What’s Going On with VAT and the Circular Economy
On 10 September 2026, the European Commission launched a public consultation seeking stakeholder views on adapting VAT rules to support circular and low-emission economy goals. Specific areas under review include:
- Treatment of second-hand goods
- Rules around destruction of viable goods
- VAT deduction rules for passenger cars used for business purposes (taxation-customs.ec.europa.eu)
This effort forms part of the upcoming Circular Economy Act and aims to propose amendments to the VAT Directive in early 2027. Consultation closes on 4 November 2026. (taxation-customs.ec.europa.eu)
Why This Matters for Tax Planning
Businesses should pay attention because proposed changes may:
- Alter VAT liabilities on second-hand and damaged goods
- Limit or adjust VAT deductions on company cars, especially low- or zero-emission vehicles
- Create new obligations or compliance costs if “destruction of goods” is reclassified or VAT treatment changes
These changes impact industries such as retail, automotive, electronics refurbishing, and environmental services.
How Businesses Can Prepare Now
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Audit your current treatment of second-hand goods
- How do you account for VAT when buying, refurbishing, and reselling used items?
- Check special schemes already in place under the VAT Directive for works of art, antiques, and second-hand goods. (taxation-customs.ec.europa.eu)
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Assess vehicle-use policies and deductions
- If your business uses passenger cars, test how changes might limit deductions. Low-emission vs. high emissions? Is private use accounted for properly?
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Track international VAT compliance and special schemes
- Keep an eye on transposition status of existing VAT rules in Member States—features like special schemes for second-hand goods or inter-EU supply designations can vary domestically. Spain, for instance, has not yet fully transposed certain rules, exposing companies to risks of double taxation or non-taxation under Directive 2022/542. (ec.europa.eu)
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Engage in the consultation
- If you represent a businesses federation, trade association, or are a company with material exposure, submit feedback before 4 November 2026. The legislative proposal will be influenced by the responses.
Example Scenarios
- A refurbished electronics dealer selling used phones under a special VAT scheme: If rules tighten around which goods qualify, you may lose entitlement to the reduced VAT treatment or need new documentation.
- Company-car fleet using emissions allowances: If deduction rules change, you might see limits on deductions for cars above certain list-price thresholds or emissions levels.
Key Takeaways
- This is still a prospective change, but early insight is crucial
- Businesses exposed to second-hand goods, car fleets, or destruction of goods must evaluate their exposure
- Participation in EU consultation offers an opportunity to shape the future rules
Action Items:
- Review internal VAT treatment of used goods and car expenses
- Estimate financial exposure under potential new rules
- Monitor developments especially in your country on transposing existing VAT directives
- Consider consulting with VAT specialists if exposure is high
With sustainable policy changes accelerating, early planning can help mitigate surprises.