Briefing document & Podcast: ECJ C-433/24 (Galerie Karsten Greve) – EU VAT Margin Scheme for Works of Art

Briefing: EU VAT Margin Scheme for Works of Art – Case C-433/24 (Galerie Karsten Greve v Ministère de l’Économie)

Date: 1 August 2025 Source: Judgment of the Court (Fourth Chamber), Case C-433/24, “CURIA – Documents”; “VAT Margin Scheme for Art: Legal Persons and First Supply”; “VAT Margin Scheme: Works of Art Case Study”.

I. Executive Summary

This briefing summarises the key findings and implications of the European Court of Justice (ECJ) judgment in Case C-433/24, Galerie Karsten Greve v Ministère de l’Économie, concerning the interpretation of Article 316(1)(b) of Council Directive 2006/112/EC (the VAT Directive). The core issue revolved around whether the VAT margin scheme for works of art can apply when works are supplied to a taxable dealer by their creator or successors in title acting through a legal person, rather than directly as a natural person.

The Court ruled that the margin scheme can apply in such circumstances, provided two crucial conditions are met:

Attributability: The supply by the legal person must be attributable to the creator or their successors in title (presumed if the legal person was established for marketing the creator’s works).
First Introduction to EU Market: The supply of the works of art to the taxable dealer must constitute the first introduction of those works onto the EU market, meaning there is no evidence of a prior VAT-subjected supply within the EU.

This judgment aims to uphold the principles of tax neutrality, prevent distortions of competition, and promote the introduction of new works of art onto the EU market, recognising the common practice of artists using legal entities for commercial activities. It explicitly rejects overly burdensome verification criteria.

II. Background to the Dispute

The case originated from a dispute between Galerie Karsten Greve (GKG), a French art gallery, and the French tax authorities (Ministère de l’Économie, des Finances et de la Souveraineté industrielle et numérique). GKG had applied the VAT margin scheme to the resale of paintings by artist Gideon Rubin, which it had acquired from Studio Rubin Gideon (SRG), a UK-incorporated company in which Mr. Rubin was a partner. The French authorities challenged this, arguing that SRG, as a legal person, could not be considered the “creator” of the paintings, thus precluding the application of the margin scheme.

The Conseil d’État (Council of State, France), the referring court, sought clarity from the ECJ on whether Article 316(1)(b) of the VAT Directive, which allows taxable dealers to opt for the margin scheme for works of art “supplied… by their creators or their successors in title,” could apply when the supply is made by a legal person.

III. Key Legal Questions and Court’s Reformulation

Initially, the Conseil d’État asked:

Whether Article 316(1)(b) “preclud[es] a legal person such as a company from being regarded, within the meaning and for the purposes of those provisions, as the ‘creator’ of a painting.”
If not, “which criteria must be taken into account to allow a legal person… to be regarded… as the ‘creator’ of a painting.”

The ECJ reformulated these questions to provide a more useful answer to the national court. Instead of focusing on whether a legal person is the creator, the Court chose to analyse “whether the supply of works of art by their creator or his or her successors in title acting through a legal person subject to VAT falls within the scope of that provision.” This acknowledged the commercial reality of artists using legal structures to market their works.

IV. Main Themes and Most Important Ideas/Facts

Purpose of the VAT Margin Scheme:
- The scheme’s “primary purpose… is to prevent double taxation and distortions of competition among taxable persons dealing in second-hand goods, works of art, collectors’ items, and antiques.” (“VAT Margin Scheme for Art: Legal Persons and First Supply”)
- It achieves this by applying VAT only to the “taxable dealer’s profit margin (selling price minus purchase price) rather than the full selling price, addressing difficulties in assessing previously charged VAT on such unique goods.” (Ibid.)
- “It is appropriate to adopt a Community taxation system… with a view to preventing double taxation and the distortion of competition as between taxable persons.” (VAT Directive, Recital 51)
Overarching Objectives of the VAT Directive:
- Tax Neutrality: The common VAT system should “result in neutrality in competition, such that within the territory of each Member State similar goods and services bear the same tax burden, whatever the length of the production and distribution chain.” (VAT Directive, Recital 7). This principle “precludes, in particular, economic operators carrying out the same transactions from being treated differently in relation to the collection of VAT.” (Judgment, para 35).
- Preventing Distortion of Competition & Hindering Free Movement: The Directive “aims to establish a VAT system that does not distort conditions of competition or hinder the free movement of goods and services.” (“VAT Margin Scheme for Art: Legal Persons and First Supply”; Judgment, para 35).
Rationale for Including Supplies by Legal Persons:
- The Court found that the wording of Article 316(1)(b) “does not expressly preclude a creator or his or her successors in title from carrying out such a supply through a legal person or such a supply from being carried out by a legal person.” (Judgment, para 33).
- Maintaining Fiscal Neutrality: “Excluding such supplies would undermine fiscal neutrality and distort competition because creators often use legal entities to market their works.” (“VAT Margin Scheme for Art: Legal Persons and First Supply”). If creators act through a legal person, they “carry out identical transactions from the point of view of levying VAT” as if they were acting as natural persons. (Judgment, para 41).
- Promoting New Works of Art: A “specific objective of the EU legislature was to promote the introduction onto the EU market of new works of art, whether imported into the European Union or newly created within its territory, by providing for favourable tax treatment.” (Judgment, para 37). Excluding legal persons would undermine this. (Judgment, para 43).
- Avoiding Administrative Burdens: The margin scheme also aims to limit “administrative burdens of proof and verification” for both taxable dealers and tax authorities regarding whether the purchase price includes input VAT. (Judgment, para 38).
Two Conditions for Application to Legal Persons: The Court ruled that the margin scheme can apply to supplies made through a legal person, provided two conditions are met:
- Attributability to Creator/Successors in Title: “the supply by the legal person is attributable to the creator or his or her successors in title, which is the case where the creator or successors in title have established that legal person for the purpose of marketing the works of art created by the creator”. (Judgment, para 50). This is a presumption, subject to verification by the national court.
- First Introduction onto the EU Market: “the supply of those works of art to the taxable dealer constitutes the first introduction of those works of art onto the EU market.” (Judgment, para 50). This means “there must be no evidence of a previous supply of that work of art, subject to VAT, constituting such a first introduction.” (Judgment, para 46). This condition “ensures that the application of the margin scheme aligns with its specific objective of promoting the entry of new works of art into the EU commercial stream.” (“VAT Margin Scheme for Art: Legal Persons and First Supply”).
Rejection of Alternative Criteria: The Court explicitly rejected criteria suggested by the referring court, such as:
- The legal person being subject to a special legal regime.
- The artist holding all or part of the legal person’s share capital.
- The artist exercising management functions within the legal person.
- Transferring a substantial part of sale proceeds to the artist.
These criteria were rejected because their “application would entail a verification of arrangements, which may be very complex, relating to property or voting rights… and to the distribution of profits… for example in the case where several artists act in the framework of such a legal person to market their works of art and, in particular, where such works of art are created collaboratively.” (Judgment, para 49). This would “undermine the objective of Article 316(1)(b)… which consists in avoiding excessive burdens in terms of proof and verification.” (Ibid.).

V. Conclusion

The ECJ’s judgment clarifies that the VAT margin scheme can extend to works of art supplied to taxable dealers by creators or their successors in title who operate through legal entities. This progressive interpretation aligns with the overarching goals of tax neutrality and preventing market distortions within the EU, while acknowledging the practicalities of modern commercial practices in the art world. By establishing clear yet flexible conditions of “attributability” and “first introduction onto the EU market,” the Court provides a pragmatic framework that supports the promotion of new art without imposing undue administrative burdens.

Source Curia