European Commission proposes package of measures announced in Circular Economy Action Plan

Executive summary

On 30 March 2022, the European Commission (Commission) proposed a package of legislative measures as part of the European Green Deal (EGD) and previously announced in the Circular Economy Action Plan (CEAP). The legislative package aims at making almost all physical goods in the European Union (EU) market more durable and therefore more environment-friendly, circular and energy-efficient throughout their whole lifecycle, from the design phase to daily use, repurposing and end-of-life.

Circular business models redefine the product and market combination and usually impact distributions channels, positioning in the market, pricing, and warranty, among others. Product re-design may result in new products or production-related intellectual property, which may attract research and development incentives (fiscal and non-fiscal). Supply chains could significantly change as businesses own their products through the lifecycle (product-as-a-service models) or are required to collect back their products or offer maintenance and repair services. Those changes may bring direct and indirect taxes implications concerning new transaction flows should be considered. Transitioning to “product as a service” business models may result in value added tax, withholding tax, transfer pricing and permanent establishment implications.

Source EY

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