Editor’s Note
The art market demonstrated remarkable resilience and growth in 2021, with major auction houses like Sotheby’s and Christie’s posting historic sales figures. This surge, reflected across the industry, underscores a robust and evolving global marketplace for art and collectibles.
2021 was a record-breaking year for art sales through auction houses. Sotheby’s sold $7.3 billion (approximately €6.45 billion), the highest figure in its 277-year history. Meanwhile, Christie’s generated $7.1 billion (approximately €6.27 billion), achieving its best results in the last five years and increasing private sales by 12% compared to 2020 and by 108% compared to 2019. Other auction houses like Phillips or Bonhams also had spectacular results.
The pandemic strengthened the position of the top 1% of the population, who saw the art market as a good outlet for their wealth. In the words of Dr. Clare McAndrew:
Furthermore, one of the attractions of auction sales is the possibility of maintaining confidentiality regarding the identity of the parties.
The most common scenario for an auction sale is when the interested seller is a private individual, who signs a sales commission agreement with the auction house. The auction house is commissioned to sell on their behalf and, if successful, earns a commission. Consequently, ownership of the item is transferred directly from the private seller to the highest bidding buyer, and the price of the item, initially received by the auction house, is transferred to the seller. It is very common for the buyer to be unaware of the seller’s identity.
However, things become complicated when the seller is not a private individual, but a Spanish company or a professional with a tax domicile in Spain who is subject to VAT and for whom the item is an asset related to their business activity. In these cases, the sale of the artwork is a commercial transaction that may be subject to VAT and, as such, is affected by certain formal obligations, including the obligation to issue an invoice and, therefore, to know the data identifying the seller. But this conflicts with one of the pillars of auction houses: the confidentiality of the parties.
It is true that, in some cases, the law allows for the issuance of simplified invoices, where it is not necessary to identify the acquirer. In the case of art sales, this would only be possible for transactions whose amount is less than €3,000 (VAT included), and provided that the acquirer is not acting as a business or professional, but as a private individual. In cases where the acquirer is a business or professional acting as such, they can always demand a full invoice from the seller. Consequently, to comply with the law, the auction house will be obliged to provide the seller with the corresponding data of the buyer, although it will depend on whether the auction house is acting in the name and on behalf of another or in its own name.
It is important to note that the invoice normally issued by the auction room in the buyer’s name for its mediation is not sufficient when the buyer is a business or professional acting as such, because technically it only accounts for and justifies the commission fiscally, but not the acquisition of the item. This must be justified by another invoice or specific document.
It is also essential to analyze auction sales operations by companies and professionals beforehand from a tax perspective to avoid future problems with the Spanish Tax Agency, which could result in the profit obtained from the sale being reduced by not having considered the VAT on the transaction.