On 10 September 2026, the European Commission launched a public consultation to adapt VAT to the circular and low-carbon economy. The initiative focuses on three practical areas: second-hand goods, the destruction of products that are still usable, and the VAT deduction for company cars.
No legislative changes have yet been approved, but the consultation offers an insight into the possible future direction of European policy. Spanish companies operating in the retail, transport or sustainability sectors should analyse how the current rules influence their decisions.
Why VAT matters in the circular economy:
VAT was designed to tax transactions, not to reward environmental outcomes. This can create friction when a product is repaired, resold, shared or taken off the market, rather than following a linear chain from the manufacturer to the consumer.
The consultation forms part of the preparatory work for the future European Circular Economy Act. It will remain open until 4 November 2026, whilst the assessment and impact analysis are expected to continue until early 2027. Any proposal to amend the VAT Directive would follow later and would have to go through the European legislative procedure and subsequently be transposed into national law. It is therefore essential to distinguish the debate now underway from the rules currently in force.
Second-hand goods and the margin scheme:
The first section concerns the treatment of second-hand goods. European legislation allows resellers, in certain circumstances, to calculate VAT on their profit margin rather than on the total sale price. Spain applies this option through the special scheme for second-hand goods, works of art, antiques and collectors’ items.
The scheme prevents the re-taxation of value on which VAT has already been paid when a product re-enters the commercial circuit, particularly if it was purchased from a private individual or another reseller who applied the same system. However, its requirements, registration obligations and international application can be complex. Furthermore, current circular economy models go beyond traditional second-hand trade and include digital platforms, refurbished devices, buy-back schemes and return systems managed by manufacturers.
The consultation allows for an assessment of whether the scheme remains appropriate for these activities. Spanish businesses must check, amongst other things, whether their procurement channels meet the requirements, whether repair or refurbishment alters the classification of the goods, how the margin is calculated, and whether their systems correctly distinguish these transactions from those subject to the general scheme.
Destruction of goods that are still usable:
The second area concerns the destruction of products that could still be put to use. The Commission is examining whether VAT rules might make disposing of stock more attractive than donating, repairing, reusing or reselling it.
In Spain, the VAT deduction is linked to the intended business use of the goods and services. The VAT Act also contains specific rules regarding the loss or destruction of goods. If this is due to a cause not attributable to the taxable person and is duly justified, there is no requirement to adjust the initial deduction. In other cases, different consequences may arise, including issues relating to own use, changes in intended use or the sufficiency of evidence.
The consultation does not, at present, introduce a new tax on the destruction of stock. Its immediate relevance is strategic: businesses holding obsolete, returned, seasonal or slow-moving stock should calculate the tax cost of destroying, donating, reselling or recycling such items before choosing an option. Documentation must demonstrate what happened to the goods and why.
Passenger cars used in business:
The third section — the VAT deduction for passenger cars — is of particular importance in Spain. Article 95 of the VAT Act generally presumes that 50 per cent of the use of passenger cars is for business purposes. A higher deduction may be claimed if greater business use can be proven. Certain categories, such as vehicles used for passenger transport, driving instruction, travel by sales representatives or security patrols, are presumed to be used 100 per cent for business purposes.
The Commission is examining whether the European framework remains appropriate for a low-emission economy. Business fleets now incorporate electric vehicles, subscriptions, car-sharing schemes and mixed-mobility solutions that do not always fit within traditional criteria. A future reform could influence purchasing or leasing decisions, fleet policies, charging costs and the means of proving business use.
In the meantime, Spanish regulations remain unchanged. Businesses claiming deductions in excess of the presumed percentage should retain objective evidence: travel logs, internal policies, parking conditions, visit schedules and restrictions on private use. The mere inclusion of the vehicle in the accounts does not, in itself, prove its business use.
Practical implications:
The consultation does not require any immediate changes to self-assessment returns. However, companies may:
- identify transactions involving used, returned, reconditioned or donated goods;
- review when they choose to dispose of stock and compare the cost of doing so with other alternatives;
- verify the evidence supporting vehicle deductions;
- ensure that accounting systems distinguish between the margin scheme and the general scheme; and
- provide practical information to the Commission by 4 November 2026, either directly or through a sectoral association.
In conclusion, the initiative does not yet amend the law, but it recognises a real problem: VAT can determine whether a circular model is commercially viable. Spanish businesses should use this period to identify costs, uncertainties and administrative burdens arising from the current system. This analysis will improve current compliance and facilitate adaptation to any future reform.