Isabel Díaz Ayuso has announced a new tax cut. The regional government will now offer a 100% rebate on the Property Transfer Tax (ITP/ITPO) on the sale of art when the transaction is carried out through specialized galleries and dealers, which in practice means eliminating the current 4% regional tax on these transactions.
Until now, the purchase of a second-hand work of art (i.e., one that is not purchased directly from the artist, but through a professional intermediary) was taxed in Madrid at 4% in the regional section of the ITP, in addition to VAT or corresponding state taxes, as applicable.
According to the regional government’s calculations, the elimination of the regional tax will mean an aggregate saving of around €700,000 per year for taxpayers linked to the art market, who, given the current price of art, are understood to be a wealthy minority.
Why the tax on art purchases is being eliminated
Ayuso announced this move during a visit to the Modern Art Fair (SAM), which is held at the Círculo de Bellas Artes and is one of the major satellite events of ARCOmadrid. Speaking to gallery owners and collectors, the president argued that “Spain cannot penalize its galleries and artists compared to their European competitors” and that the aim is to create “a more favorable tax environment” for a sector that competes with countries where the tax treatment of art is less burdensome.
Although this rebate refers to a relatively small regional tax, the gesture is part of a larger struggle: that of cultural VAT. For years, the art market has been calling on the central government to lower the 21% VAT on the sale of works in Spain, which is much higher than in Italy (5%), France (5.5%), or Germany (7%). The Community of Madrid has no jurisdiction over this VAT, but it does have jurisdiction over the regional portion of the ITP, and it is using this leverage to try to move closer to the “European model” and make its own mark vis-à-vis the Ministry of Culture.
Madrid wants to be a hub for the art market
Image courtesy of Galería Elba Benítez
The regional government also justifies the measure in terms of international positioning. Madrid accounts for around 30% of Spanish galleries, and Spain ranks fifth in the European art market, behind the United Kingdom, France, Germany, and Italy, with around 1% of the global volume. The elimination of the 4% regional tax seeks to reinforce this position and attract sales transactions that could otherwise go to other locations with more favorable tax regimes, especially in a context in which ARCO and other fairs and exhibitions have turned the city into an annual showcase for collectors from around the world.
The reduction is in addition to other lines of support for the sector: by 2026, the Community plans to allocate €9.4 million to the Museums and Exhibitions program and has maintained a budget of around €500,000 per year since 2020 for the purchase of works of art, with 332 pieces acquired during this period and the reinforcement of infrastructure such as the CA2M warehouse in Móstoles. There is also a non-binding proposal on the table to ask Congress for a reduced VAT rate on the sale of art, with which the regional executive wants to pressure the central government to accompany the regional reduction with changes in state taxation.
Who benefits and what are the limits?
The announcement refers to “sales made through specialized galleries and dealers,” which in principle excludes transactions between individuals that do not go through these intermediaries and other forms of direct sales (donations, inheritances, etc.), which are taxed under other categories.
According to data from Cinco Días , Madrid’s wealthy already concentrated 70% of their luxury goods in art for tax reasons in 2023. Art has therefore been a tax haven in the region for years, a curious exception in the national landscape. In almost all autonomous communities, according to the economics section of El País, the proportion of jewelry and vehicles far exceeds that of works of art.