Tax Havens Shelter Art Billions

Art collectors of ArtKabinett social media network enjoying going to Madrid's Art Triangle: the Prado, Reina Sofia, and Thyssen-Bornemisza.

What visitors don’t know as they visit the latter is that many of the Monets and Matisses are legally owned by secrecy-guarded companies in tax havens: Liechtenstein, the Cayman Islands, the British Virgin Islands and the Cook Islands.

Van Gogh’s 1884 painting, Water Mill at Gennep, is one of the works that Baroness Carmen Thyssen-Bornemisza, pictured here, purchased with the help of an offshore operative based in the Cook Islands, a South Pacific haven more than 10,000 miles from Madrid.

Documents obtained by the International Consortium of Investigative Journalists show how Thyssen-Bornemisza built up part of her collection buying art from international auction houses such as Sotheby’s and Christie’s through a Cook Islands company.

The offshore service provider now called Portcullis TrustNet helped with the arrangements under a secretive structure that connected people in as many as six different countries.

Thyssen-Bornemisza gains tax benefits by holding ownership of her art offshore, and gains maximum flexibility when the paintings are moved from country to country.

Offshore ownership helps prevent works of art from getting tied up by laws in various countries that can make it a nightmare to transfer them across national borders.

Thyssen-Bornemisza isn’t alone in using offshore havens to manage her vast art collection. Many of the multi-millionaires and billionaires who count themselves among the world’s biggest art collectors use tax havens to buy and sell art, experts told ICIJ.

Using offshore entities to buy and sell art “is quite common among the very, very wealthy,” said Hector Feliciano, a Puerto Rican journalist who investigated the commercial side of the art world for his book about Nazi-plundered art, The Lost Museum.

Feliciano said many art dealers and big collectors use companies in the Cayman Islands, Luxembourg, Monaco and other “loosely regulated” jurisdictions to trade and own art in much the same way they use offshore entities to make investments, reduce their taxes and protect their fortunes.

The global art market now tops $55.1 billion. The mixing of art and offshore is another example of how the super-rich use tax havens to organize their lives and their belongings — buying and selling art, yachts, homes and jewelry through offshore companies and trusts.

In the United States, a 2006 Senate investigation found that billionaire brothers Sam and Charles Wyly and their families had spent “at least $30 million in untaxed offshore dollars” on artwork, jewelry and furnishings over a 13-year period.

A $937,500 portrait of Benjamin Franklin and other items were legally owned by two offshore corporations, but the report said evidence showed that the family held and used these assets in the U.S.

Thyssen-Bornemisza’s attorney said she paid sales taxes for her paintings in the countries where she bought them, but she doesn’t pay annual wealth taxes on them in Spain or Switzerland, where she holds a passport.

A loophole in Spanish law allows her to live in Spain most of the year, but not declare her wealth or pay taxes. She declares her assets in Switzerland but she doesn’t have to pay taxes there on her art because assets held in trusts are exempt from taxation under Swiss law.

Had the paintings been owned directly under her name, instead of through offshore entities, she may have been required to pay millions of dollars a year in taxes, ICIJ’s research indicates.

The Carmen Thyssen-Bornemisza collection remains in Spain temporarily, though, given up “for free” thanks to a loan agreement signed in 1999 with then-Minister of Culture (and now Prime Minister) Mariano Rajoy.

It was due to expire in 2011, but it has been renewed yearly since then — although the number of paintings has decreased 35 percent because of the move to Málaga.

In return, the public foundation that owns the Thyssen-Bornemisza museum in Madrid receives around €4 million annually in subsidies. Public funds also paid for an expansion between 2002 and 2004.