Swiss Freeports – A Tax Haven for Art

Posted July 22nd, 2012

Business, Collectors, Switzerland

“Simon Studer started his career in a basement vault in a warehouse complex near the heart of this city, known for international banks and outrageous prices. It was a strange job. Every day, someone would open the vault and lock him inside until it was time for lunch. Then he’d be let out of the vault and, after eating, he’d be locked in again until it was time to go home.”

The New York Times reports: “He was taking inventory for one of Switzerland’s best-known gallery owners, who rented the space. “I was checking sizes, condition, looking for a signature,” Mr. Studer recalls, “and making sure the art was properly measured.”

This might have been a tedious way to spend four months, but what was being tallied and assessed was the handiwork of Pablo Picasso. Not hundreds of pieces, but thousands — shelf upon shelf of drawings, paintings and sculptures. It was Mr. Studer’s first peek at the astounding wealth stuffed inside the Geneva Freeport, as this warehouse complex is known.

The second peek came when he realized what the guy in the vault next door was doing: counting a roomful of gold bars.

“That’s the Freeport,” says Mr. Studer, who now runs his own gallery. “You have no idea what is next door and then you happen to be there when they open a door and, poof, you see.”

That Picasso gig was about 25 years ago, and all evidence suggests that the Freeport is more treasure-crammed than ever. Though little known outside the art world, this surprisingly drab series of buildings is renowned by dealers and collectors as the premier place to stash their most valuable works.

They come for the security and stay for the tax treatment. For as long as goods are stored here, owners pay no import taxes or duties, in the range of 5 to 15 percent in many countries. If the work is sold at the Freeport, the owner pays no transaction tax, either.

Once it exits the premises — either because it’s been sold or because the original owner has moved it — taxes are owed in the country where it winds up. But for as long as a work is in the Freeport, it’s as if it resides in a no-man’s land where there is no Caesar to render unto.

Only a few years ago, in fact, the Freeport was officially not part of Switzerland. The buildings have since been patriated, but they and a handful of lesser-known freeports in different parts of Switzerland remain the closest thing to the Cayman Islands that the art world has to offer. It’s a haven where the climate — financial and otherwise — is ideal for high-net-worth individuals and their assets. ”

Read on at The New York Times.

Photo by Victo Ngai