Compliance
How VAT Rules Are Being Reworked to Fuel the Circular Economy in the EU
A recent EU public consultation is the first step toward overhauling VAT rules—impacting second-hand goods, destruction of viable goods, and business use of passenger cars.
By NomadicTax Research Team • 5-6 min read • September 14, 2026
## 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](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai))
### 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](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai))
- **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](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai))
- **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](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai))
## 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](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai))
## 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](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai))
- 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.