Coming into effect in January 2025, the decision has been made amid pressure from art dealers and galleries in the country who claim they are struggling to compete in the international market following the need to increase their prices to cover the cost.
With its art sales VAT at 19%, Germany has been one of the most stringently regulated art markets in the world.
German dealers have argued many collectors have been put off buying in the country in favour of purchasing a comparable piece of artwork in countries such as the UK, US and France - the latter enjoys a 5.5% import VAT for art.
The Federal Association of German Galleries and Art Dealers (BVDG) spearheaded the campaign after pushing for change for 10 years. It stated the change will make Germany more competitive and make the art market in the country “fit for the future”.
“The reduced rate is an important signal, particularly in difficult times, for the art market and the cultural contribution made by galleries,” said Germany’s culture minister, Claudia Roth.
It is not the first time Germany has had a 7% rate: it did so until 2014 when a European Union directive excluded art from a list of goods and service eligible for reduced rates.
In 2022, a new directive was introduced, allowing for reduced rates on items which “pursued objects of general interest” - including art - as long as the VAT rate was 5% or more.
The VAT rate on art imported to the UK currently stands at 5% but imports plummeted by 8% to $10.6bn in 2023, leaving the market 11% off its pre-pandemic level. The obligation to pay import VAT on art from the EU along with additional paperwork has contributed to this decline, according to some in the art market.
Data from HMRC confirmed the trend, showing trade has been falling since 2019. In response, the UK government in March this year has pledged to cut red tape around art imports and simplify customs processes.
