Comments on ECJ C-433/24: Profit margin scheme also applicable after the purchase of an art object from the artist’s company

Comments on the decision

CJEU Ruling on Margin Scheme for Art Resellers: The Court of Justice of the European Union (CJEU) ruled that art resellers can apply the margin scheme to works of art supplied to them by their creators if the supply is made through a legal entity.
Case Involving Galerie Karsten Greve: Galerie Karsten Greve (GKG) purchased paintings from Studio Rubin Gideon, a company co-owned by artist Gideon Rubin, and applied the margin scheme when selling these paintings to customers. The French tax authorities disputed this application, leading to additional VAT assessments against GKG.
Conditions for Margin Scheme Application: The CJEU specified that for the margin scheme to be applicable, the legal entity must be able to attribute the delivery to the creator, and the supply of the artwork to the reseller must be the first introduction of those items to the EU market.

VAT margin scheme may be applied not only to works of art supplied by creators but also by their companies (legal persons)

VAT Margin Scheme Applicability: The VAT directive allows the margin scheme for supplies of works of art by creators or artists, extending this eligibility to situations where the creator supplies artworks through a legal entity, such as a company.
Case Background: In a case involving a French art gallery that acquired paintings from a UK company (partly owned by the artist), the French tax authorities denied the application of the VAT margin scheme, arguing that the paintings were not acquired directly from the creator, as the company is a legal person.
Advocate General’s Conclusion: The Advocate General affirmed that the gallery could apply the VAT margin scheme to the resale of the paintings, emphasizing that the supply of the artwork can be made by an artist through a legal entity, provided the artist retains sufficient decision-making power and benefits from the sale, aligning with the scheme’s objectives of promoting art market accessibility.

Advocate General Szpunar has determined that resellers can apply the margin scheme to works of art acquired from their creators through a legal entity, provided the creator holds sufficient influence within that entity.
In the case involving Galerie Karsten Greve (GKG) and artist Gideon Rubin, GKG faced additional VAT assessments for allegedly misapplying the margin scheme when selling paintings acquired from Rubin’s company.
The conclusion emphasizes that for the margin scheme to be applicable, the creator must have decisive voting power in the legal entity regarding the sale, and a significant portion of the sale proceeds must benefit the creator’s assets.