Gibraltar: Collection Art In Gibraltar Is Now Less Taxing

I'm not entirely sure how it all happened so fast, but 2014 is half done already and here I am writing the August column. It's the time when many of us are thinking about relaxing with families and friends, either at home or further afield. As my aim in this column is to match the season, I intended to pen a relaxed piece – lazy days on the beach, piña colada in hand. I'm sure you get the picture. But then, "events, dear boy, events".

My reverie was rudely interrupted by that strangest of seasonal phenomena – the Gibraltar Budget. Not for us a statement in chilly November or a lengthy speech in March. No, we have to wait until the start of the holiday season. As I pen this piece, the financial statement has just been issued and debated in parliament. We are also approaching the point of time in the electoral cycle where politics becomes a dominant factor – as if it ever really goes away here in Gibraltar – and the horse-trading between government and opposition is to be expected. I will consider some of the Budget measures in future articles but, as we (or at least you) head off for a break, one particular item came as a pleasant surprise. Read on.

I cannot help noticing that even here in Gibraltar we are seeing increasing use of one of Westminster's favourite political tricks – the pre-announcement announcement or, as others might put it, the deliberate leak. In this way, details of a planned policy are made public a couple of weeks before the statement itself – when it is repeated. This allows politicians to get two bites at the cherry – either to whet the public appetite for a popular measure or dilute the impact of potential bad news.

On this occasion, our Chief Minister Fabian Picardo announced, during a dinner speech a couple of weeks before the annual Budget on 30 June, a proposal to scrap the import duty on art. Sure enough, it was re-announced in the Budget statement together with a whole raft of other welcome measures along the same lines. From now on, we shall be able to import a much wider range of goods free of duty. The list includes yachts under 18m in length, mobile phones, musical instruments, sunglasses and even umbrellas – not that it ever rains in Gibraltar, of course!

This was welcome news as art happens to be a personal passion for me and I have written in the past about its use as an alternative investment. There are several reasons for the growth in this recognised "alternative asset class" over recent years – near zero interest rates, low inflation, not to mention a reluctance to invest in more traditional classes such as stocks and bonds. Those with money have had to look at other "stores of wealth".

We are well used to screaming headlines from the art world, especially when it comes to fabulous sale prices at auction. Just this month, a Francis Bacon triptych sold in London for £26.7m. This staggering amount is all the more remarkable considering it was painted less than 50 years ago. However this was dwarfed by the amount paid last November at Christie's for the same artist's larger-scale work "Three Studies of Lucien Freud", which set a world record for the most expensive artwork ever sold at auction. The gavel eventually came down at US$142m – around £83.7m at current exchange rates.

If one includes "collectibles" in a broad definition of art, a sale in New York in May also saw a very rare 19th Century British Guiana postage stamp – the "One-Cent Magenta" – sell for US$9.5m (£5.6m). No a bad return from one cent! As well as setting a new world record for a stamp, Sotheby's said the lot was the most expensive by weight and size ever sold.

All mouth-watering stuff but I doubt it was these heady heights that our Chief Minister had in mind when he decided to do away with import duty on artwork. So perhaps it is time to return to the real world.

Let's consider the local art scene, viewed (as always in this column) from the financial angle. It is easy to find details of exhibitions at the numerous galleries and other local venues on the Rock that are happily increasing all the time. In addition, Gibraltar boasts a number of local art groups and appreciation societies – including Gibraltar Decorative and Fine Arts Society with which I have been closely associated since its launch four years ago.

I have written in the past that Gibraltar is home to a hugely impressive number of world-class artists and with plenty more aspiring talent bursting on to the scene. The Budget also called for the elimination of duty on other all types of stationery including some artists' materials such as pens and pencils – so the new concessions are therefore not limited to finished oeuvres.

So will this lead to an immediate deluge of art imported into Gibraltar? Probably not, but was this really the point of the exercise? The more important issue, I think, is that all types of art can now be imported without the need to add any excise duty. Hopefully then Gibraltar-based art lovers will have a wider choice and be able to purchase items abroad in galleries or at auctions. It should be borne in mind that Gibraltar has no export duty either, so artwork can now be freely imported then re-exported, but the rules in other countries vary so these should also be taken into consideration.

I am often asked about the acquisition of art as an investment and indeed I have written on this topic previously. In addition to the purchase price, a number of important factors come into play that should be considered. Import duty was one such hurdle and its demise is to be welcomed, but there are other hidden costs to consider.

These include where the artwork is to be stored – or displayed – and under what conditions. Our climate isn't the easiest for holding expensive artwork; storage facilities if required can be expensive and hard to find. Insurance is also an issue, although locally-based brokers with the necessary expertise are available (do ask me for an introduction). Remember that replacement value is not the only factor. Even if good title and provenance are assured, things can go wrong. There was the hapless British collector whose treasured possession of a Marc Chagall work came to an unhappy end when it was declared to be a fake by the Paris-based Chagall Committee who ordered it be destroyed under French law? Caveat emptor.

An art expert friend of mine always advises clients about to start an art collection to buy pieces they really like – something they want to live with every day. Indeed, this is how we have gone about building our very modest collection at home – focussing on pieces we like irrespective of value. It is gratifying then that one painting is now worth many times more than the price we paid for it 20-years ago – enough for a Caribbean cruise say – but that wasn't the reason we bought it and I cannot imagine selling it willingly any time soon.

So while the elimination of import duty is unlikely to lead to long queues of trucks loaded with objets d'art waiting to cross the frontier into Gibraltar, I hope that it will add to the many advantages Gibraltar already offers to high net worth individuals considering a new country of residence, complementing the lack of capital gains and inheritance tax. In my day job I advise HNWIs considering Gibraltar's Category 2 residency rules; maybe now is the time to focus particularly on wealthy art collectors who may wish to bring their collections with them. The tax changes are likely to encourage those who collect, buy or sell art, whether for aesthetic or investment reasons, to consider Gibraltar as an excellent tax free forum.

Enjoy the summer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions