VAT should not punish the second life of a product

The European Commission has launched work on a future Circular Economy Act, due for adoption in 2026, to build a stronger single market for secondary raw materials and stimulate demand for circular materials in the EU.

A product that comes back from a customer does not automatically become waste. It can be tested, graded, repaired, refurbished, resold, donated or recycled. Yet tax logic still treats the linear economy as the default and the circular economy as the exception.

Our position: VAT should be neutral — or preferential — for verified circular products. A refurbished sofa, appliance or electronic item should not carry the same fiscal burden as a newly manufactured one if the goal is to keep products in use for longer.

A new sofa may be too expensive. A refurbished, professionally checked return could be perfectly usable, safe and affordable — but if it is taxed at the same VAT rate as a new sofa, part of the affordability advantage disappears.

A 5% reduced rate would cut the price by €48 versus 21% standard VAT; a zero-rate circular approach by €63. For a student or a budget-conscious household, that can decide whether they buy second-life or buy nothing.

Important nuance: VAT is a tax on value added, not literally “the same tax paid twice”. The EU already has a margin scheme for some second-hand goods — VAT on the dealer’s margin, not the full price — but it does not cover every return/refurbished/resale case. Reverse logistics needs clearer, broader, easier circular VAT treatment.

Margin scheme: applies to some second-hand goods, taxing the profit margin rather than the full price.

Reduced rates: Member States may apply reduced VAT (generally not below 5%) to eligible Annex III categories — but unevenly across markets.

The gap: returned, refurbished and resold goods do not always fit existing schemes, creating complexity, uncertainty and sometimes a higher price for the greener choice.

In a weak economy, consumers are careful, retailers sit on stock, warehouses fill up and cash is blocked — while millions of usable products only need grading, repair, documentation and a trusted resale channel. Smarter VAT for verified second-life goods supports four goals at once: consumer affordability, waste reduction, retail cash recovery and circular-economy demand.

Not tax avoidance — verified circularity: a lower rate where a product has a documented second-life process.

1. Reduced VAT for verified refurbished goods, sold with transparent condition data.
2. Clear treatment for open-box and customer returns across the EU.
3. Donation-friendly rules — do not penalise donating usable goods instead of destroying them.
4. Digital proof of circularity — photos, grading, repair notes, serial/SKU data.
5. Anti-abuse safeguards — traceability so relief applies to genuine second-life flows.
6. Consistency across Member States so cross-border reverse logistics can scale.