Fashion: second-hand players call for an end to resale taxation

In the United States, the Circular Textiles organisation (members: ThredUp, Fashionphile, Vestiaire Collective, Unspun) launched a petition on August 26, to ban V.A.T. on second-hand fashion items, which varies between 4% and 7.5% depending on the state. In France, private customers do not pay V.A.T. on second-hand goods but professionals are subject to V.A.T. on profits. Thrift shops, for example, pay a 20% tax on resale margins. Since 2022, the French Federation of Circular Fashion has been lobbying for a switch to a reduced rate of V.A.T. (5.5%). “V.A.T., which has already been paid once on new purchases, is a real brake,’ Alexandre Fristot, C.E.O. of start-up Enhancy, told mind Retail. “It would make sense to tax second-hand products less, especially as it is logical that they are back into circulation several times”.

On the other hand, Europe seems to be moving in the opposite direction when it comes to taxing income from the resale of second-hand goods. Since 2021, European DAC7 regulations have obliged resale marketplaces like Vinted or LeBonCoin to report selling tax information to the national authorities. In France, sales between private individuals are reported to the tax authorities when values exceed €3,000 a year. However, an individual is only liable for income tax on sales of more than €5,000 a year. “The V.A.T. general rules governing second-hand goods were not designed for the sale of low-priced clothes in large quantities by professionals, but rather for the sale of high-value items by antique dealers. To encourage the growth and professionalisation of the circular economy in fashion, a reform that takes these issues into account would be welcome’, said the fashion specialised Lawyer Glynnis Makoundou.

In Spain, e-shoppers selling on Vinted, Wallapop (19 million users) and Milanuncios are also subject to income tax when they sell more than €2,000 per year and 30 items. Rates range from 19% to 23%.