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Art Leasing: Where Business and Culture Converge
Beyond its traditional role in galleries, museums, and private collections, art has embarked on a captivating journey into the corporate landscape. Over the past decades, companies worldwide have recognized the value of art collections within their workspaces. These collections not only elevate the visual appeal of their environments but also enhance their prestige and corporate identity. Art collection by enterprises is no longer a niche endeavor; it's a transformative strategy embraced by companies of all sizes. While some companies have the means for direct acquisitions, there are other avenues that lighten the financial load while offering additional fiscal advantages, and one such avenue is art leasing.
Art leasing, often referred to as art rental or art lending, presents a dynamic approach to art acquisition. It grants companies the opportunity to display artworks in their offices by renting pieces with an eventual option for acquisition, known as "location avec option d'achat" (LOA) in France. This financial arrangement brings numerous advantages: flexible payment terms that preserve cash flow, an enhanced workspace environment, support for the arts, and substantial tax deductions. Indeed, this innovative practice acts as a bridge between the art world and the corporate realm, benefiting both sides.
Art leasing, often referred to as art rental or art lending, presents a dynamic approach to art acquisition. It grants companies the opportunity to display artworks in their offices by renting pieces with an eventual option for acquisition, known as "location avec option d'achat" (LOA) in France. This financial arrangement brings numerous advantages: flexible payment terms that preserve cash flow, an enhanced workspace environment, support for the arts, and substantial tax deductions. Indeed, this innovative practice acts as a bridge between the art world and the corporate realm, benefiting both sides.
Allan McCollum at Cuatrecasas, Madrid (c) Óscar Monzón
How Does It Operate?
The art leasing process is straightforward. Leasing companies acquire artworks from galleries or dealers and then offer them for rent to businesses, or lessees, through a lease agreement with an option for acquisition. Drawing inspiration from the concept of leasing cars, companies can deduct the entire rental payments, typically spread over 12 to 46 months, as operational expenses for interior design and decoration. To qualify for this deduction, lessees must display the artwork in publicly accessible areas within their company premises. At the end of the leasing period, companies have the enticing option to acquire the artwork at a remaining residual price, usually ranging from 4% to 7% of the artwork's initial value.
This opportunity is open to all companies subject to corporate tax (SA, EURL, SARL, or SAS) or income tax in the category of industrial and commercial profits (BIC). While there are no limits or restrictions on the type of art that can be acquired through leasing, it is recommended that the annual leasing amount does not exceed 5% of the company's annual turnover.
Art leasing has gained significant traction in France, with numerous companies specializing in this practice, such as Bail Art, We Art Partners, Art Avantage, and Sacerd'Art, to name a few. However, it's not the only option in France that offers tax benefits linked to the arts.
The art leasing process is straightforward. Leasing companies acquire artworks from galleries or dealers and then offer them for rent to businesses, or lessees, through a lease agreement with an option for acquisition. Drawing inspiration from the concept of leasing cars, companies can deduct the entire rental payments, typically spread over 12 to 46 months, as operational expenses for interior design and decoration. To qualify for this deduction, lessees must display the artwork in publicly accessible areas within their company premises. At the end of the leasing period, companies have the enticing option to acquire the artwork at a remaining residual price, usually ranging from 4% to 7% of the artwork's initial value.
This opportunity is open to all companies subject to corporate tax (SA, EURL, SARL, or SAS) or income tax in the category of industrial and commercial profits (BIC). While there are no limits or restrictions on the type of art that can be acquired through leasing, it is recommended that the annual leasing amount does not exceed 5% of the company's annual turnover.
Art leasing has gained significant traction in France, with numerous companies specializing in this practice, such as Bail Art, We Art Partners, Art Avantage, and Sacerd'Art, to name a few. However, it's not the only option in France that offers tax benefits linked to the arts.
Idris Khan at Deutsche Bank Center, New York (c) Liz Ligon
Enterprises also have the opportunity to acquire artworks by contemporary living artists while benefiting from the tax deduction. However, specific conditions apply: tax deductions must not exceed 0.05% of the company's total revenue and are applicable solely to artworks created by living artists. Eligible works include paintings, drawings, sculptures (limited edition of 8), photographs (edition of 30), and unique ceramics.
In this approach, tax deductions are evenly spread over five years, beginning in the year of acquisition and continuing for the subsequent four years. This means that each year, the deduction amounts to 1/5th (20%) of the artwork's cost price. Even if the acquisition occurs in the middle of the year, the deduction remains consistent and is not prorated temporally. However, there are limits. The deductible amounts can reach a maximum of €20,000 or 0.5% of the turnover, excluding corporate tax.
In this approach, tax deductions are evenly spread over five years, beginning in the year of acquisition and continuing for the subsequent four years. This means that each year, the deduction amounts to 1/5th (20%) of the artwork's cost price. Even if the acquisition occurs in the middle of the year, the deduction remains consistent and is not prorated temporally. However, there are limits. The deductible amounts can reach a maximum of €20,000 or 0.5% of the turnover, excluding corporate tax.
Art leasing is a compelling solution, seamlessly blending financial advantages with cultural enrichment, making it an appealing choice for forward-thinking enterprises.
Supporting contemporary art through acquisitions also enriches the workspace environment and contributes to cultural development. While in France, few companies fully embrace the concept of artistic patronage due to the complexity and stringent conditions associated with tax deductions, art leasing offers a more flexible approach that extends beyond living contemporary artists and accommodates varying price ranges. It's a compelling solution, seamlessly blending financial advantages with cultural enrichment, making it an appealing choice for forward-thinking enterprises. In the ever-evolving corporate landscape, the synergy between art and business continues to thrive, promising a brighter future for both.
15 May 2023 | Art Market
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