect 23,000 taxpayers for two years, with a goal of collecting nearly €1,500 million a year. However, the government has already left the door open to extending it longer or even making it permanent.