What’s Happening?
On 10 September 2026, the European Commission launched a public consultation on aligning VAT rules with the circular economy. It seeks feedback on how VAT can better support sustainable business models and identify reforms to come in early 2027. (taxation-customs.ec.europa.eu)
Key Topics under Review
- Second-hand goods: Clarifying taxation when goods change hands to encourage reuse and fair treatment of used items. (taxation-customs.ec.europa.eu)
- Destruction of viable goods: Determining when VAT liabilities arise and how to discourage businesses from destroying goods that could be donated or reused. (taxation-customs.ec.europa.eu)
- Business use of passenger cars: Examining VAT deduction rules where companies use cars; could affect sectors like leasing, rideshare fleet management, and mixed personal/business use. (taxation-customs.ec.europa.eu)
Why It Matters
- Environmental & Tax Incentives Align: Properly structured VAT rules can help reduce waste and promote sustainability, while keeping control over lost revenues and abuse.
- Businesses Need to Adapt: Companies involved in refurbishing, resale, or car-based services will want to plan ahead. New VAT rules might shift costs or change deductions.
- EU’s Broader Green Agenda: This connects VAT reform to initiatives like the Circular Economy Act and broader climate goals. (taxation-customs.ec.europa.eu)
What to Do Now: Actionable Advice
- Participate in the consultation by 4 November 2026. Stakeholders including businesses, trade associations, tax experts and public authorities can submit positions. (taxation-customs.ec.europa.eu)
- Audit current VAT treatment in your business:
- How do you treat second-hand goods or repairs?
- Do you have internal policies for the destruction of stock; could alternative better options serve both sustainability and your VAT exposure?
- Are your car-use expenses properly documented for VAT deduction under current rules?
- Model impact scenarios for potential changes: build forecasts under “current rules” vs “reformed rules” to understand cash flow and compliance risks.
What to Watch For
- A legislative proposal in early 2027 that amends the VAT Directive.
- Changes to standard VAT deduction rates, possibly differentiated rules for cars or goods reuse.
- Guidance from the Commission clarifying definitions (what is “viable goods”, how to treat used goods, etc.).
Example
A retailer selling refurbished electronics may currently apply reduced-rate or override standard VAT treatment; under the reforms, the line between second-hand and new goods might be more clearly defined, reducing disputes. Including VAT-friendly policies for donations may become more cost-effective than disposing of viable goods.
By aligning VAT structure with environmental goals, the EU is setting up a system where compliance equals sustainability, not a trade-off. Businesses that prepare now will avoid last-minute cost shocks and gain competitive advantage.
Category: Compliance taxHome: EU
Who benefits most: Platforms dealing in second-hand or repaired goods, automotive and fleet businesses, those with significant VAT input on passenger cars.