Compliance
Compliance Spotlight: Upcoming VAT Changes in Europe for Circular Economy
The EU is consulting on aligning VAT rules with sustainability; businesses across value chains must adapt to impending changes in second-hand goods, deductions, and waste treatment.
By NomadicTax Research Team • 5-8 min read • September 11, 2026
## What’s Changing: VAT & the Circular Economy in the EU
On 10 September 2026, the European Commission launched a public **consultation** to reform VAT rules in line with principles of circular and low-emission economies. The consultation examines ways to **amend the VAT Directive** to better support sustainable models. Key areas include:
- Treatment of second-hand goods
- Rules for destruction of viable goods
- VAT deductions on passenger cars used for business purposes ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai))
These reforms are part of the upcoming Circular Economy Act and will form through stakeholder feedback and impact assessment, concluding early **2027**. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai))
---
## Implications for Businesses & Compliance Requirements
- **Invoicing and classification**: Businesses dealing in second-hand goods will need to reclassify supplies, possibly adjusting VAT returns and record-keeping.
- **Destruction or disposal of stock**: Destroying goods that could still be sold may lead to VAT adjustments or credit reversal rules.
- **Business use of vehicles**: Companies using passenger cars for business might see changes to when VAT on costs can be recovered, potentially tightening criteria.
---
## What Tax Teams Should Do Now
- Register to contribute to consultation before 4 November 2026 through the EU’s “Have Your Say” portal. Stakeholders can provide input to shape the legislative proposal. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai))
- Review historic VAT accounting for second-hand goods or stock destruction to spot areas that may need change.
- Examine current treatments of business vehicle VAT recovery to forecast possible loss of deduction.
- Begin impact mapping: evaluate which product lines and business activities may see VAT rule shifts and quantify exposure.
---
## Case in point: Marketplace for refurbished electronics
“GreenGizmo,” an online retailer of refurbished smartphones across EU Member States, currently buys used phones, cleans and resells them. Under current VAT rules, full input tax deductions are allowed. If the new directive imposes limitations or extra tax on second-hand goods or requires different treatment of discarded stock, GreenGizmo could face higher tax bills or reduced margins. GreenGizmo should engage in the consultation, re-evaluate its pricing models, and potentially adjust inventory destruction policies.
---
## Summary
The EU’s VAT consultation on the circular economy signals concrete legislative change by early 2027. Businesses must start auditing current VAT practices—especially around second-hand goods and vehicle deductions—and engage actively in the policy process. Preparation now helps avoid last-minute surprises when the reform takes effect.