Art collectors squirrelling away works from the tax authorities were given a wake-up call on Wednesday (18th November) when Switzerland’s Parliament approved tough new regulations on the use of ‘secret art warehouses’ or freeports.
Freeports are controversial tax-free warehouses, which were originally designed to hold goods and commodities in transit. Located most notably in Geneva, Lichtenstein and Singapore, they have come to be used as storage lockers for priceless artworks, artefacts and other treasures owned by the world’s wealthiest collectors. According to a 2013 report by the Swiss Federal Audit Office such long-term storage is indicative of illegal storage for tax optimisation and the avoidance of trade regulations on cultural goods and weaponry.
Controversy over the use of freeports rocked the art world earlier this year when art dealer Yves Bouvier was arrested on allegations of fraud and money-laundering. Crowned the “Freeport King”, Bouvier owns several of these type of storage facilities. He is accused of overcharging Russian billionaire and AS Monaco football club owner Dmitry Rybolovlev by $1 billion on the sale of 37 artworks including Modigliani’s‘Reclining Nude with Blue Cushion’. A Monaco appeals court denied Bouvier’s motion to annul the proceedings against him last week.
The new Swiss regulations form part of a wider anti-money-laundering strategy, which is especially targeted at the freezing of assets in Swiss bank accounts but will have broader implications for the art market. A report by Artnet suggests the introduction of a six month time limit on the freeport storage of goods intended for export is likely to have the most significant impact. This period can only be extended by Swiss authorities if the extension is justified by valid reasons.
Other requirements imposed by the regulations, which are likely to be of interest to art dealers, include the need to declare if goods are intended to be exported to a Swiss freeport. There will be a requirement to identify both the owner of goods coming in and the buyer of goods leaving Switzerland. Export to a freeport will only be allowed if buyers have a registered office or home abroad.
It is also envisaged that a requirement to identify the content of crates entering and exiting freeports will assist in combatting the illicit trade in stolen goods and antiquities, a source of growing concern in the art and archaeological worlds.
The amendment to the Swiss Customs Act introducing these new measures is due to enter into force on 1 January 2016.