Conditions for deducting a provision for a collection of works of art: an example

A company operating as an art publisher was subject to a tax audit, following whichadministration challenged the deductibility of a provision for inventory write-downs claimed during the 2016 fiscal year.

The company had, in fact, had its inventory of artworks appraised by an auctioneer, who estimated that its value was lower than the amount recorded in the company’s books.

The reassessment was challenged all the way to the Administrative Court of Appeals, which ruled that:

• The auctioneer's appraisal merely provides a brief analysis of the works without taking the date of acquisition into account

• Out of a sample of 21 sales made in 2016 and 2017, the company did not sell any artwork at a loss

• At these auctions, the selling prices were significantly higher than the appraised values

• The company failed to prove that "the simultaneous release of numerous similar lithographs would, by increasing supply, cause the applicable prices to fall" to such an extent that the sale of a single work would not have reflected the value of the inventory. The Court further notes that the existence of works similar to the 21 works sold necessarily had an impact on their price.

• Even if we assume that there is only weak demand in the lithography market, this does not justify writing down the inventory, especially since the company has not demonstrated that the sales made in 2016 and 2017 "do not reflect the characteristics of this market."

 The Administrative Court of Appeals therefore ruled that the provision was not justified and was not deductible. It upheld the tax assessment.

CAA Paris, Dec. 1, 2025, No. 24PA02224

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