A few words about the taxation of works of art

As the market value of many works of art reaches astronomical sums and art remains a good way to invest funds, the question of its taxation becomes increasingly important.

About art – the main features

From the point of view of the taxation of the disposal of art works, it is crucial to recognize their two characteristics. Firstly, works of art are, from a legal point of view, movable property, which is quite relevant not only to the form of the sale contract, but also to the manner of taxation. Secondly, the disposal of an artwork will be a different taxable event depending on whether the painting is sold by a collector, artist or entrepreneur.

Personal income tax

The rules for the taxation of the sale of movable property by individuals in Poland are set out in the Personal Income Tax (PIT) Act. Pursuant to Art. 10 paragraph 1 point 8 of the Personal Income Tax Act, the source of revenue is, inter alia, the disposal against payment if it does not take place in the performance of business activity and has been effected, in the case of disposal against payment of real property and property rights referred to in the preceding items a-c – before the lapse of five years, counting from the end of the calendar year in which acquisition or construction took place, and of other items – before the lapse of six months, counting from the end of the month in which acquisition took place; in the case of an exchange, these periods apply to each of the persons effecting the exchange.

This means that income derived from the sale of works of art is free of income tax if at least six months have elapsed since the end of the month in which the acquisition took place. Thus, if an individual has acquired, for example, a painting and holds it continuously for more than 6 months and then sells it, he or she does not have to pay income tax. This is because such a sale does not fall within the scope of the Personal Income Tax Act.

An exception to the above situation is movable property used in business activities or that has been acquired and written off as fixed assets in business activities. The sale of such items is subject to personal income tax and therefore triggers the obligation to pay tax.

Artists who have created a work of art, which is the subject of the sale, will also not benefit from the exemption, as the income obtained should then be classified as income from the sale of a property right.

Corporate income tax

In the case of legal persons and unincorporated organisational entity to Corporate Income Tax (CIT), the rules of taxation of income from the sale of movables differ from those applicable to natural persons.

The sale of movables, even after the lapse of six months from their acquisition, may be subject to taxation on the basis of the Corporate Income Tax Act of 15 February 1992 (i.e. Journal of Laws of 2023, item 2805, as amended). Indeed, the aforementioned Act does not provide for an exemption in income tax on profits from the sale of movable property depending on the lapse of time from the acquisition of the object.

Tax on civil law transactions

Pursuant to the Act on Tax on Civil Law Transactions of 9 September 2000 (i.e. Journal of Laws of 2024, item 295), the scope of taxation covers an agreement on the sale and exchange of goods and property rights (Article 1 paragraph 1 point 1).

Thus, if an individual decides to purchase a painting from an individual, he will be obliged to pay tax on civil law transactions. The tax rate pursuant to Article 7 paragraph 1 point 1 letter a of the aforementioned Act will be 2%. It should be emphasised, however, that the tax obligation will nevertheless lie with the buyer (pursuant to Article 4 point 1 of the Act).