Global investors buy art tax-free in New York
New York — New York collects sales tax on even the smallest items, but it probably won’t collect a cent on a nearly half-billion dollar painting by Leonardo da Vinci.
The Italian Renaissance artist’s “Salvator Mundi” sold for $450 million (380 million euros) during a record-breaking auction at Christie’s last month to a buyer reported to be a Saudi prince.
But unless he decides to hang the work in a Manhattan pied-a-terre, or ships it using a certain type of carrier, he’ll likely be spared the roughly $39 million in sales taxes a regular New Yorker would have to pay for buying a work of art at that price at a local poster shop.
That’s because the state’s laws are structured so that out-of-town buyers generally don’t get hit with big tax bills. If they did, New York’s status as a global center for art sales might be jeopardized, an expert said.
Christie’s declined to identify the buyer of the 500-year-old painting, but media reports point to the Saudi royal family. The New York Times reported Tuesday that documents it reviewed identify the painting’s anonymous buyer as a little-known Saudi prince, Bader bin Abdullah bin Mohammed bin Farhan al-Saud. The Wall Street Journal reported Thursday that Bader was actually acting as a proxy for Saudi Arabia’s crown prince, Mohammed bin Salman.
Whoever the original purchaser was, the painting now appears headed to the newly opened branch of the Louvre museum in Abu Dhabi, capital of the United Arab Emirates. The museum tweeted Friday that the painting had been acquired for the museum by the government’s tourism and culture department.
The identity of the owner and ultimate destination of the artwork plays a big role in whether the sale is taxed.
If the painting of Christ raising a hand in blessing had been bought by someone who planned to keep it in New York, the buyer would be on the hook to pay an 8.875 percent state and local sales tax, which on a $450 million purchase would amount to around $39 million (30 million euros), said Jason Kleinman, a lawyer who advises art collectors on the tax consequences of their purchases. That probably won’t happen if the painting is shipped to the Middle East.
“We’re not supposed to tax the Saudi guy if he takes the painting outside the U.S.,” Kleinman said. “The caveat is that New York has very particular rules about how a painting needs to be shipped out of the city. If those rules are not abided by, there will be some inadvertent sales tax.”
The painting’s buyer could be forced to pay the tax if he hired a specialized fine-art shipper to deliver the painting to him in Saudi Arabia or Abu Dhabi. New York state authorities say purchases by out-of-state buyers who use specialized art shippers as opposed to common freight carriers like UPS or FedEx are subject to sales tax.
Christie’s advises buyers on its website that it must collect tax on items collected by certain carriers.
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