VAT and the Circular Economy – a BusinessEurope position paper

Key messages

• Donations: qualifying donations of usable food and non-food goods should not trigger output VAT or the loss of input VAT deduction.
• Destruction: new restrictions on input VAT deduction for destruction should not be the principal means of encouraging donations. Justified disposal should not face disproportionate evidentiary requirements.
• Margin scheme: preserve the option to apply ordinary VAT treatment and introduce an optional simplified aggregate-margin method. Provide clear, consistent definitions of reuse, repair, refurbishment and remanufacturing.
• Passenger cars: VAT should remain neutral. VAT deduction should reflect taxable business use, with appropriate treatment of private use, rather than propulsion technology or environmental classification. Emissions should be addressed through better-suited instruments.
• Lower burdens: reforms should contribute to the Commission’s administrative burden reduction targets of at least 25% overall and 35% for SMEs without unnecessary additional reporting or documentation requirements.
• Evidence based measures: any consideration of reduced VAT rates should assess their effectiveness, implications for VAT neutrality and administrative costs, including whether intended price benefits reach buyers and support environmental outcomes.