Legislation

Art law in Germany is not a separate area of codification, but rather an interdisciplinary, cross-sectional area of law that encompasses public and private law regulations. The Cultural Property Protection Act (KGSG) plays a central role in the protection of cultural property. It regulates the import and export of cultural property, the registration of nationally valuable cultural property, and the due diligence obligations of the art trade, in particular with regard to provenance checks. It is flanked by EU regulations such as Regulation (EC) No 116/2009 and Directive 2014/60/EU.

In the area of intellectual property, the Copyright Act (UrhG) is decisive. It protects works of fine art, grants moral rights, regulates exploitation rights and the resale right in the event of resale.

The provisions of the German Civil Code (BGB) relating to sales law are also relevant to the art trade, in particular with regard to material defects, acquisition of ownership, and the statute of limitations. Criminal law risks arise, among other things, from the German Criminal Code (StGB) in cases of fraud, handling stolen goods or money laundering.

The Money Laundering Act (GwG) also applies.

Relevant Authorities

The competent authorities at the federal level are, in particular, the Federal Government Commissioner for Culture and the Media and the customs authorities.

At the state level, monument protection authorities and ministries of culture play a central role. The German Lost Art Foundation is of particular importance for questions of provenance and restitution.

Under German law, artists as authors have certain legal rights to their own works. These rights are divided into moral rights and exploitation rights in accordance with the Copyright Act (UrhG).

Moral Rights

The author has the right to recognition of their authorship of the work and can determine whether and how the work is marked with a copyright notice.

Copyright protects the author in their intellectual and personal relationship to the work.

The artist’s right to a name is also understood as a special form of the general right of personality and is also protected by German Law. An artist can defend themselves against the unauthorised use of their name.

Exploitation Rights

The author has the exclusive right to exploit their work in physical and non-physical form, in particular through reproduction, distribution, exhibition and public performance.

These rights may be transferred to third parties through rights of use, but the copyright itself remains with the author and is not transferable.

Performing artists also have a right to recognition of their performance and can determine whether and under what name they are named.

In summary, under German law, an artist has the right to recognition as the author, the right to be named, comprehensive exploitation rights, and protection against interference with their authorship and name. In the event of violations, there is a right to rectification, cessation and, if applicable, compensation.

If several artists jointly create an art work without their shares being separately exploitable, they are co-authors. They then hold the copyright jointly – ie, essential decisions such as publication, exploitation and changes to the work may only be made jointly; however, no co-author may refuse to give their consent in bad faith.

• The exploitation of the work (eg, licensing, publication) requires the consent of all co-authors.
• Changes to the work are also only permitted with the consent of all co-authors.
• Each co-author is entitled to assert claims arising from infringements of the joint copyright, but can in principle only demand payment to all co-authors.
• The proceeds from the use of the work are due to the co-authors in proportion to their contribution, unless otherwise agreed.
• A co-author may waive their share of the exploitation rights; their share accrues to the others.

In the case of violation of the copyright on a piece of artwork, the author can sue for injunctive relief and damages. However, it is first necessary to issue a warning letter, the costs of which are borne by the potential infringer.

Damages can be calculated according to the following criteria: either based on the infringer’s profits from the use of the artwork or the exploitation of the copyright, or based on the specific damage, provided that this can be quantified, or based on a standard market licence fee. In some cases, immaterial damage can also be compensated.

Copyright infringements can also have criminal law consequences, but criminal law protection is subject to higher requirements; in particular, commercial exploitation in violation of third-party copyrights is punishable by law.

In summary, copyright infringement leads to claims for injunctive relief, removal, damages and information, as well as possible criminal consequences, with the focus on civil legal protection.

Protection

The German Copyright Act regulates protected works and the requirements for copyright protection. Protected works of literature, science and art include, in particular:

• verbal works, such as written works, speeches and computer programs;
• musical works;
• pantomime works, including works of dance;
• works of fine art, including works of architecture and applied art, as well as designs for such works;
• photographic works, including works created in a manner similar to photographic works;
• cinematographic works, including works created in a manner similar to cinematographic works; and
• representations of a scientific or technical nature, such as drawings, plans, maps, sketches, tables and plastic representations.

Works within the meaning of this Act are only personal intellectual creations. This means that copyright protection only applies to works that represent an individual, creative achievement of the author.

Registration

A registration is not constitutive which means that the work is protected in the moment after being created by the author.

However, an exception is the register for anonymous and pseudonymous works which is maintained by the German Patent and Trademark Office. An author or entitled party can register their authorship in order to prove their rights in the event of a dispute. Such a registration is voluntary and has a declaratory effect.

German copyright law also includes a so-called droit de suite. This gives the author of a work the right to receive a share of the proceeds from further sales if an auctioneer or art dealer is involved as the purchaser, intermediary or seller. These rights are then usually asserted by so-called collecting societies (eg, VG Bild). It is inalienable and cannot be waived.

The amount of remuneration is capped at amounts to a maximum of EUR12,500 per resale.

Copyright law provides for the possibility of granting someone a right to use an image or a work of art. This can be reflected in a contract. The author can grant a third party the right to use the work for certain or all types of use; this is typically done through a licence agreement that specifies the type and scope of the permitted use (eg, reproduction, distribution, making available to the public) in a licence agreement. The contractually agreed use should not be exceeded, otherwise this in turn constitutes a copyright infringement.

A right of use that has already been granted can only be transferred with the consent of the author.

Copyright can be inherited and passes to the persons whom the author has appointed as heirs or legatees. The author can determine in their will who should receive the rights.

It is important to note that copyright cannot be transferred outside of a succession.

The heirs can then also assert the corresponding rights associated with copyright – ie, exploitation rights or damages in the event of copyright infringement or licence fees.

It should be noted that the law regulates how long the right is protected. The term of copyright protection is generally 70 years after the death of the author.

There is generally no obligation for a foundation or another person who can assert copyrights to include a particular work by an artist in a catalogue raisonné. In German law, a catalogue raisonné is a compilation of all of an artist’s works based on scientific findings. It is a comprehensive and systematic documentation and analysis of the biography and complete works of the artist in question, often taking into account the provenance, date of creation, technique and location of the works.

However, even the creator of a catalogue raisonné cannot be forced to include a particular work against their scientific convictions. This is not mandatory within the framework of academic freedom.

Confirmation of authenticity cannot be demanded either.

Where purchased artworks are declared inauthentic after purchase, this constitutes a so-called defect – ie, warranty rights are available under sales contract law.

It can be assumed that, in the context of a sales contract for a work of art, authenticity is an essential characteristic of the item being purchased and was either expected or even expressly agreed upon.

The seller then has the right to remedy the defect or make a replacement delivery. Remedying the defect is not possible in the case of a defect relating to authenticity. Authenticity cannot be restored, so that the other rights can be asserted. The only option then is a replacement delivery, which is also difficult to achieve.

The buyer can therefore withdraw from the contract and demand rescission or a reduction in the purchase price. 

However, it must be ensured that no exclusion of liability has been agreed. Such an exclusion leads to the exclusion of the warranty, unless the seller has acted fraudulently and deliberately misled the buyer.

Concept of Cultural Property

There is no definition of cultural heritage in German law. However, there is the concept of cultural property. If a work falls under this classification, special regulations contained in the Cultural Property Protection Act apply.

The Cultural Property Protection Act covers works of art that are defined as “cultural property”. These are movable objects or collections of objects of artistic, historical or archaeological value or from other areas of cultural heritage, in particular of palaeontological, ethnographic, numismatic or scientific value.

Works of art enjoy special protection as “national cultural property” if they:

• are entered in a register of nationally valuable cultural property;
• are publicly owned and held by a public-law institution for the preservation of cultural property;
• are owned and held by a cultural property preservation institution that is predominantly financed by public funds; or
• are part of an art collection of the federal government or the federal states.

Entry in the register of nationally valuable cultural property pursuant to the KGSG requires that the work of art be of particular significance to the cultural heritage of Germany or one of its regions and that its removal would represent a significant loss to German cultural property. Works by living authors may only be entered with their consent. The export of works of art is also subject to value and age limits which, if exceeded, require an export licence.

In summary, the KGSG covers all movable works of art of artistic, historical or scientific value. Works of art that are in public collections or have been entered in the register of nationally valuable cultural assets enjoy special protection as national cultural assets.

According to the German Cultural Property Protection Act, it is prohibited to place on the market cultural property that has been lost, illegally excavated or unlawfully imported. Transactions involving obligations and dispositions that are prohibited are null and void.

However, the German Cultural Property Protection Act does not completely exclude the possibility of an adverse possession. In this case, the general rules of the German Civil Code apply.

Adverse possession of works of art is generally possible provided that the general requirements – ten years of ownership and good faith – are met.

However, there are restrictions.

• If the work of art has been lost (eg, stolen or misplaced), adverse possession is excluded if the owner was not acting in good faith at the time of acquisition or later learns of the lack of authorisation.
• There is a prohibition on the marketing of lost cultural property, which is sometimes interpreted in the literature as an indication of an exclusion of adverse possession. However, case law does not see this as a general exclusion of adverse possession, but points out that in most cases there is already a lack of good faith, especially in the case of museum pieces or clearly identifiable cultural property.
• Adverse possession is also excluded if there is a general prohibition on acquisition, which is not generally the case for works of art.

As a result, an adverse possession is possible, however the requirements of the German Civil Code are high. Overall, the problem with works of art that qualify as cultural property is that good faith is not usually given and ten years can also be very long for a minimum holding period.

In the individual federal states of Germany, there are treasury rights for cultural heritage items which are ownerless or can be attributed to cultural history, or that are scientifically significant finds that become the property of the state or another public authority upon discovery.

Furthermore, the state can secure and confiscate the cultural property in accordance with the Cultural Property Protection Act if it has been illegally imported, exported or lost. It then becomes the property of the state. Any rights of third parties expire. The previous owner is generally entitled to appropriate compensation, unless they have recklessly brought about the conditions for seizure or acquired the cultural property in full knowledge of the circumstances.

If the cultural property belongs to the state or a public corporation, there are claims for surrender.

The mere fact that it is cultural property is not sufficient to effect surrender by the owner. However, there are often restrictions on the owner’s rights.

Monument protection: Even if ownership remains with the private individual, state monument protection law may impose extensive restrictions on the use, alteration and sale of the cultural property. Such provisions restricting the content and scope of ownership are permissible under Article 14(1) sentence 2 of the German Constitutional Law as long as they are proportionate and serve the common good.

In summary, depending on the circumstances and state law, the state may acquire ownership of the find, secure and confiscate the cultural property, demand its surrender or restrict its use; claims for compensation by private individuals must be taken into account. 

In principle, German law stipulates that an art sale contract is a typical purchase agreement, meaning that the general rules governing purchase agreements apply. The seller undertakes to hand over the artwork to the buyer and to transfer ownership of it. The artwork must be free of material defects and defects of title. The buyer is obliged to pay the agreed purchase price and to accept the artwork.

It is necessary to provide precise details of the artwork’s value, such as the artist, title, technique, dimensions, year of creation and provenance.

Provenance in particular is an important factor in the art market. In art law, provenance refers to the history of the origin and ownership of a work of art – ie, the complete documentation of the ownership and possession of the work from its creation to the current owner, previous owners, storage locations, donations or inheritances. It can also be significant when works of art lead to claims for restitution (eg, in the case of cultural property confiscated as a result of Nazi persecution) or to the fulfilment of legal due diligence obligations, in particular under the Cultural Property Protection Act.

Complete proof of provenance increases the value of the work and is often a prerequisite for legally secure trading. If the provenance is problematic, this must also be disclosed to the buyer if it is not complete.

In the art trade, an exclusion of warranty – especially for authenticity and origin – is common and generally permissible, provided there is no malice or guarantee. The seller is not liable for defects that are known to the buyer at the time of conclusion of the contract.

Furthermore, the purchase price and due date are specified, as well as the time and modalities of delivery.

Catalogue information or expert opinions are generally not binding agreements on quality, but purely informational, unless they are expressly agreed as such. Rights of withdrawal may also be voluntarily agreed.

In summary, a typical art purchase agreement contains provisions on the object of purchase, price, transfer/ownership, quality, warranty/liability, transfer of risk and other modalities; special features exist in the quality agreement and exclusion of warranty/liability.

When selling a work of art with transfer abroad, the following legal aspects in particular must be observed.

In terms of the Cultural Property Protection Act, if the item is cultural property, its export is subject to authorisation if the work of art exceeds certain age and value limits or is listed in a register of nationally valuable cultural property. From a German perspective, no distinction is made between EU and third countries. If an export licence is not available, penalties and fines may be imposed.

When exporting and, in particular, when importing into the country of destination, the legality of the export from Germany and, if applicable, the provenance of the artwork must be documented by means of appropriate documents (eg, export licence, certificates of origin).

German sales law does not apply to international art sales; instead, the UN Convention on Contracts for the International Sale of Goods (CISG) applies if the buyer and seller are based in contracting states and no other choice of law has been made.

The CISG regulates in particular the rights and obligations of the parties, warranty and transfer of risk, but does not contain any provisions on the protection of cultural property or export licences.

In an international case, the seller must obtain the licence. The buyer should ensure that the licence and export permit are also available.

When it comes to the responsibility of auction houses for counterfeit works of art, it depends on the parties to the contract. Regardless of any contract, auction houses may be liable for tort (damages).

In short, auction houses are liable for fake art if they violate their duty to examine, act fraudulently or provide a guarantee. However, with careful examination and effective warranty exclusion, liability is excluded.

Contractual Liability

If the auction house acts as a contractual partner in the same way as a seller, it is liable in the same way as a seller for material defects, in particular if a characteristic (eg, authenticity) has been expressly guaranteed or a warranty has been given. In practice, auction houses usually exclude any warranty of authenticity.

As with other persons, such an exclusion is valid unless the auction house acts fraudulently or provides a guarantee.

Tortious Liability

If the auction house can be proven to have intentionally or negligently misrepresented the authenticity of the artwork at the time of sale, for example, a claim for damages may be considered. Liability for negligent acts may be considered if the auction house violates its duty of care, for example by failing to conduct a sufficient examination of authenticity despite recognisable doubts. As a rule, reputable auction houses examine the authenticity of the artworks that are put up for auction.

Gross negligence even exists if an art historian fails to recognise a forgery, even though this would have been possible with careful examination.

Auction houses are commercial enterprises and are licensed as such by the trade licensing authority. According to the German Trade Licensing Act, auctioneers must act in a particularly knowledgeable, conscientious and impartial manner. This includes the obligation to verify the authenticity, origin and condition of works of art to the best of their knowledge and to provide an accurate description in the auction catalogue.

The specific duties have been established in case law. Auction houses must carefully examine the works of art they wish to put up for auction, in particular with regard to authenticity and provenance. This must be done independently – ie, on the basis of their own research. The higher the value of the work of art, the more intensive the examination obligation. In case of justified doubts, the auction house is also required to consult an expert to be sure.

The auction house must also ensure that the catalogue information is provided to the best of its knowledge and belief and that no misleading or inaccurate information is provided. In the event of a legal dispute, the auction house must prove that the relevant inspection and due diligence obligations have been complied with.

There is no typical regulatory framework for an art adviser, who will usually advise their clients on the purchase of art and thus act as an adviser. They conclude a service contract and provide the services defined therein.

Their main responsibility is to provide the client with expert, careful and truthful information about the characteristics, value, authenticity and risks of the artwork. They should incorporate their expertise into their advice and also take into account the client’s risk profile and objectives. The details depend on the contract – ie, which specific obligations have been stipulated. This also determines the service to be provided (eg, acquisition of artworks that will increase in value or the compilation of a specific art collection).

The advice must be both investor-oriented (taking into account the client’s knowledge, objectives and risk tolerance) and object-oriented (comprehensive information about the art object and its special features).

In the event of incorrect or incomplete advice, the art adviser is liable for damages if the client suffers financial loss as a result. The burden of proof for a breach of duty lies with the client.

The Money Laundering Act applies in Germany. This also covers art dealers and auction houses, which have extensive obligations under money laundering law. The key obligations include the following, in particular.

• General due diligence obligations – according the German GwG, art dealers and auction houses must verify the identity of the contracting party for transactions exceeding EUR10,000 (or EUR2,000 for cash transactions) and, where applicable, also the identity of the person acting on their behalf and the beneficial owner. In addition, information about the purpose and nature of the business relationship must be obtained and evaluated, and the business relationship must be monitored on an ongoing basis.
• Risk management – in general, there is an obligation to set up a risk management system that includes a risk analysis and internal security measures. In certain cases, a money laundering officer must be appointed to monitor these obligations for the auction house.
• Suspicion reporting obligation – if facts come to light that indicate money laundering or terrorist financing, a report must be made immediately to the Financial Intelligence Unit (FIU). The reporting obligation also applies to unusual or implausible transactions.

Art collections and libraries may also qualify as cultural property under the Cultural Property Protection Act (KGSG). Collections such as library holdings and collections, provided they have artistic, historical, scientific or other cultural value, are also covered by the scope of protection. Libraries are also expressly referred to as “cultural property preservation institutions”.

This is subject to the following rules, otherwise, the general rules apply to art collections.

• Protection includes, in particular, a ban on uncontrolled export from Germany, the possibility of registration in lists of nationally valuable cultural property, and claims for return and restitution in the event of unlawful removal or deprivation.
• The donation or inheritance of an art collection may also be eligible for tax relief if, under certain conditions, it is made available to the general public.

In summary, art collections and libraries are specially protected as cultural assets within the meaning of the KGSG and other regulations, in particular against emigration, loss and unlawful removal.

Photographs can be considered works of art and are therefore also subject to copyright. The prerequisite is that they are photographic works that represent the intellectual creation of their author.

It is necessary for the photograph to be the result of an individual, creative design, whereby the requirements for the level of design are low.

It is sufficient if the photographer makes a personal artistic contribution through the choice of motif, composition, exposure, perspective or other creative means and has thus created something new. Portrait or landscape photographs can be works of art if they display original design.

In individual cases, it is often difficult to determine when a work of art exists. If an artistic component is denied, the photograph may constitute a photograph and, if it is the original image, also enjoys a certain degree of protection. This is not the case if it is only a copy of an existing image.

If a photograph is not a classic work of art within the meaning of the German Copyright Act, it can still be protected as a photograph. This protection applies to all photographs and comparable products, regardless of any particular artistic design or level of creativity.

This means that photographs taken for technical or documentary purposes, such as passport photos, product photos or snapshots, are protected by copyright, provided they are not merely mechanical copies of another photograph.

In this case, only the photographer as the author is entitled to reproduce, distribute and make publicly available the photograph they have taken. The term of protection is 50 years from publication or, if the photograph has not been published, from production. According to case law and literature, the threshold for protection as a photograph is very low.

An NFT (“non-fungible token”) is not a physical object (“thing”) under German law, but is treated as another object within the meaning of the German Civil Code (BGB).

These are digital, non-exchangeable tokens on a blockchain that can serve as a certificate of exclusivity for a specific digital or physical reference object – eg, digital art, music or collectibles. Since it is not a physical object, it is not a thing, but also not a right, because it does not confer any classic rights. The owner only holds possession of a token.

The fact that NFTs qualify as “other objects” means that they can also be the subject of contracts. Instead of a handover, a technical transfer on the blockchain is then required.

In summary, under German law, an NFT is a digital, non-physical, other object that exists on the blockchain as a unique certificate and is treated as such in legal terms; transfer and taxation are governed by the respective regulations for other objects.

NFTs can be counterfeited. There is the technical counterfeiting of NFTs, which are created and purport to represent an original digital work, but the issuer is not authorised to do so. This can lead to criminal deception – ie, fraud or, in some cases, document forgery.

If an NFT is traded without the consent of the rights-holder, this can lead to claims for damages.

The transfer of works of art and art collections can take place in various ways in Germany.

• First, it is necessary to consider what the testator intends to do with the works of art, whether they will be kept within the family, made available to the general public, or used entirely for charitable purposes. It is also important to consider whether the works of art should remain as a whole or whether they may be transferred individually.
• Under German law, it must be taken into account that in the event of a transfer to several heirs, they form a so-called community of heirs. They can then only make decisions jointly and no one can dispose of the art as a co-heir alone. It is also difficult to reach an agreement when it comes to deciding who ultimately receives which painting. The co-heir can only sell their share of the inheritance, but not the individual work of art. However, it can also happen that, due to inheritance disputes or tax payments, some of the works of art have to be sold and the collection is then broken up.
• One solution is therefore to transfer the works of art or the art collection to a foundation in order to keep the works together. There is the option of a family foundation, which generally supports family members. It is not a charitable organisation, but can hold the art without any further requirements. A family foundation cannot be dissolved by the beneficiaries or the foundation’s board of trustees without further ado, so it exists virtually forever. This can be useful for preserving an art collection.
• Collectors or artists often decide to transfer the artworks to a charitable foundation, which must use the artworks to promote charitable purposes. It is tax-exempt, but in return must strictly adhere to the requirements of charitable law. Once in a charitable foundation, the artworks may no longer be transferred to the assets of a private individual.

Under German law, works of art are inherited in the same way as other assets, by way of universal succession.

Upon the death of the testator, their entire estate, including works of art, is automatically transferred to the heir or heirs. However, art can also be passed on to legatees. In this case, they only have a claim against the heirs for the surrender of the works of art.

If there are several heirs, a community of heirs is formed, which is entitled to the entire estate – including the works of art – as joint property. The heirs can only dispose of individual items of the estate, including works of art, jointly.

The heirs immediately assume the position of the testator. If there is a will or an inheritance contract, the testator can bequeath individual works of art to specific persons; in this case, the heirs initially acquire ownership, but must surrender the work of art to the legatee.

German inheritance law also recognises the right to a compulsory portion, which guarantees the next of kin a minimum share of the estate, even if the testator has disinherited them; this can also apply to works of art. This can be particularly problematic because the claim to a compulsory portion is a monetary claim, but the works of art represent illiquid assets. In extreme cases, the heirs would then have to sell the assets in order to satisfy the compulsory portion claims. If illiquid assets – such as an art collection – are inherited, it is therefore advisable to agree on a waiver of the compulsory portion with the parties concerned. This can only be done before a notary and, of course, the parties involved must also agree to this.

The donation or inheritance of works of art is generally subject to inheritance and gift tax. The purchaser – ie, the heir or donee to whose assets the work of art is transferred free of charge, is liable for tax. However, this only applies if either the testator/donor or the purchaser is resident in Germany – ie, has their domicile or habitual residence in Germany.

If this is not the case, Germany would not levy inheritance or gift tax, even if, for example, the art is located in Germany. It is a movable object, for which the location is irrelevant (unlike real estate).

Works of art are generally valued at their fair market value at the time of acquisition. This means that the market value of the work of art is decisive for the tax assessment. This is often not easy to determine. In individual cases, it may be advisable to obtain an expert opinion from an art expert.

The amount of tax is based on the value of the acquired work of art, the family relationship (tax class) and personal allowances. Higher allowances apply to close relatives (eg, spouses, children) and lower allowances to more distant relatives or third parties. Several gifts from the same donor to the same recipient within ten years are added together for the calculation of the allowance.

There are tax allowances for transfers every ten years; for spouses EUR500,000, for children EUR400,000 and for grandchildren EUR200,000. However, for brothers, sisters and third persons, it is only EUR20,000.

There are also three tax classes in German inheritance and gift tax law. Tax class I covers transfers between spouses and direct descendants at a rate of 7–30%, while tax class II covers transfers between siblings, uncles, aunts, nephews and nieces at a rate of 15–43% and transfers to third parties at a rate of 30 or 50%.

For the tax exemptions see 10.4 Artworks Exempt from Inheritance/Donations Taxes.

Works of art, art collections, scientific collections, libraries and archives are exempt from inheritance tax under the following conditions, which must be met cumulatively:

• if their preservation is in the public interest due to their significance for art, history or science;
• they are made available to an appropriate extent for the purposes of research or public education; and
• the annual costs generally exceed the income generated.

In this case, the beneficiary items are to be valued at 40% of their value (15% for real estate).

A full tax exemption is possible if, in addition, there is a willingness to subject the items to the applicable provisions of monument preservation and they have been in the family’s possession for at least 20 years or are listed in the register of nationally valuable cultural assets.

The purchaser must fulfil the requirements; in particular, proof of subjection to monument preservation must be provided.

Arts and crafts and frequently reproduced works are not eligible, nor are works of poetry or music, manuscripts, literary works or pieces of music; works of fine art such as paintings and sculptures are particularly eligible.

The above tax exemption can be fulfilled as follows: the works of art can be made available to a museum through a loan agreement in order to make them available for the purposes of public education or research. This should be prepared before the succession.

For 100% tax exemption, it is sufficient to involve the monument protection authority. This should be sufficiently documented.

Furthermore, the art or the entire art collection can also be transferred tax-free to a charitable foundation. It must be recognised as charitable under German law.

The exemption shall cease to apply with retroactive effect if the conditions for recognition as a charitable organisation cease to apply within ten years of the transfer and the assets are not used for charitable purposes. It should be noted that the recipient organisation must meet the requirements of German charitable law. In practice, this will be difficult or impossible for almost all foreign organisations.

It is also possible to transfer art or art collections to a natural person or a non-charitable organisation, provided that the latter undertakes to use the art/art collections for charitable purposes.

Tax exemption is not about the recipient organisation, but about the use itself. In practice, this should be secured by a funding agreement. This provision makes it possible to transfer art tax-free to a charity abroad.

Germany has not ratified the Hague Trust Convention, which means that trusts are not recognised as independent legal entities in Germany. Trusts do not exist as legal entities under German law. The reason for this is that German law does not allow beneficial ownership to be separated from equitable ownership. Under German law, a trust cannot therefore hold works of art as a legal entity itself.

If a trust is established under foreign law, the trustee, as the formal owner under the applicable foreign law, can hold and manage the assets (eg, German works of art); ownership is transferred to the trustee, who manages it in the interests of the beneficiaries. Under German law, however, it is not the trust as such, but the trustee as a natural or legal person who is entered as the owner in the land register or register. The recognition of the trust and its effects is governed by German private international law. As a rule, the trust is subject to the law chosen by the settlor. In the absence of an express or implied choice of law, the law with which the trust has the closest connection is decisive. The chosen law governs the validity, interpretation, effects and administration of the trust as well as the rights and obligations of the parties involved.

If a person wanted to set up a structure similar to a trust under German law, they could consider permanent executorship in inheritance cases or even set up a foundation so that art is bundled in a legal form. In the case of permanent executorship, estate assets are permanently administered by a person on behalf of the heirs, thereby also protecting the assets. However, structuring via a foundation is more secure because the foundation is a separate entity and foundations are also subject to foundation supervision. They cannot be dissolved, which can be particularly interesting for works of art or art collections that are to be protected from sale or where fragmentation of the assets is undesirable.