Chairman: Milton Grundy
13 April - 8 June
It is easy to lose a lot of money by investing in art. Traditional sectors have been in decline for years. Contemporary sales have experienced explosive growth. There is a buying fee of 25% at auction. Part of the advisor’s job is to protect the vulnerable – mainly middle-aged, successful men operating on instinct and lacking knowledge. The market is of the order of $ 68bn a year. The margin of a dealer is typically 200-300%. The art world does not look commercial, but is in fact aggressively and ingeniously commercial. There are many instances of conflict of interest: advisers routinely profit from their advice. Timothy Sammons was jailed for fraud in the United States. Clients become emotionally involved in a work they plan to buy and resistant to unwelcome advice. The value for insurance should not be used for any other purpose.
The sales channels are dealers and brokers and the global auction house. Auction houses use “business getters”, whose advice owners should never be relied on. The art market is surprisingly thin. Understanding marketing reach is critical. Purchasers and sellers are in need of informed and independent advice, which is not easy to obtain.
Germany’s laws against tax evasion are very strict, with long limitation periods, and stringent reporting requirements. New residents should consider their future tax liabilities before they arise. There are exit taxes on departure. There are CFC rules and high rates of corporation tax and real estate transfer tax. A partnership is tax transparent, but a proposal for partnership to have the option of being treated as a corporation is under discussion. Foundations are regulated, the interest of the beneficiaries not being protected by a right of action by them, as with a trust, but by rules enforced by statute (which are currently being revised).
Germany has a wide net of double taxation agreements and retains for the time being its relation with the United Kingdom prevailing under the European Union. Federal debt has grown during the pandemic and increased taxation is expected, possibly including a wealth tax.
Migration has been growing, especially over the last 18 months. Governments offer residence and citizenship in return for investment. This is a valuable source of revenue. Clients may be motivated by convenience, safety, personal security, investment in the future, citizenship renunciation, avoiding the Pandemic and the closing of borders. Mobility has been stimulated by distance working. There has been a decline in travel freedom. Australia is currently the most popular destination, followed by the US, Canada and Portugal. Climate change also influences migration. Japan is the leading destination for clients seeking ability to travel. Citizenship by investment is offered by Austria, Malta, St Kitts, Grenada, Montenegro. Popular residence destinations include UK, Canada, Portugal. Beneficial passports are issued by several countries.
Since 1977, the EU Commission has been introducing machinery for sharing information, most recently in DAC6 of 2018, with 77 pages of text. DAC7 of 22nd March of this year relates to rent of immovable property, payments for personal services, proceeds of sale of goods and rental of transport involving internet activity. The Directive introduces reporting obligations for Platform Operators and Sellers each year and provides for the information received to be shared with other EU countries. Member States are required to take steps to ensure compliance. Foreseeably relevant information – including royalties – may be required from other Member States. Provision is made for joint audits. DAC8 is a proposal to introduce exchange of information relating to crypto assets. There is presently a period of consultation, ending on 2nd June 2021. Nothing is yet known about a DAC9.