Since the work is then sold to the gallery, he/she must add VAT to the net amount of 935 euros, in this case 7%, equaling 65.45 euros. The artist receives his share of 935 euros for the painting.
#Art of deduction meaning professional#
not amateurs practicing the trade as a hobby) thus find themselves in a dual role, just like all other business owners: For their sales, they must calculate the VAT, collect it, and pay it to the tax office for their professional purchases, however, artists initially pay the VAT to the seller, but are later reimbursed by the tax office. If the customer had bought the photograph for professional reasons, for example for his/her shop or law firm, the purchase would have qualified as a business transaction and the buyer would have been reimbursed for the VAT paid.Ĭonversely, for the selling artist (provided that he/she is subject to VAT) this would mean that the VAT must be added to the sales price on his/her invoice as a seller, which the artist must then collect from the customer (the gallery owner), and pay to the tax office. Since the customer was a private individual, he/she pays 2,000 euros. At the end of the day, the gallery owner's income from the sale is 935 euros (liable to income tax). He/She must then pay a share to the artists – let us say they had agreed on half of the net price, i.e. The gallery owner must pay the 130 euros to the tax office, thus leaving him/her with a (net) revenue of 1,870 euros. This amount includes a VAT of approximately 130 euros (at the current reduced VAT rate of 7% in Germany). A VAT-registered business owner will later be reimbursed by the tax office.Ī German gallery owner sells a painting to a private customer for 2,000 euros. Anyone – whether a private individual or business – must initially pay VAT.VAT is intended to tax only private consumption, not consumption in a professional or business context.VAT is thus based on two main principles: If he/she purchases the folder for professional reasons, however, the tax office reimburses the VAT (which, as we have learned, is listed on the receipt). If the artist uses the folder for private purposes, he/she winds up paying the VAT for the item. When making the purchase, the artist initially pays the VAT and the seller forwards it to the tax authorities. Accordingly, in addition to the total, the receipt also shows the underlying net price and the corresponding VAT. Therefore, the state collects the tax not from the artist but the seller. It would be too complicated, however, to collect the tax from private consumers. The government does not intend to apply VAT to goods and services purchased in a professional context. If, for example, an artist liable to VAT buys a folder at a store, he/she only needs to pay the tax if he/she purchases said folder as a private individual. VAT could also be called end consumer tax (or: private consumption tax), because the government only wishes to charge private end consumers, i.e.
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