VAT and circular economy

What the Commission proposes

The European Commission has launched a consultation on VAT and the circular economy to support the transition towards sustainable consumption. The initiative focuses on modernising value-added tax rules that potentially hinder circular business models and secondary markets. Key areas of review include the VAT treatment of second-hand goods, circular production chains, the destruction of viable goods, and VAT deduction rules for passenger cars. Any proposed solutions aim to remain proportionate, fraud-proof, and fully compatible with the common EU VAT system.

• Modernising VAT rules to remove barriers to circular business models
• Reviewing the VAT treatment of second-hand goods
• Examining VAT rules for circular production chains
• Addressing the VAT implications of the destruction of viable goods
• Assessing VAT deduction rules for passenger cars
• Ensuring changes remain proportionate and fraud-proof

Affected, as named in the text: Businesses involved in circular economy models; Second-hand goods traders; Consumers choosing sustainable options; Tax authorities.

What is asked: Respondents are asked to comment on how current VAT rules affect circular business models, second-hand goods, circular production chains, the destruction of viable goods, and passenger car deductions, and how these rules should be modernised.

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