Tax exemption for professionals

Tax deductions for acquisitions of original works by living artists

(Article 238 bis AB of the General Tax Code)

Last December, the association worked on a draft amendment to Article 238 bis AB of the General Tax Code and the doubling of the incentive system currently linking patronage and the purchase of works by living artists.
Parliamentarians voted on an amendment to increase the alternative expenditure deduction ceiling from €10,000 to €20,000 before its possible abolition on 31 December 2022.

This practical sheet can help you understand the system and be able to promote its application to your contacts and customers .

SMEs/VSEs are established locally and regionally. Our goal is to assist in the acquisition of works of art by living artists and thus encourage and support artists through their activity and sales. We aim to help develop the local market and encourage purchasing at affordable prices, within a local area.

For whom?

– Companies subject, automatically or optionally, to corporation tax (IS).

– Sole proprietorships subject to income tax in the BIC category, excluding BNC (Example: a doctor cannot but a medical practice could).

– More generally, it is necessary to be able to enter the price of the work in a special reserve account on the liabilities side of the company's balance sheet.

Terms

The company must exhibit the work of art and must communicate about the location of the exhibition:

– In a place accessible free of charge to the public or to employees; on the company’s premises (Example: this cannot be a personal office, a personal residence or a place reserved solely for the company’s clients);

– Or during events organized by the company or by a museum, a local authority or a public establishment to which the property has been entrusted or in a museum to which the property is placed on deposit;

– Permanently for 5 years (period corresponding to the year of acquisition and the following 4 years).

How and how much?

The acquisition of original works by living artists and patronage open up a capped tax deduction depending on the most advantageous option for the company:

– Or up to 0.5% of the turnover excluding tax

– or up to €20,000, alternative ceiling

For the purchase of a work of art, the amount of the purchase is deductible from the result of the year of acquisition and over the four following years (i.e. spread over 5 years) and this in equal fractions = division of the price of the work by 5.
These 1/5ths are therefore deductible within the limit of 0.5% of the turnover excluding tax or 20,000 euros, depending on the most advantageous option and reduced by the sponsorship actions already carried out during the year.
If the fraction of the purchase price of the work(s) purchased (1/5th) cannot be fully deducted over a year, the unused surplus cannot be carried forward and deducted to the following year; it is lost.

Here are some examples of the application of this measure:

Example 1:

A company achieves a turnover of 5 million euros for year N.
She buys one or more works for an amount of €10,000.
Here it is in her interest to choose the ceiling imposed by 0.5% of the net turnover: here 25,000 euros, higher than the alternative ceiling of 20,000 euros.
She can therefore benefit from the entire tax deduction: 10,000 euros / 5 = 2,000 euros.
She can therefore deduct 2,000 euros per year over 5 years, up to a maximum of 25,000 euros for year N.

Example 2:

A company achieves a turnover of 200,000 euros for year N.
She buys one or more works for an amount of €10,000.
Here it is in her interest to choose the alternative ceiling of 20,000 euros, higher than the ceiling of 0.5% of her net turnover: here only 1,000 euros.
She can therefore benefit from the entire tax deduction: 10,000 euros / 5 = 2,000 euros.
She can therefore deduct 2,000 euros per year over 5 years, up to a maximum of 20,000 euros for year N.

Example 3:

A company achieves a turnover of 200,000 euros for year N.
It purchases one or more works for an amount of 10,000 euros and carries out sponsorship actions for an amount of 18,000 euros.
Here it is in her interest to choose the alternative ceiling of 20,000 euros, higher than the ceiling of 0.5% of her net turnover: here only 1,000 euros.
The company can benefit from the full tax deduction: 10,000 euros / 5 = 2,000 euros + 18,000 euros = 20,000 euros.
She can therefore deduct 2,000 euros per year over 5 years but also benefit from the deduction for her sponsorship actions for a total of 20,000 euros (18,000 euros + 2,000 euros) over year N.

Example 4:

A company achieves a turnover of 200,000 euros for year N.
She buys one or more works of art for an amount of €10,000 and carries out sponsorship actions for an amount of €19,000.
Here it is in her interest to choose the alternative ceiling of 20,000 euros, higher than the ceiling of 0.5% of her net turnover: here only 1,000 euros.
To the extent that the overall deduction ceiling (20,000 euros) is reached by adding patronage and the purchase of works (10,000 euros/5 = 2,000 euros + 19,000 = 21,000 euros), patronage is deductible as a priority and here in full.
This is not the case for the amount corresponding to the purchase of the artwork(s): 10,000 euros / 5 = 2,000 euros. Only the remaining fraction below the ceiling of 20,000 euros, i.e. 1,000 euros, is. The remaining 1,000 euros are permanently lost.

Example 5:

A company achieves a turnover of 200,000 euros for year N.
It purchases one or more works for an amount of €10,000 and carries out sponsorship actions for a total of €20,000.
Here it is in her interest to choose the alternative ceiling of 20,000 euros higher than the ceiling of 0.5% of net turnover: here only 1,000 euros.
To the extent that the overall deduction ceiling has already been reached following the patronage operation (20,000 euros), the annual deduction amount corresponding to the purchase of the work of art: 10,000 euros/5 = 2,000 € is not deductible. This amount is definitively lost for year N.

For liberal professions:
It all depends on whether you are subject to corporate tax or not.
As indicated, it is necessary to be able to enter the price of the work in a special reserve account on the liabilities side of the structure's balance sheet.