The Art Law Review: Czech Republic
Virtually all legal aspects of the art trade needed to be reinvented and rebuilt for the new market conditions that followed the 1989 Velvet Revolution and the collapse of the communist regime in what was then Czechoslovakia. Because there was no real art market and virtually no specialised laws, professional art valuers or other art experts, the uncertainty in the art market was overwhelming. It took a very long time for professional and legal grounds to be established, and we are still facing remnants of that era in several outdated and insufficient laws today.
Despite these difficult beginnings, the Czech art market is quite lively and still developing rapidly, currently representing a value of over €50 million in annual auction turnover. Only €7 million is attributable to cross-border art transactions. The Czech art market is dominated by a small number of local auction houses, such as Adolf Loos Apartment and Gallery, Galerie Kodl and Arthouse Hejtmánek, while major international houses are not well established in the Czech Republic. A previous auction record is beaten almost every year: in 2020, a 1926 Toyen painting became the most expensive paining auctioned in the Czech Republic at nearly €3 million.
There are not many art disputes on public record, with the exception of a cultural heritage dispute regarding a 1913 Kupka painting, which was prohibited by court from being acquired by a foreign buyer under a 1987 law (see Section V.iii).
The year in review
There has been very little development in art legislation in the past year; however, an interesting proposal is due to reach the floor of the House, reinventing a surprisingly effective law from the communist era that would require a marginal percentage of any public building expenditure to be invested into art-related projects.
i Title in art
Direct purchase from the artist
From a legal point of view, this is the simplest and, at the same time, safest form of acquiring an original or an authorised reproduction of an artwork. The buyer concludes a contract directly with the artist, who guarantees its originality and determines its price. Sometimes, additional agreements can add other conditions to the deal (conditions of placement, exhibition and availability to the public, resale, loan for exhibition, etc.). These conditions tend to be in the nature of a licensing agreement, so in this particular case, this would be a purchase agreement (in its pure form) or a mixed agreement (purchase and licensing contract).
In such cases good faith is presumed. However, it is recommended that the conditions of sale include the issue of an authenticity certificate containing a representation of the work, its description (usually physical dimensions, background material and design) and the signature of the artist, who hereby declares that the artwork is genuine and original. It is recommended that the new owners of the work also keep records of the negotiations that preceded the purchase of the work (correspondence with the author, photographs of the work and the artist taken during a possible visit to the studio, etc.) and keep a catalogue in which the work was mentioned or even depicted. The above also largely affects the direct business relationship with the artist's heirs.
If the authenticity of the work is not sufficiently documented during the purchase itself (e.g., due to the age of the work or other objective circumstances) and the buyer still decides to take a risk and purchase the work of art, it is appropriate to obtain an expert opinion or art historical and restoration expertise, at the expense of either the seller or the buyer. The buyer can agree with the owner that these documents will be obtained by the seller before the sale and, if the report confirms the authenticity of the work, the buyer will pay the costs associated with obtaining these documents (through which he or she will gain additional assurance that he or she is acquiring the authentic piece).
Purchase from a representative of the artist
These types of purchases are very similar to purchases from the author or heirs of the author. At the same time, it is necessary to take into account that the agent or representative is a person acting in the name and on behalf of the author, but is still a person or legal entity different from the artist or author of the work. This can have a major impact, especially on the exercise and enforcement of copyright (both property and personality rights). For this reason, the buyer should always verify that the representative is authorised by the author or heirs to enter into transactions with the work in question and is authorised to grant appropriate licences for the work.
Purchase through art galleries
This type of ownership transfer is a commission sale; the seller may be the artist himself or herself, the owner or a person who has no direct relationship with these persons. Most often, a commission contract is concluded when selling a work, but the contractual relationship can also be an agency or an intermediary contract. Sometimes the seller wants his or her identity to remain secret, sometimes it is the artist himself or herself, who sees the sale of his or her work merely as a time-consuming activity. Often, the seller is a gallery owner or antique dealer, who acts in the name of the artist, heir or the owner of the artwork and on their behalf. The seller collects a commission determined either from the sale price of the work or a fixed amount (or a combination).
One of the differences in the acquisition of ownership through private sale or auction is mostly recognisable in situations where the ownership is acquired from a person who was not the real owner of the artwork. In the case that the ownership right is transferred through the auction from an unauthorised person, the buyer becomes the owner of the work as long as the artwork was not entered in any public list of lost or stolen art and the buyer acted in good faith. However, the above does not apply to persons who acquire ownership under a contract, so the buyer must be careful and require not only documents and expert opinions that certify the authenticity of the work, but ideally also evidence of the seller's ownership.
In general, good faith is presumed and therefore it does not need to be explicitly demonstrated at ownership transfer. However, when acquiring ownership, the new owner acquires not only the rights but also obligations associated with the object. In the case of paintings or other works of art the buyer acquires ownership, but the copyright remains with the author. The author can still decide on how his or her work should be used or displayed and the owner has no right to use the object beyond his or her personal needs unless he or she has obtained the appropriate licence rights.
There is no specific duty of inquiry into title by the purchaser upon purchase, just as there is no specific duty to prove title by the seller upon the sale. The lack of regulation in this area is largely criticised. However, prudent purchasers who do inquire into title of the acquired work do so in their own best interests.
ii Nazi-looted art and cultural property
The central problem of most lawsuits concerning confiscated property or artwork from Jewish or other families during the Second World War is that there are significant problems, namely the subsequent takeover of political power by the Czech Communist Party and the associated nationalisation of all property. Most property, including famous Czech works of art, was nationalised after the Second World War and the majority of litigation over it is conducted as part of restitution proceedings. However, such proceedings often end to the detriment of original owners, both in relation to art and property in general.
A well-known example concerns the restitution proceedings regarding the Waldes a spol factory. The company was originally owned by Jiří Waldes, a factory owner of Jewish origin. During the period of occupation, the Nazis looted not only the factory, but also a collection of almost 20 paintings, including several paintings by František Kupka, one of the most famous and best-selling Czech painters of modern times. Subsequently, all the company's assets were nationalised based on the Beneš decrees (the decrees of former president Edvard Beneš concerning the status of ethnic Germans in post-war Czechoslovakia, which formed the legal framework for the expulsion of Germans from Czechoslovakia). The ownership of the company, including the art collections, was transferred to the Koh-I-Noor company. The claims Waldes's original partners made during the nationalisation were not compensated by Czechoslovakia because the registered heirs were at that time 'persons unreliable for travelling abroad without the consent of the Czechoslovak authorities'.
After the Velvet Revolution in 1989, the courts concluded that previous decisions of the Czech authorities did not constitute an obstacle to the restitution claims of the Waldes family. However, the Constitutional Court did not agree and annulled all previous verdicts in the restitution case. According to the Constitutional Court, the factory owners lost all their property before 1948, when the Beneš decrees came into effect, and were therefore not entitled to restitution. The final point behind the restitution dispute was subsequently made by the Supreme Court, which rejected the Waldes family's appeal against the interpretation of the Constitutional Court.
iii Limitation periods
Because a special legal regulation is lacking, the general rules of Act No. 89/2012 (the Civil Code) apply. If a work of art is a forgery or has other legal defects, the purchaser has rights arising from defective performance.
The good faith possessor acquires title by acquisitive prescription after three years of qualified possession, and by extraordinary acquisitive prescription a possessor acquires title even if he or she cannot prove a legal ground of his or her possession, unless fraudulent intent can be proven.
No special limitation periods apply to art misappropriated during the Nazi era. As mentioned above, most of the art or property in general that was confiscated by the Nazis during the Second World War was subsequently nationalised. Such action was made based on the Beneš decrees, and it is therefore necessary to demand it through the restitution procedure. However, the regulation of the restitution proceedings themselves, which often end with reference to the fact that the property was confiscated before 1948, and therefore prior to the decrees coming into effect, cannot be applied in such case.
iv Alternative dispute resolution
Alternative dispute resolution, including arbitration and mediation, exist and can be used for art disputes, but they are not prevalent. There is no specialised alternative dispute resolution organisation for art matters in the Czech Republic.
Fakes, forgeries and authentication
Under Czech law, if a buyer purchased a fake or a forgery, the purchase is considered to be defective due to the defect of performance, and results in, inter alia, the buyer's entitlement to withdraw from the purchase agreement. The seller shall be liable for such defect unless the buyer could have recognised the defect with the usual levels of diligence associated with the purchase agreement. However, provided that the seller explicitly guaranteed the authenticity to the buyer, the seller's full liability remains preserved.
In addition to defects liability claims, under certain circumstances the buyer may be entitled to claim the difference between the purchase price actually paid and the real value of a fake or forgery, if the seller knew or should have known, by its expertise, that such piece is a fake or forgery. Moreover, the buyer may further consider taking necessary steps to initiate criminal proceeding.
However, the most efficient and recommended strategy minimising any potential risks is undoubtedly thorough due diligence on the buyer's part provided by thoroughly evidenced provenance and an expert's opinion from a distinguished expert.
i Private sales and auctions
In the Czech Republic auctions are quite common, for rare and antiquarian items, as well as artworks. Art can be purchased by both natural persons and companies. Both domestic and foreign persons may participate as bidders. The acquisition of art objects may take place directly or indirectly through an agent.
The main laws governing private sales and public auctions in the Czech Republic are: Act No. 26/2000 on public auctions; Act No. 71/1994 on the sale and export of objects of cultural value (the Export Act) and the Civil Code.
Public auctions of art conducted in an auction house or online are subject to the Act on public auctions. The persons involved might be physically present or use audiovisual or electronic means to attend the auction. The auctioneer must have a trade licence to conduct public auctions. In a public auction, ownership of the auctioned item is acquired by the fall of the hammer provided that the bidder has paid the price achieved in the course of the auction within the set time period. The auctioneer shall, without undue delay, hand over the auctioned item to the person who has acquired ownership and issue a written confirmation of its acquisition of ownership.
For private auctions only the general regulation of the Civil Code applies, with no application of the Act on public auctions. Such privately held auctions are governed by auction rules issued by the organiser of the private auction and must reflect the relevant provisions of the Civil Code for consumer protection.
As further described bellowed, the Czech Republic applies several measures to the export and sale of antiques and art. Objects of cultural value in the field of archaeology or of a sacral and cult nature may be auctioned or offered for sale only if accompanied by a certificate for permanent export. Professional organisations listed by the Ministry of Culture, including museums, galleries, libraries and the National Heritage Institute, issue such certificates.
ii Art loans
Art loans are not particularly widely practised in the Czech Republic and there is thus no specific regulation in this regard other than general laws regarding object leases. The practice is generally embraced by minor or alternative galleries who lease artworks of emerging artists to various office spaces on a short-term basis.
iii Cross-border transactions
In addition to EU law, the export of cultural property from the Czech Republic is regulated by several local legal acts, depending on the type of cultural property in question. The most profound protection is provided to artworks classified as cultural treasure or national cultural treasure, for which exports from the Czech Republic are subject to approval from either the Ministry of Culture or the government.2 A similar regime applies to collections and collection items under Act No. 122/2000.
Furthermore, the sale and export of objects of cultural value is regulated by the Export Act. Objects of cultural value shall be exported from the Czech Republic only with an export permit issued by certain cultural institutions or the Ministry of Culture. The owner of the artwork applies for either a temporary export permit or, if the artwork fulfils certain characteristics, a permanent export permit. Artworks that require a permit are classified by their age of origin and price. The respective professional institution shall decide within 21 days of receipt of the application to either issue the export permit or, if it refuses to grant the permission, to submit an application to declare the relevant artwork as a cultural treasure to the Ministry of Culture, which shall issue its decision within three months. Moreover, if the artwork is to be exported outside the European Union, an additional export permit needs to be obtained by the Ministry of Culture, which cannot be issued separately and is only complementary to the general export permit described above.
The case that resonated within the art community in the Czech Republic is the one of a prominent Czech gallery against the Ministry of Culture regarding František Kupka's abstract The Shape of Blue, acquired by a foreign art collector for the very high sum of 55.75 million Czech korun. The Czech National Heritage Institute confirmed to the gallery via email prior to the auction that the respective abstract was not considered as cultural heritage. However, after the auction, to the new owner's disappointment, the Ministry of Culture declared that The Shape of Blue could not be exported because it belongs to a set of works declared as cultural treasure in 1997 by the Ministry of Culture. The gallery applied for annulment of the declaration, which was denied by the Ministry of Culture and was followed by an action by the gallery against the Ministry of Culture. After several appeals, The Shape of Blue remains a cultural treasure and may be exhibited outside the Czech Republic only upon the Ministry's consent.
When it comes to import of cultural property to the Czech Republic, Czech legal regulation is far less restrictive and the import is subject to general conditions for import of goods as well as export conditions of the relevant jurisdiction of the country of origin.
In addition, the Czech Republic is a party to the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, the 1995 UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects and the 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights.
When it comes to acquiring artworks from another EU Member State and its subsequent local sale, it is crucial to correctly cover the following aspects of Czech tax law:
- value added tax (VAT);
- personal income tax (PIT) for natural persons; and
- corporate income tax (CIT) for legal entities.
Generally, when it comes to artwork acquired by a Czech entrepreneur or a legal entity (VAT payer), the standard VAT regime shall apply to the acquisition of the artwork from another EU Member State and its subsequent sale in the Czech Republic whereby self-assessment of VAT (i.e., a reverse-charge mechanism) applies to the goods acquired from the Member State and the standard 21 per cent output VAT rate applies to the full selling price of the artwork in its subsequent local sale. However, subject to the conditions of the Act on value added tax, as amended (VATA),3 a VAT payer who is a 'dealer of second-hand goods, artworks, collectors' items and antiques', pursuant to VATA may decide to apply a special voluntary regime (the Special Regime) in relation to such acquisition and its subsequent local sale. Under the Special Regime, the general 21 per cent VAT rate does not apply to the full selling price but solely to the art dealer's margin on the local sale (the respective VAT payer does not have the right to claim input VAT). However, when considering the VAT aspects of a cross-border artwork sale, it is vital to bear in mind that the Special Regime shall be applied to both the acquisition of the artwork from the EU Member State and the subsequent sale of the artwork in the Czech Republic. Thus, it is not possible to combine the standard VAT regime when acquiring the artwork from another EU Member State with the Special Regime to its subsequent local sale.
Subsequent sale of the artwork in the Czech Republic
Under Czech tax law, the respective tax base (income from the sale of the artwork decreased by specified expenses) is generally subject to a 15 per cent PIT rate, provided that it is sold by a natural person outside his or her business activity unless the conditions for exemption of such income are met.
On the other hand, if the artwork is sold by an entrepreneur acting as a professional art dealer (or natural person within his or her business activity), the respective tax base (income decreased by specified expenses – 'on a cash basis') is subject to a 15 per cent PIT rate, as well as a potential solidarity surcharge of 7 per cent of the individual's gross income, calculated on the amount by which his or her tax base exceeds 1,672,080 Czech korun.4 Social security and health insurance must be also considered.
It is necessary to distinguish these cases from cases in which an entrepreneur sells artworks in his or her own name on behalf of someone else (e.g., in the form of commission sales), in which case the entrepreneur's taxable income consists only of remuneration for commission.
Under Czech tax law, if an artwork is sold by a legal entity, the respective tax base (revenues decreased by specified expenses – 'on an accrual basis') is generally subject to a 19 per cent CIT rate with no possible exemption for such income.
It is necessary to distinguish these cases from cases in which a legal entity sells artworks in its own name on behalf of someone else (e.g., in the form of a commission sale). According to the prevailing interpretations, in such case the taxable income of the legal person would consist only of remuneration for commission.
iv Art finance
The Czech Republic has a very unfortunate history in art-related lending from the 1990s, when several lenders, including major financial institutions, accepted forgeries or overvalued works as collateral. Due to several historical issues resulting from this, there is an overall reluctance to provide any finance against art works.
There are a few institutions, such as the Pro Arete investment fund, that are involved in fundraising and collective investing in art; however, leading artwork acquisitions are generally financed directly by private collectors.
Given the relatively low value of individual art pieces traded in the Czech Republic in comparison with artwork auctions taking place in leading art centres across the globe, the Czech market has not been a particular focus of international art finance providers either.
i Moral and resale rights
The moral and resale rights of artists in the Czech Republic are governed by the Copyright Act, as amended.5 According to the Copyright Act the authors (artists) have the following moral rights:
- the right to decide on making his or her copyrighted work public;
- the right to claim authorship, including the right to decide whether and in what way his or her authorship is to be indicated when his or her copyrighted work is made public and further used;
- the right to the inviolability of his or her copyrighted work; in particular, the right to grant consent to any alteration or other intervention in his or her copyrighted work, unless otherwise stipulated in the Copyright Act; and
- the right of supervision over another person's right to use the copyrighted work (i.e., the author's supervision), unless its nature or its use implies otherwise, or unless it is not possible to fairly require the user to enable the author to exercise his or her right to supervision.
None of the above-mentioned rights can be waived, transferred or assigned to a third person.
Furthermore, all moral rights last for the lifetime of the author, but no one may arrogate authorship of the copyrighted work after the author's death. The copyrighted work may only be used in a way that shall not detract from its value, and the name of the author must be indicated (unless the copyrighted work is anonymous).
With respect to the resale rights of the author, according to the relevant provision of the Copyright Act, where the original work of art (that has been transferred by its author to the ownership of another person) is subsequently sold for a purchase price of €1,500 or more, the author (or his or her heirs for the duration of the author's economic rights) shall be entitled to royalties from any resale of the work as set out in the Annex to the Copyright Act, provided that a gallery operator, auctioneer or any other person who consistently deals in works of art takes part in the sale as a seller, purchaser or intermediary. The royalty ranges from 0.25 per cent to 4 per cent of the relevant part of the purchase price (depending on the amount), but the total amount of the royalty may not exceed €12,500.
The persons liable to pay the royalty shall be the seller and the dealer jointly and severally, who pay it to the relevant collective administrator, the Authors Copyright Protection Organisation, which is an association of authors of works of art, architecture and visual components of audiovisual works.
The right to royalties shall not apply to the first resale if the seller obtained the original work of art directly from the author less than three years before the resale and if the purchase price of the original work, when resold, does not exceed 250,000 Czech korun.
ii Economic rights
According to the Copyright Act, the author has the below-stated economic rights. However, if more than one person participated in the creation of the copyright work, the economic rights can only be exercised jointly.
Generally, economic rights last for the lifetime of the author plus 70 years. However, there is an exception in the case of anonymous or pseudonymous copyrighted work, where the economic rights last 70 years from the time the work has been lawfully made public.
Economic rights include:
- the right to use the work by:
- life performance of a work;
- performance of work from fixation;
- retransmission of the broadcast; and
- performing broadcast;
- resale rights;
- the right to remuneration in connection with the reproduction of work for personal use and for legal persons' own use; and
- the right to remuneration in connection with the rental of originals or copies of the work.
None of the above-mentioned economic rights can be waived, and are not transferable or subject to the execution of a decision. Furthermore, unlike moral rights, economic rights are inheritable.
Trusts, foundations and estates
The possibilities for the holding and administration of artworks and art collections as a specific type of asset do not substantially differ from the possibilities generally available for other types of assets. In determining a suitable method of acquiring and administering a work of art or an art collection, the decisive factor is the purpose of administration and the investor's (current or potential owner's) long-term plan.
i Holding and administration via a foundation, endowment fund or trust
In addition to direct ownership by a natural person and administration of property by the owner, there is the possibility of using traditional or less traditional entities that are often a safer and more effective and meaningful alternative. Suitable entities that can be set up under Czech law include a foundation, an endowment fund and a trust, all of which are regulated by the Civil Code.
A foundation is a traditional legal entity (endowment institution). It is created to permanently serve a socially or economically beneficial purpose. The purpose of a foundation may be public benefit, if it involves support of a public good, but also charitable, if it involves support for a certain group of persons. The setting up and operation of a fund is bound by a rigid legal regulation with unambiguous rules and clear-cut limits. The law prescribes the basic structure of the foundation's bodies (a management board, supervisory board or a supervisor) and determines the minimum amount of the principal (capital) of a foundation: 500,000 Czech korun. The legal regulation restricts the business of a foundation (which can only be its secondary activity), dealing with the assets of a foundation and the method of acquiring assets and contributions. From the practical perspective, administration of art collections via a foundation is a traditional and conservative option; major art collections are administered in this way, in particular where the owner wishes to preserve the collections and to support the development of fine arts and culture or other publicly beneficial purpose.
An endowment fund is also a traditional legal entity (endowment institution). It is more flexible than a foundation, offering the possibility of being used for a socially or economically beneficial purpose, which means that it can be used for purely private purposes that could also be achieved via business. The law regulates only the main state-related issues, all the rest is left to the settlor's will. An endowment fund does not create any principal or capital; its assets are formed by a set of donations and contributions. Dealing with the assets of an endowment fund is easier than in a foundation. An endowment fund is frequently used for dealing with works of art and is well suited to modest investor plans or for specific private or family situations. Endowment funds are also traditionally used to support art and culture.
A trust is a new concept to Czech law (since 1 January 2014). Its legal regulation was inspired abroad, namely and most closely by the legal regulation of trusts under the law of the Canadian province of Quebec. A trust is an entity without legal personality (it is not a person) and functionally it falls within the concept of administration of the property of others. The key functional role of a trust is the trustee, who administers the property of a trust in their name on account of the trust. A trust is more flexible than a foundation; the legal regulation is very minimal, with all its internal functioning (internal organisation, control, selection of beneficiaries, dealing with the property) being governed by rules set out by the settlor in the trust deed. The property of a trust is not owned by any person, it is appropriated to the purpose of the trust. In the context of dealing with art, a trust is an ideal means of asset protection, which also allows solving complicated and unique personal situations that would be difficult to solve if the property was privately owned or if traditional entities were used.
Foundations, endowment funds and trusts are subject to general tax regulation; particularly relevant are the Income Tax Act6 and VATA. From the income tax perspective, for foundations (with some exceptions), the status of publicly beneficial taxpayer is applied, which involves the relevant tax benefits, such as application of special items reducing the tax base, subject to compliance with certain conditions. Also, the status of a family endowment institution (a foundation or an endowment fund set up to support the founder or persons close to the founder) may entail an advantageous tax regime, in particular in relation to the exemption for gratuitous income (of beneficiaries – natural persons) from a family endowment institution's property, subject to compliance with certain conditions. Under tax law, a trust operates de facto based on a legal assumption similar to a legal entity as a taxpayer of the respective tax; for example, gratuitous income (of beneficiaries – natural persons) from a trust's property is also (income) tax-exempt in certain circumstances. The appropriation of property to a trust or a family endowment institution for income tax purposes is regarded as a contribution to a company. Family endowment institutions, as well as trusts, constitute what are called tax-neutral entities, the existence and operation of which are basically not associated with any specific tax benefits or burdens based on which these entities could become effective tools for wider tax planning.
Family endowment institutions and trusts are suitable forms of inter-generational transfer of assets (works of art and art collections). In all cases, it is possible to simultaneously set detailed rules and prevent undesired disintegration of property in inheritance proceedings; it is also possible to involve second and further generations in the implementation of the owner's (investor's) plan during the owner's lifetime.
ii Holding and administration by other means
In the case of a prevailing business or commercial plan there is the possibility of using companies for holding and administration purposes (most often limited liability or joint-stock companies) pursuant to the Companies Act7 or an investment company or investment fund pursuant to the Act on investment companies and funds.8 A work of art or an art collection is then administered as part of the company's assets or an investment portfolio.
iii Key estate planning considerations relevant to art holdings
The most crucial aspect in planning the holding and administration of art (individual works of art or art collections) is the initial situation and vision. To choose a suitable model or course of action, the following factors are decisive: (1) the owner's or investor's personal situation, (2) the quality, quantity, nature and value of works of art or art collections, and (3) the owner's or investor's plan and objective. A personal situation determines whether planning requires active or passive involvement of the owner (investor) in a new project, whether the goal is to expand or effectively optimise an art collection or whether the reason for planning is an inter-generational transfer of assets or other involvement of third parties. The second factor involves requirements regarding the suitability of the solution chosen from the perspective of economic justification and tax implications, and the third aspect involves a timeline approach.
If art is considered a conservative investment with the potential for steady and permanent appreciation, the key aspect is the long-term goal, which means that such an investment needs to be set so that:
- it outlives the original owner (investor);
- the art is suitably separated from the owner's (investor's) personal and business assets;
- it enables achieving the owner's (investor's) long-term goals;
- it enables efficient and continuous administration of the property;
- it enables appreciation of the property and involvement of select persons; and
- it enables the flow of revenue from the administration of the property or other benefits to select persons.
When taking the above criteria into account, the most important steps in planning are (1) carefully formulating the owner's (investor, settlor or founder) plan and (2) carefully considering all legal, economic and tax implications as the plan will run simultaneously with the entity's business operations.
In addition to these criteria, in planning the administration of art collections, tax implications (e.g., complex issues of VAT on works of art) and specific legal regulations limiting certain types of dealing with works of art also play a role. These circumstances should be kept in mind in specific cases, in particular in relation to imports and exports of artefacts; in general, however, they do not play a significant role.
Outlook and conclusions
The major obstacles in the art market in the Czech Republic are primarily the lack of commonly accepted market standards of legal documentation that both merchants and buyers can safely rely on. This is especially important as the legislation is still underdeveloped, which creates an aura of legal uncertainty that prevents the market from further developing and adopting international standards. We can expect the legislation to slowly follow such developments and market trends. This is particularly applicable to tax legislation, which also significantly impairs this emerging market.