Tax Planning

Planning for VAT under the EU’s Circular Economy Push

The EU is changing VAT rules to support sustainability—businesses need to understand how second-hand goods, deduction limits, and car usage rules may affect their tax position.

By NomadicTax Research Team • 5-8 min read • September 12, 2026

## 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](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai)) 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](https://taxation-customs.ec.europa.eu/news/european-commission-launches-public-consultation-vat-and-circular-economy-2026-09-10_en?utm_source=openai)) ## 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 1. **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](https://taxation-customs.ec.europa.eu/taxation/vat/vat-directive/vat-exemptions/exemptions-right-deduct_en?utm_source=openai)) 2. **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? 3. **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](https://ec.europa.eu/commission/presscorner/api/files/document/print/en/ip_26_442/IP_26_442_EN.pdf?utm_source=openai)) 4. **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.