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This warehouse is not part of the United States, at least if you ask the IRS, this warehouse
is not part of Switzerland, at least if you ask the Swiss Tax Administration, this warehouse
is not part of Singapore, at least if you ask the Revenue Authority of Singapore, and
this warehouse is not part of Australia, but that’s because it’s in Norway.
What these places are are freeports—warehouses that, for the purposes of taxation, are not
in the country they are in.
Each and every country can essentially decide where within its territory its laws apply,
and while most laws apply in most places, there are, of course, exceptions.
The best known example is embassies.
In France’s embassy in South Africa, for example, the South African laws don’t apply—French
laws apply.
No matter what’s going on within those walls, South African police are not allowed to enter
because it’s not their jurisdiction.
For all intents and purposes embassies are parts of their home country with a tiny little
asterisk—they’re not.
While embassies do have the laws of their home country they are not sovereign territory
of their home country.
This allows the host country to kick embassies out if they get too many parking tickets or
build a thermonuclear bomb in their basement, for example.
There are also some other categories of land that work similarly yet differently to embassies.
For example, the United Nations headquarters in New York is not considered to be sovereign
territory of the US but the laws of the US do apply, except in the case where UN laws
override US laws, and the large hadron particle collider at CERN is so big that it stretches
from Switzerland into France but, for the purposes of simplicity, the tunnels in France
are considered to be part of Switzerland.
This allows CERN to more easily carry out its business of definitely not shifting the
world into an alternate reality where a certain someone became president as they officially
denied.
But the point is that countries can make special areas with special laws, and that’s exactly
what happened with these warehouses.
Freeports were originally designed as places for goods to be stored near ports for free.
If someone wants to ship goods from Rotterdam, Netherlands to Kingston, Jamaica, for example,
they might not ship the goods directly but rather send them on a boat to Boston then
on a different boat to Kingston.
Once goods enter the United States, however, you have to pay taxes on them.
That is, of course, unless you put them in a freeport.
That’s what these warehouses are—they’re weird jurisdictional exemptions where you
can put anything and legally not pay import taxes on it because, for customs purposes,
it has not entered the country.
Ports and airports all around the world have these areas but freeports are starting to
be used for something entirely different.
This painting was recently sold at auction for 450 million dollars making it the most
expensive piece of art ever sold, but five years earlier, it was bought by this guy,
Dmitry Rybolovlev, for $127.5 million.
He then brought it to Switzerland where normally he would have to pay the 7.7% import tax on
it which is equivalent to almost $10 million, more than the cost of a Toyota Corolla, but
he didn’t want to so he put it in this freeport in Geneva.
For vowel-deficient guys like Dmitry Rybolovlev, who totally didn’t hide his wealth in shady
shell companies, definitely didn’t help an alleged international criminal evade arrest,
and absolutely didn’t have this guy murdered in 1996, bank accounts aren’t always the
safest places to store wealth but art is untraceable, easily movable, and can actually appreciate
in value and serve as an investment.
A lot of the current art market is centered around billionaires buying pieces as stores
of wealth.
With freeports, these multi-hundred million dollar pieces can be stored indefinitely without
paying taxes or, in some cases, without even being reported to the host country.
Money now is more valuable than money later due to the whole finite and fleeting nature
of human existence so it just makes sense for the buyers of these objects to hold off
as long as possible on paying the taxes.
Nobody even knows the true value of what’s inside places like the Geneva freeport but
it’s so much that freeports have to have insurance policies for an unlimited amount
of money.
Due to this system, a lot of the world’s most famous pieces of art are just sitting
in dark, bleak, yet tax-free warehouses.
If you’re a totally legitimate billionaire who hides your wealth in multi-hundred million
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