September 26, 2017

By Sigrid Hemels


Art may be stored without tax in free ports. However, one may wonder whether free ports are just special tax regimes or whether there is more laying behind their high walls. Sigrid Hemels discusses why free ports may become dodgy art prisons and how this problem can be solved.

During my research for our book ‘Tax incentives for the creative industries’, I stumbled across ‘free ports for art’. These special tax regimes are not very well known, but deserve serious attention: are they beneficial or do they imprison art in a dodgy underworld?

What is it?

A free port for art is a location with purpose-built art facilities where imported works of art may be stored without taxes such as value added tax, transaction taxes and customs duties. As long as the art does not leave the free port, such taxes are not imposed, hence the word “free.” Some countries allow for temporarily tax free exits. For example, goods may exit the Monaco Free Port (established 2012) for exhibitions, restoration and expert assessment in Monaco. In Singapore art may temporarily leave to Singapore museums, which is advertised as increasing the market value of the art. Furthermore, several countries do not levy tax upon the sale of art within a free port. As many free ports do not impose time limits they can be used as semi-permanent tax-free havens for valuables. Art buyers/investors can transfer art tax free as long as it stays in the free port.

Free ports have been around in Switzerland since 1849. These were established for agricultural goods and later branched out to art. The TEFAF Art Market Report 2017 estimated that 1.2 million artworks are held by Geneva Free Ports. According to UNESCO, there are currently seven free ports for art, the newest ones being in Shanghai and New York (since 2017). Often, these offer more than just specialized storage. The Singapore art FreePort, in 2010 the first outside Switzerland, offers showrooms, workshops, photo studios, a branch of Christies and exhibition spaces. The “Beijing Freeport of Culture” (established in 2014) is the only zone in China that allows foreign investors to set up art businesses without any limitations. It consists of warehouses, showrooms and trade centers, and houses art fairs such as the Beijing International Fine Art Fair and Sotheby’s auctions. Private collectors are not the only users of free ports. Clients include museums, galleries and art investment funds

Why have free ports?

Dapiran mentions that the Beijing free port aims to encourage Chinese collectors to keep or repatriate their art in Beijing instead of storing it overseas. According to Ditzig, Lynch and Ding governments see free ports as a fast-track to a more mature and sustainable art market. Luxembourg wanted to become an art and finance cluster through the free port. Singapore regarded it as a way to cater for the growing Asian art and collectables industry and to develop supporting services for art logistics and wealth management services like art banking.

Customs regulations can be burdensome, making countries unattractive for art fairs, international galleries and auction houses having to import art which might not remain in the country. The free port regime removes this problem. However, there are alternatives. In the EU no import duties are levied if art is imported for a public or a sales exhibition.

Why are they problematic?

Free ports are controversial, but not because of their tax free status. From a philosophical point of view, questions are raised whether art is not deprived of its essence when it is stored for no-one to be seen. Steyerl calls free ports “secret museums (…) the Silk Road into which things disappear (…) a museum of the dark net, where movement is obscured.” Bowley and Carvajal quote museum directors saying “Works of art are created to be viewed” and that storage puts art “intellectually almost in a coma.” On the other hand, they cite a New York gallery owner stating that “Paintings are not a public good.”

Where this philosophical argument might be difficult, another issue is the secrecy around what is stored by whom. The Financial Action Task Force warned that free trade zones are a money laundering and terrorist financing threat because administrative and oversight procedures are reduced or eliminated in order to boost economic growth through trade. UNESCO highlighted that free ports are used to store art from thefts, lootings or illicit excavations for resale in the black market. For example, in 2003, hundreds of antiquities stolen from excavation sites in Egypt were discovered in the Geneva free port. Furthermore, now that increased international transparency and abolishment of bank secrecy have made it more difficult to hide bank accounts for the tax man, free ports offer an attractive alternative to hide wealth. Free ports may become the new save havens for tax evasion.

The solution: world wide transparency

Transparency of free ports is an effective solution for these problems. In reaction to negative publicity, Swiss free ports became more transparent. They must record the value, origin and owner of cultural objects for Customs and grant Customs access to conduct controls. However, increased Swiss regulation seems to have caused the emergence of free ports elsewhere, such as in Singapore, where no disclosure is necessary. Unilateral measures, therefore, merely shift the problem.

The main challenge is to obtain worldwide transparency. Free ports could, similar to banks, be obliged to provide information on what they store for whom and this information could be included in existing international obligations on exchange of information. Countries refusing to exchange this information could be blacklisted. This proved to be an effective threat as regards bank accounts.

Thus, transparency is the way to free art from dodgy prisons whilst allowing countries to keep beneficial tax regimes.


This article is based on:

Hemels, Sigrid and Kazuko Goto (eds.) (2017) Tax Incentives for the Creative Industries. DOI:10.1007/978-981-287-832-8.

About the author:

Sigrid Hemels is Professor of Tax Law Erasmus University Rotterdam and member of the tax team of Allen & Overy Amsterdam.

About the image:

skeeze (2016) Vancouver Skyline

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