South Korea's soft power has taken the world by storm in recent years with K-Pop music, award-winning movies such as Parasite, and their mega-hit Netflix series, Squid Games, getting into mainstream western culture. Furthermore, the country is now gaining attention from the international art world for its talented artists, wealthy art collectors, and attractive business incentives. It appears to be we are witnessing the rise of a new art hub in Asia.
In this article, you will find everything you need to know about the contemporary art market in South Korea: from why its economy to understanding the rise of local art collectors to its local infrastructure that allowed for the new wave of western art galleries to move in.
Economy
South Korea is doing quite well economically. It is among the leading export and import countries worldwide, exporting electronics, automobiles, and machinery. According to Statistica, it is one of the top countries with the most significant proportion of global domestic product / GDP based on Purchasing Power Parity (PPP).
Despite the economic downturn triggered by the COVID-19 outbreak, the population of high-net-worth individuals in South Korea increased, similar to the wealth of individuals in other developed nations. According to Forbes, the wealth of Korean billionaires increased by 46% in 2021. As the number of wealthy individuals rises, we see the rise of art collectors, especially from the younger generation of South Koreans, who play a vital role in supporting the growth of the art market ecosystem.
Change in Wealth by Region:
© Arts Economics (2022) with data from Artory
Art Market Size
Last year South Korea's art market grew almost three-fold, according to KAMS, reaching an estimated value of 920 billion won ($663.6m). In terms of its art market global scale, South Korea only made up 2% of the value of sales in 2021. However, local art market in Seoul is thriving with an ever-widening customer base, particularly among the young. The rise of young art collectors in their 30s and 40s in South Korea is looking at art as the new financial asset to replace stock and real estate investing.
Market Share of the Post-War and Contemporary Sector in 2021: Value of Sales
© Arts Economics (2022) with data from Artory
Taxes
The Korean government recently imposed new tax regulations on traditional wealth-building assets, such as stock and real estate. To cool an overheated housing market, the government has raised taxes on multiple-home owners, tightened regulations on real-estate loans, and imposed capital gains on real estate sales. Additionally, for the first time, Koreans will now also have to pay capital gains on cryptocurrency and stock trading from 2022 and 2023. Luckily, there are no capital gain taxes on personal transfers of artworks and inheritances or gifts to heirs, and the VAT on art sales is low and, at times, zero. These new tax regulations have made art collecting, or, shall I say, art investing, very attractive to the wealthy populations of Koreans looking to grow their wealth.
Capital Gains Tax: Artworks valued below 60 million Korean won ($43,255) are exempt from capital gains taxes. For pieces valued above that amount, a 22% tax is levied on a maximum of 20% of the sales price, and there's no levy on transactions involving works by living local artists.
VAT: Zero VAT on art by living artists valued at less than 60m Korean won ($43,255). But this does not apply to photographs, editions, and multiples (and anything else that can be considered easily reproducible or distinct from a unique work of art). The non "unique artwork" has a 10% VAT.
Import Tax: Zero VAT if the import is classified as a "unique artwork." Otherwise, a flat 10 percent Value Added Tax (VAT) on all imports and domestically manufactured goods. A special excise tax of 10-20 percent is also levied on importing certain luxury items and durable consumer goods.
Knowing the taxes applied in different countries and the country's specific art classification is beneficial when importing art. For example, in South Korea, LEDs and other artworks with electric lights are categorized as "Lighting equipment" rather than art by Korean customs. This artwork classification means that it is slapped with a hefty 30% import tax on the value of the work, including shipping costs.
Western Blue-Chip Galleries Moving-In
For the past few decades, Western galleries have been doggedly exploring opportunities for growth in Asia. In the beginning, Hong Kong drew their interest with its free trade and investment policy, efficient governance, low taxation, and more. Then they looked towards mainland China, with mixed results. But in the past couple of years, alongside regional art hubs such as Tokyo, Taipei, Singapore, and Jakarta, Seoul has been getting the most attention, attracting an influx of international galleries. Galleries such as Pace, Lehmann Maupin, Perrotin, Thaddaeus Ropac, Various Small Fires, and Frieze art fair have all made Seoul their new home in Asia as a way to attract the regional ultra-high-net-worth collectors.
Courtesy of Andrew Russeth for Artnews
Infrastructure
Before global galleries and Frieze arrived, South Korea had a robust domestic art market. It is home to incredibly talented artists, such as Nam June Paik, Do Ho Suh, and Lee Ufan, world-class museums, corporate collections, non-profits, biennales, art fairs, galleries, and auction houses. It is no wonder South Korea's art market is now rising globally. Local galleries that have been opened since the 70s and 80s, such as Gallery Hyundai, Kukje Gallery, and Arario Gallery, helped establish a vibrant scene along with private and public institutions having exhibitions of major international blue-chip artists such as Alexander Calder, Anish Kapoor, and David Hockney. The effort put forth by art institutions in South Korea helped to cultivate an interest in fine art in society, thus making the transition from spectator to collector seamless.
However, the solid collector base in South Korea that we are witnessing today has not always been there. This new rise in art buyers is one of the reasons the art market is growing. An art market is never strong despite its developed cultural infrastructure unless there are local buyers to support the galleries and artists of the region.
Closing Thoughts
As we can see, the Korean art market is very healthy and is expected to continue growing. Seoul's thriving local gallery scene, growing class of affluent collectors, developed infrastructure, low taxes, and international blue-chip western galleries contribute to cultivating a healthy and sustainable art market. However, it has a long way to go, explicitly concerning logistics. South Korea currently does not have enough professionally trained art handlers, properly equipped storage spaces, and not enough designated art shippers. Still, I am sure this will resolve in the upcoming years as more businesses will result from the rise of the art market.