Understand the VAT applicable to transactions involving new industrial waste and recovered materials

Reverse charge of VAT on waste: who is concerned?

Managing VAT on waste and recovered materials is a sensitive issue for many businesses. An error in applying the reverse charge regime may result in tax adjustments. The purpose of this article is to clarify the rules for securing your transactions.

In this system, it is not the seller who collects and pays VAT, but the buyer, provided that the latter has a VAT identification number in France. This measure aims to simplify and secure the collection of tax in this particular sector.

What is new industrial waste or recovered material?

The tax authorities precisely define the assets concerned by this system.

Les new industrial waste are manufacturing scraps that cannot be reused as they are. They require prior treatment such as sorting, shearing or crushing before being reintegrated into a production cycle. Operations aimed only at facilitating transport or storage, such as putting into coarse metal ingots, do not cause them to lose this quality.

Les salvaged materials for their part, refer to objects and products that are discarded or out of use, which are collected to be recycled or recovered. They can come from businesses as well as households or communities.

When does waste become a commodity?

All the complexity lies in this distinction. As soon as waste is treated to the point where it can be directly used as a raw material, the VAT regime changes: we leave the reverse charge to return to conventional VAT, collected by the seller.

Here are some concrete examples by sector:

Metals sector

Sorting, shredding or shearing operations do not transform metal waste into a new product. The materials maintain their waste status until the smelting or refining operation. The sale of this waste to a steel mill or a foundry is therefore a reverse charge. On the other hand, the sale of ingots or other foundry products is a sale of raw materials subject to conventional VAT.

Plastics sector

A plastic product withdrawn from sale for non-compliance is waste. If this waste is simply pressed into bales for transport, its sale is subject to reverse charge. On the other hand, if they are sorted according to a specific standard (such as DIN 6120) that guarantees their purity and their direct use in a processing machine, they are considered raw materials. VAT must then be collected by the seller.

Paper and cardboard sector

The same reasoning applies. A simple compaction of paper and cardboard into bales does not change their nature as recovery material: reverse charge is the rule. But if these bales are made of materials sorted to comply with the EN NF 643 standard, they are then considered to be directly incorporated into a production process. The sale is therefore subject to the normal VAT regime.

Reverse charge for processing services

Processing services on new industrial waste or recovered materials follow the same logic. They are subject to the reverse charge system, regardless of whether or not the processing operation transforms the waste into a new product. The only condition is that the material entrusted to the service provider be, at the beginning, qualified as waste or recovered material.

How does reverse charge work in practice?

The reverse charge system involves specific reporting and billing obligations for the seller and the buyer.

Billing obligations

The seller (supplier or service provider) must issue an invoice without VAT. The invoiced amount is therefore an amount excluding tax (exc. VAT). The invoice must bear the mention “reverse charge” to justify the absence of tax collection by the seller.

VAT declaration by the buyer

The customer (buyer) identified for VAT in France must declare the total amount excluding VAT of the transaction on the line “other taxable transactions” of its turnover statement. The corresponding VAT, thus paid, is deductible under ordinary law conditions. An oversight is punishable by a fine.

Declaration by the seller

For his part, the seller must report the total amount excluding tax of the transaction on the line “other non-taxable transactions” of his statement. Although he does not collect tax, he still has the right to deduct VAT on his own expenses.

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