EU Circular VAT Consultation Targets Second-Hand Goods, Donations and Company Cars

Summary 

• The European Commission is consulting on targeted VAT changes to support circular and low-emission business models. 

• The work focuses on second-hand goods and circular chains, the destruction or donation of viable goods, and VAT deduction rules for business passenger cars. 

• Feedback is open until 4 November 2026 and is intended to inform a proposal to amend the VAT Directive. 

Extended article 

The European Commission has launched a public consultation on modernising selected VAT rules to better support the circular economy. The initiative is connected with the forthcoming Circular Economy Act and seeks to identify tax barriers that may discourage reuse, repair, refurbishment, remanufacturing and donation. 

Three areas are central. First, the Commission is examining VAT treatment of second-hand goods and circular production chains, including whether present rules create complexity or repeated taxation. Second, it is considering the treatment of viable goods that are donated rather than destroyed. Third, it is reviewing deduction restrictions for passenger cars used for business purposes, including their alignment with low-emission objectives. 

The Commission states that any solutions should remain proportionate, fraud-proof and compatible with the common VAT system. The consultation closes on 4 November 2026. Its results will feed into the evaluation and impact assessment and inform a planned proposal to amend Directive 2006/112/EC. 

For businesses, the consultation is relevant beyond sustainability teams. Potential changes could affect product lifecycle models, returns and unsold stock, charitable donations, fleet policies, margin-scheme processes and the evidence required to preserve VAT neutrality. 

External links 

• European Commission consultation announcement 

• EUR-Lex initiative record 

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