EU Launches Consultation on Circular-Economy VAT Reform: Why Should Tax Structure Be Included in TCO When Sourcing Second-Hand, Refurbished, and Repairable Products?
Whether circular sourcing is economical depends on more than purchase price and repair costs. VAT treatment may also determine whether refurbishment, resale, or scrapping is the more reasonable route.
Key takeaway
The real TCO of circular-economy procurement equals the purchase price plus inspection and repair, logistics, inventory handling, and tax costs. It is not just a comparison between the unit prices of new and second-hand products.
On September 10, the European Commission launched a public consultation on VAT and the circular economy. It focuses on VAT treatment of second-hand goods, the destruction of goods that still have useful value, and VAT-deduction rules for company passenger cars. The consultation results will inform a later legislative proposal.
Why should overseas buyers pay attention?
More companies are adding the following models to procurement:
- Refurbished equipment;
- Parts reused after repair;
- Returned goods resold;
- Second-hand office or industrial assets;
- Trade-in and recycling programs.
Tax treatment and cross-border movement rules can easily change the economics of these models.
Which costs should buyers include in the model?
| Cost layer | Typical items |
|---|---|
| Acquisition | Purchase price of new or second-hand goods |
| Recovery | Inspection, repair, and refurbishment |
| Logistics | Collection, reverse logistics, and repackaging |
| Tax | VAT and treatment under different transaction paths |
| Compliance | Product safety, warranties, and labeling |
| Residual value | Resale or parts value |
How does supplier selection change?
Procurement teams may increasingly value whether suppliers can support:
- Repairs and spare parts;
- Inspection and grading of returned goods;
- Designs with replaceable modules;
- Product-condition records;
- Documents needed for secondary sales.
The point is not to spend more money for environmental reasons. It is to determine whether the circular route is commercially workable.
What can contracts define in advance?
- Ownership of returned goods;
- Responsibility for refurbishment;
- Parts and labor prices;
- Quality standards for secondary sales;
- Authorization for scrapping and destruction;
- Boundaries of tax and invoicing responsibility.
Scope and limits
This is still a public consultation, and the final VAT rules may change. Cross-border second-hand goods may also involve product-safety, waste-classification, and import rules, so they cannot be assessed from a VAT perspective alone.
FAQ
Have the VAT rules already changed?
No. This is a consultation and assessment phase launched in September 2026.
Why is it worth paying attention now?
Contracts for long-term after-sales service, returns, and refurbishment systems often span multiple years. Companies can identify in advance which processes are most affected by tax rules.
Which buyers are most affected?
Buyers of equipment, automotive parts, electronics, household appliances, and other categories with repair or secondary-market value.