Tax treaties

A treaty first fixes a person's tax residence, according to ranked criteria: home, centre of vital interests, habitual abode. It then indicates which State may tax each type of income: capital gains on movable property are, in general, taxed in the seller's State of residence.

To avoid double taxation, it provides either for the exemption of the gain in one of the States, or for a tax credit up to the amount of tax paid in the other. The choice of method depends on the treaty.

A collector who moves or who holds works in several States must identify their tax residence and the State that may tax their gains. A sale made at a foreign auction house is not, in principle, taxable in the house's State: everything depends on the treaty.

The exchange of information allows administrations to make sure that sales are declared. A collector who has not declared a sale abroad is exposed to a reassessment, sometimes several years later.

Inheritance and gift duties are another area where treaties play an important role. A work held by a resident of one State but kept in another may be taxed twice on their death, if no treaty divides the right to tax.

Few treaties address this subject. OIMAP recommends that collectors plan their estate with a specialist adviser, taking into account where their works are kept and their residence status.