5% VAT in Italy for the art market: regulatory impacts and opportunities for international operators

It is an early morning in July 2025 when word spreads among market operators and professionals: Italy has cut the VAT rate on works of art to 5%. The change, in force from 1 July 2025, is simple in appearance yet far-reaching in effect for a sector historically governed by special regimes and cross-border arbitrage. By recasting the domestic rules for sales and imports of art, collectibles, and antiques through an amendment to Presidential Decree 633/1972 (“VAT Decree”), Italy has moved decisively toward the policy direction envisaged at EU level and in the Law approved in 2023 by Parliament as to provide the Government with the power to reform the Italian tax system (“2023 Reform”). This move also comes with a significant recalibration of the long-standing balance between the ordinary VAT system and the margin scheme.

What the Reform Does, Exactly

The reform is contained in Article 9 of Decree-Law No. 95 of 30 June 2025, published in the Italian Republic Official Gazette on the 30 of June 2025 and effective the following day. It introduces a new reduced rate of 5% for the “generality” of sales and imports of works of art, collectors’ items, and antiques by inserting point 1-novies in Table A, Part II-bis, of the VAT Decree, and by coordinating amendments to related provisions. With the same intervention, the former 10% reduced rate, previously limited to imports and to sales made directly by authors or their heirs/legatees, was abrogated.

The 5% rate applies to transactions occurring on or after the 1 July 2025 based on the VAT “time of supply” rules, notably the moment of delivery or shipment if not anticipated by invoice issuance or payment. The same 5% rate is extended to imports by virtue of Article 69 of the VAT Decree, as well as to intra-Community acquisitions pursuant to Article 43(5) of Decree-Law 331/1993.

For identification of the eligible categories of goods, the reform continues to refer to the definitions of works of art, collectors’ items, and antiques in the Table attached to Decree-Law 41/1995, letters a), b), and c), which implement Annex IX to Directive 2006/112/EC. These definitions include, among others, (i) hand-executed paintings and drawings, (ii) original prints and sculpture, (iii) certain tapestries and unique ceramics, and (iv) photographs meeting strict authorship and edition criteria.

The Critical Trade-Off: 5% Reduced Rate vs. Margin Scheme

The new reduced rate is expressly incompatible with the margin scheme for resellers of used goods, art, antiques, and collectibles. In practical terms, a dealer who chooses to apply the 5% rate must account for VAT on the full sale price under the ordinary regime and may deduct input VAT, whereas a seller who applies the margin scheme accounts for VAT only on the margin and cannot combine that scheme with the reduced rate. This exclusivity reflects Article 98-bis of the VAT Directive as amended by Directive (EU) 2022/542 and is implemented in national law by the new wording of Table A, Part II-bis, and by amendments to Article 36 of Decree-Law 41/1995.

This repositions the long-standing operational calculus. Where acquisitions are from private individuals or “assimilated” non-taxable persons, the margin scheme can still be economically efficient, since there is typically no input VAT to recover and VAT falls only on the margin. Conversely, for imports and intra-Community acquisitions — now squarely within the 5% — the ordinary regime offers a lower tax burden at the border or upon acquisition and the standard right to deduct VAT on related costs, which can materially improve cash flow.

Implementation Frictions and Mid-Year Transitions

Because the law took effect mid-year, operational transitions require care. Where the analytical margin method is used, a reseller may switch to the ordinary regime with reduced rate on a transaction-by-transaction basis, provided that the option is reported in the annual VAT return for the relevant year. Where the global margin method has been adopted — commonly used for certain collectibles — the switch cannot be made per single transaction; the reseller must first migrate to the analytical margin method and then elect the ordinary regime per sale, with increased administrative complexity.

In addition, a mid-year migration from the global to the analytical method may entail rectifying first-half VAT computations by excluding from the global margin those costs associated with items purchased but not yet resold, with a potential need to repay the resulting VAT difference. Given these burdens and the timing of the change, the cost-benefit of switching methods and regimes in relation to tax year 2025 may have been modest for some operators, and clarifications from the authorities on options and revocations during such year would be welcome.

From a compliance perspective, where the ordinary regime is applied, invoicing is generally mandatory and input VAT becomes deductible with reference to the time of resale, subject to recording in the purchase ledger in accordance with Article 25 of the VAT Decree and Article 38(1) of Decree-Law 41/1995. Dealers will therefore need to align their invoicing and ledger practices with the chosen regime at the point of sale.

Scope Nuances and Open Questions

Two critical issues deserve attention:

• First, the reform confirms that the 5% rate now applies to domestic sales by any seller — including art galleries and auction houses — but should not be extended to the auction house’s intermediary services (e.g., seller’s commissions), which should remain subject to the 22% standard rate as distinct supplies and are not so closely linked as to form a single supply with the sale of the artwork. For imports, the personal scope is unchanged; the rate is reduced from 10% to 5% irrespective of the importer’s status;

• Second, there is a specific tension regarding philatelic items. The Table to Decree-Law 41/1995 classifies stamps among “collectors’ items,” which would suggest application of the new 5% rate under item 1-novies of Table A, Part II-bis. Yet the VAT Decree still contains a provision in Table A, Part III, that applies a 10% rate to “stamps for collection” and “collections of stamps,” creating a potential overlap that requires interpretive clarification to avoid inconsistent treatment.

A further practical question arises from the mutual exclusivity between the reduced rate and the margin scheme. Since all qualifying sales and imports of art, antiques, and collectibles are now, in principle, eligible for a reduced rate, it is not entirely clear in which circumstances resellers can still elect the margin scheme for items they import or acquire from authors while meeting the new legal condition that no reduced rate has been applied upstream. This statutory interplay, acknowledged by scholars, underscores the need for administrative guidance from the Revenue Agency.

European Alignment and Market Positioning

The reform aligns Italy with the framework permitted by the VAT Directive following its 2022 amendments, which allow Member States to apply reduced rates to the relevant categories listed in Annex III, provided the measures are consistent with the harmonized rules and respect the incompatibility with the reseller margin scheme. It also implements the direction set by the 2023 Reform, which envisaged reducing the rate on imports and extending the reduced rate to domestic sales to enhance competitiveness.

Across the EU, several jurisdictions have already implemented reduced rates for domestic sales of art and related goods, and others have progressed reforms in the same direction. This convergence reflects a shared policy objective of reducing distortions in a market characterized by repeat circulation and appreciation over time — features that challenge the neutrality of the ordinary multi-stage VAT system and historically justified the margin scheme.

Looking ahead, VAT territoriality and compliance channels for cross-border sales of art may also evolve under the EU’s “VAT in the Digital Age” initiative. These prospective changes, considered together with the 5% rate, would further support price transparency and market integration.

Practical Takeaways for Market Participants

The headline rate cut is unequivocally material for imports, intra-EU acquisitions, and domestic sales by dealers and auction houses, but its benefits are conditioned by the choice of regime and by transaction-level facts. Where input VAT is recoverable and margins are robust, the ordinary regime at 5% offers clear advantages over the margin scheme. Where stock is acquired from private sellers and margins are thin or variable, the margin scheme may still prevail economically notwithstanding the new rate.

Finally, dealers should confirm that the items they intend to treat at 5% fall within the legal definitions of art, collectors’ items, or antiques, noting the strict requirements for photographs and the exclusion of items partially produced by mechanical processes such as 3D printing.