How Norwegian VAT Rules Apply to Museums and Galleries

VAT: What rules apply?

It is hardly news that a VAT obligation for Norwegian museums and galleries was introduced on January 1, 2010, with a VAT rate of 12%. However, the VAT only applies to museums and galleries that charge visitor entrance fees.

One reason for making museums and galleries VAT liable was that several were already listed in the VAT registry due to turnover from their own kiosks and cafés. Thus, visitor entrance fees were made VAT liable to facilitate VAT handling.

As museums and galleries charge VAT, challenging issues arise regarding VAT calculation and the so-called deduction rights.

VAT Calculation

In some situations, it may be challenging to determine which costs to include when calculating VAT for museum and galley changes, for example, when lending out artworks in Norway and abroad.

When a museum or gallery lends out its artworks, it is obligated to charge a 25% VAT in accordance with the general rules regarding VAT on lent goods.

Normally, when lending out works of art, the art objects must be prepared for transportation. This can involve simple packaging or more extensive work and materials that are invoiced to the borrower. Are such preparation charges VAT liable?

Under the Norwegian VAT Act, all costs of fulfilling an agreement must be included in the basis for calculating VAT. This applies regardless of whether the preparation charges are included in the remuneration for the loans, or whether a separate payment is made. When charging the borrower for the preparations, the costs are necessary for the fulfilment of the loan agreement and are therefore VAT liable.

When Norwegian museums and galleries deal in art abroad, e.g., when artworks are sold or lent out to other countries, a general VAT exemption applies. In practice, this means that the VAT rate is 0%.

VAT Deduction

Museums and galleries must also consider the scope of the so-called deduction rights, i.e., to what extent deductions can be made for VAT on purchases.

A primary condition for deduction rights is that the museum or gallery must carry out a business activity. In simple terms, this means that an activity must be carried out at the museum or gallery’s own risk and expense, which over time theoretically is able to make profits.

For some museums and galleries, the visitor entrance fees may not be sufficient to create profits for the exhibition activity. However, grants are also included as income, and therefore the requirement for business activity is often still met.

Deductions Not Eligible for Any Purchase

Note that deduction rights do not apply to “anything”. Firstly, it is a condition that the goods and services are purchased for use in the VAT liable business activity. Purchases for private use, or purchases to other companies, do not entitle the museum or gallery to deductions.

Museums and galleries that do not charge visitor entrance fees, will not have deduction rights related to purchases for use in their exhibition activities, as these activities are not VAT liable.

If a museum or gallery has both a VAT liable and a non-VAT liable activity (e.g., exhibition activities without visitor entry fees, but a gift shop that theoretically can make profits), only purchases for use in the VAT liable activity are eligible for deductions. If the purchased goods or service are utilized in both activities, the museum or gallery may receive a partial deduction right.

However, if a museum or gallery has an exhibition with visitor entrance fees, a café and a gift shop, it will have deduction rights for purchases regardless of which part of the VAT liable activity makes use of the purchase.

VAT on Art Importation

Artists who produce and deal in their own artworks are not obligated to charge VAT and therefore do not have deduction rights for VAT incurred on purchases in connection with the production of their own art. However, museums and galleries that exhibit the artworks, and in many cases fund commissioned works, have deduction rights.

If an artist sells or lends out a work of art to a museum or gallery, the general rule is that there shall be no VAT on the invoice from the artist.

When an artist sells or lends out a work of art, and the work of art is imported to Norway from abroad, questions can still arise about whether an entry VAT of 25 % is incurred.

An entry VAT does not apply when a living artist imports their own original works to Norway. The same applies if the import is carried out by an intermediary in the artist's name. The term "intermediary" means a person or organization acting on the artist's behalf.

If a museum or gallery imports works of art in its own name, or imports works of art by a deceased artist, the 25 % entry VAT will apply. For museums and galleries that charge visitor entrance fees and are planning to use the artworks in their exhibition activities, this will not be a problem, as the amount can be deducted.

Do Not Miss Out on Deductions

Navigating the VAT rules can be challenging, but with the right understanding, museums and galleries can ensure that they meet their obligations without missing out on deduction opportunities.

Do you have questions? Feel free to contact our Museums team.