The auction price system…

Auctions are a proven means of selling and buying works of art. The market seems to be dominated by large, mostly bank-backed international auction houses. 

The hammer blow that confirms the bid price appears to be a transparent trading procedure for all parties, as it confirms the highest bid and automatically creates a purchase contract between the auction house and the highest bidder. However, the highest bid corresponds neither to the buyer's actual purchase price nor to the proceeds that the consignor receives from the auction house for the work he has just sold. Rather, this hammer price is only the basis for calculating further auction costs.

In the following, you will therefore receive an overview of the main costs that arise additionally when buying and selling works of art at auctions. We present the individual costs associated with the auction.. The basis is our analysis of the auction conditions of various national and global auction houses. In addition to the premium, the most important cost drivers include sales tax, transport and insurance costs and, if applicable, the resale rights fee.

1. Direct auction sales costs

The average additional costs on top of the hammer price are usually 25%. However, you still have to add the delivery fee, which is usually 10% of the hammer price to the auction house, which is deducted when the hammer price is paid to the consignor. These costs add up to at least 35%, which corresponds to about the maximum dealer's margin.

But these approximately 35% are only the visible cost areas. 

2. Sales tax

In Europe, auction sales of artwork are subject to VAT, but the rate and structure vary significantly between countries. Many EU countries offer reduced VAT rates specifically for art, while others impose standard rates or provide exceptions under certain conditions:

France applies a reduced VAT rate of 5.5% on artwork bought directly from artists and a 10% VAT rate for art sold through galleries and auction houses ArtSecureArtnet News.

Germany charges a standard VAT rate of 19% on art sales, although works bought directly from artists were previously taxed at a lower rate, now mostly phased out. Art dealers have criticized the high rates due to additional costs for social security fees and resale rights Artnet News.

Italy and Spain apply a higher VAT rate of 21% and 10%, respectively, on art sold through auctions and galleries, with Italy's rate among the highest in Europe Artnet News.

Outside of the EU, Switzerland imposes an 8% VAT rate, which is lower than most EU countries, providing an advantage for international buyers.

Globally, VAT rates on art can differ widely; for instance, in Japan and China, tax policies vary, but VAT is often applied to auction sales. In the United States, most states do not impose VAT on art, but sales tax is generally applied at varying rates depending on the state.

Differences in the delivery fees arise when art is delivered privately or commercially: If the art object to be sold is delivered by a businessperson who is entitled to deduct input tax, it is inevitably subject to standard taxation. As a rule, these works are specially marked in the auction catalogue. The sum of the hammer price and the premium is used as the basis for determining the sales tax under standard taxation. The amount of sales tax for unique art objects differs from country to country and is, for example, 7.7% in Switzerland, 19% in Germany, and in Greece or Austria a reduced tax rate of 13% applies to art objects instead of the usual 24% or 20%.

However, if the art is privately owned, differential taxation can usually be applied. This relates exclusively to the difference between the purchase price and the sales price.

3, Resale rights levy (royalties)

For art objects whose author is still alive or died less than 70 years ago, a resale rights levy may be due in the event of resale.
In many European countries, including all EU Member States, the resale right (droit de suite) allows artists or their heirs to receive royalties on the resale of their artworks. Under the EU Resale Right Directive, this royalty applies to works of fine art, like paintings, sculptures, and photography, and ranges from 4% for sales up to €50,000 to a cap of €12,500 for works sold at or above €2 million . These rates are applicable in countries such as Germany, France, and Italy, although each country may set a minimum sale price threshold for the resale right to apply. For instance, this threshold is €400 in Germany and €750 in France.
Outside Europe, countries with similar rights include the United Kingdom, Australia, and certain other countries with reciprocal agreements under the Berne Convention. In Australia, for instance, eligible artists receive a 5% royalty on commercial resales of their work priced over AUD 1,000. However, major art markets like the United States and Switzerland do not recognize the resale right, leading to debates on fairness and market competition between these jurisdictions.

4. Transport costs

Most auction houses do not automatically include transport costs for artwork purchased at auction. Buyers often have to pay for shipping themselves, although auction houses often recommend partner companies for this service. The costs for transport vary greatly depending on the type, value, dimensions and destination of the artwork. In individual cases, it makes perfect sense to make your own effort to transport the artwork or even travel there yourself with it.

However, it is also important to consider the expense of customs regulations.

For example, prices for national shipments can be between 300 and 1000 euros, while international shipments can be considerably more expensive. For large or particularly fragile artworks, additional costs for special packaging and insurance may apply. It is advisable to obtain quotes from various companies, taking into account equally high security standards.

5. Insurance costs

Last but not least, insurance fees for works of art are one of the hidden but significant costs associated with submitting works of art. These fees usually arise when a work is only sent to a head office for general assessment. Even if there are usually collective transports, transport and insurance are still invoiced individually by auction houses such as Sotheby's or Christie's. It is therefore worth clarifying the question of costs immediately before submission. In general, the auction house as an agent will charge insurance fees of around 1-2% of the work of art. Regardless of the fact that obtaining your own specific insurance is usually much cheaper, you should also pay attention to the duration until the final conclusion of the sales process - i.e. until payment or until return in the event of a non-sale. For a work of art worth EUR 10,000:

the insurance costs seem rather low: EUR 100 to 200.

For valuable objects worth millions, e.g. a Picasso painting with an insurance value of EUR 10 million, EUR 100,000 - 200,000 would be due. In addition, there are costs for special requirements of the insurance company. Insured transport with private accompaniment can not only be safer due to anonymity, but also considerably cheaper.

6. Overhead costs

Other costs may include additional fees that can change over time: .

e.g. the so-called overhead premium, an additional commission of 0.5 - 1% of the hammer price, which is to be paid by the buyer and is intended to cover the company's overhead costs.

Finally

But these approximately 35% are only the visible cost areas. Overall, the difference between the amount the seller actually receives and the amount the buyer actually pays, taking into account the individual calculations, is about 40 to 45%. More and more art collectors are aware of this when buying or selling.

 

RECOMMENDED ALTERNATIVES

Given these costs, selling through an agent is certainly an alternative worth considering.

• The work of art usually remains in the safe place of a security house in the duty-free area.

• This means that expensive transport and insurance measures are usually completely unnecessary.

• The actual sale/purchase takes place, for example, with the support of ArtExpert, via a prime lawyer firm with the highest possible security ranking.

• The costs for this are based on the hourly work and the statutory fee schedule.

• Costs for the brokerage effort including the necessary consulting services are usually in the range of usually 10 - 15% of the purchase/sale price.

• Upon request, the seller/buyer will also receive a comprehensive art market report from ArtExpert | NETWORK based on all available data sets and information from an international network of experts.

Further advantages:

Very quick processing of usually one to three months compared to the lead and follow-up times of an auction house of an average of 6 - 12 months.

For exclusive orders: No risk of public non-acceptance; i.e. no so-called burning of the work on the market.

 

OTHER SERVICES:

Auction advice and representation

Our service can also prove extremely fruitful when buying/selling via auction and can help to save costs and solve any problems. In individual cases, we represent consignors and/or first-time bidders in a fiduciary capacity and thus completely anonymously.

Private Sales - Cooperation

Last but not least, ArtExpert / network can also assist as an authorized representative in initiating and carrying out a private sale via auction houses. The ArtExpert representative may guarantee a higher result, because in individual cases it saves considerable costs.

All information is subject to change and is therefore provided without guarantee.