Editor's Note: This year, the State Council has repeatedly issued documents to promote the construction of a waste recycling system, accelerate the green transformation of the development mode, "on accelerating the construction of a waste recycling system of opinions" (State Council [2024] No. 7) pointed out that we should promote the fine management and effective recovery of waste, improve the level of waste resourcing and reuse, and cultivate and grow the resource recycling industry; "to promote the large-scale The Action Program for Promoting Large-scale Equipment Renewal and Consumer Goods Trade-in (Guo Fa [2024] No. 7) improves the quality and level of recycling in the national economy by implementing the four-pronged initiatives of equipment renewal, consumer goods trade-in, recovery and recycling, and standard upgrading. At the local level, Sichuan Province issued the "Sichuan Province Renewable Resources Recycling Industry Development Plan (2023-2025)", Hefei City issued the "Hefei Waste Material Recycling System Construction Implementation Plan" and other documents to promote the construction of waste material recycling system. The resources recycling industry is of great significance in improving the level of resource recycling and promoting green, low-carbon and recycling development, and it is an industry field that governments around the world attach importance to and encourage the development of. In terms of taxation, the recycling of renewable resources, comprehensive utilization of the field of policy changes, in order to promote compliance, improve profit margins, the business model of the resources recycling industry has also been adjusted, and at the same time also accompanied by a number of tax compliance issues. Recently, new tax regulatory developments such as strict investigation of tax rebates and promotion of reverse invoicing have triggered heated discussions in the renewable resources recycling industry. Previously, Hwuason Law Firm has analyzed the tax risks of recycling enterprises, and this article extends downstream of the renewable resources recycling industry to analyze the tax-related risks and compliance suggestions of waste-using enterprises under the new regulatory trends.

I. The acquisition of waste materials through recycling enterprises is a common practice of waste enterprises

(I) The business of recycling waste materials needs to be registered for the record

The Announcement on Improving Value-added Tax Policies for Comprehensive Utilization of Resources (Ministry of Finance SAT Announcement No. 40 of 2021, hereinafter referred to as "Document No. 40") stipulates that taxpayers for recycling of renewable resources shall comply with the requirements of recycling management measures issued by the competent authorities of the State Department of Commerce, and shall register as market players and complete the filing of recycling operators in the Department of Commerce. The Recycling Operator Filing was completed. The "Administrative Measures for Recycling of Renewable Resources" stipulates that, in order to engage in business activities of recycling of renewable resources, it is necessary to comply with the conditions for registration in the industrial and commercial administration, and to be registered in the industrial and commercial register before engaging in business activities. Therefore, regardless of whether the waste materials are in the hands of individual retailers or large retailers, they ultimately need to be pooled into recycling enterprises with business qualifications to supply waste materials to waste-using enterprises in the name of recycling enterprises. In the current practice, the waste enterprise through the recycling enterprise to purchase the required waste materials.

(II) "retail households - recycling enterprises - waste enterprises" mode can alleviate the plight of waste enterprises invoice

Most of the sources of waste materials in China for industrial and life waste, waste enterprises based on their dominant position in the industry, or for off-the-books sales, tax avoidance and other purposes, usually without tickets will be sold to the recycling station of waste materials and other self-employed, and residents of the daily production of waste is sold directly to the scavengers, scrap recycling stations, and even more can not be issued out of the value-added tax special invoices. Therefore, in the collection of waste materials to the recycling station individual operators (hereinafter collectively referred to as "retailer") link, the issuance of VAT special invoice chain has been broken.

In order to alleviate the plight of this industry, before 2008, tax incentives such as first levy and then return, tax exemption, etc. were introduced successively for those engaged in resources recycling industry, especially under the tax exemption policy, the recycling enterprises are exempted from value-added tax for the sale of waste materials acquired by them, and the enterprises using the waste can calculate the offsetting of input tax in accordance with the ordinary invoice issued by the recycling enterprises. Under this policy, coupled with the fact that recycling enterprises can make use of the acquisition vouchers for pre-tax deduction, the business model of "retailer-recycling enterprises-waste-using enterprises" has become the mainstream, and the waste-using enterprises can realize the VAT input deduction and the enterprise's VAT deduction by purchasing waste materials through the recycling enterprises and obtaining the VAT special invoices. Enterprises using waste purchased waste materials through recycling enterprises, obtained VAT special invoices, and realized VAT input deduction and pre-tax deduction of enterprise income tax.

In 2008, the Ministry of Finance and the State Administration of Taxation issued the Circular on VAT Policies for Renewable Resources (Cai Shui [2008] No. 157), which canceled the tax exemption for recycling enterprises and the calculation of deduction policy for waste-using enterprises, and in some regions, recycling enterprises are no longer allowed to make pre-tax deduction of EIT with self-manufactured vouchers. Against this background, most of the recycling enterprises chose to carry out their recycling business in regions with fiscal rebate policies to alleviate the tax burden brought about by issuing invoices and paying full taxes to waste-using enterprises.2021 Although the No. 40 issued in 2012 stipulated that renewable resources recycling enterprises may choose to apply the simplified taxation method to calculate and pay the value-added tax (VAT) at a rate of 3% on the sale of the waste materials acquired by them, which has alleviated the VAT burden of recycling enterprises to a certain degree. enterprises' VAT burden, but the policy did not effectively respond to the issue of pre-tax deduction vouchers for enterprise income tax, and most enterprises in the trade chain of the resources recycling industry still rely on the fiscal rebate to construct the trade chain for the purchase and sale transactions of waste materials.

(III) One of the conditions for enterprises using waste to enjoy "instant tax refund" is to "obtain invoices" for the acquisition of waste materials.

A listed company recently announced the "2023 Annual Report" shows that the company to three leftovers, crop residues, crop stalks, salal, corn cobs as raw materials for the production of fiberboard and particleboard and other products to implement the value-added tax that is refundable policy, a total of that is refundable revenue of more than 43.66 million yuan. VAT refund is the main source for some renewable resource waste enterprises to reduce actual tax burden and realize profit, and it is one of the bases for enterprises to maintain production and operation, therefore, how to correctly enjoy the policy of VAT refund has become the focus of attention of the vast majority of waste enterprises.

Circular No. 40 stipulates that taxpayers engaged in the resource comprehensive utilization projects listed in the Catalogue of Preferential VAT for Resource Comprehensive Utilization Products and Services (2022 Edition) (hereinafter referred to as the "Catalogue") shall meet seven conditions when applying for enjoyment of the policy of instant VAT refund, one of which is that the acquisition of waste materials shall be subject to the following conditions Invoice or other legal vouchers - taxpayers shall obtain VAT invoices from the seller of the renewable resources acquired within the territory in accordance with the regulations; if the tax exemption policy is applicable, ordinary VAT invoices shall be obtained from the seller in accordance with the regulations; if the seller is a unit unable to apply for invoices according to the rules and regulations of the law or a natural person engaging in small amount of sporadic operation business, he/she should obtain If the seller is a unit which cannot apply for invoice according to the law or a natural person engaging in small-scattered business, the seller shall obtain the collection vouchers issued by the seller and the internal vouchers of the acquirer or the invoices issued by the tax authorities.

It can be seen that obtaining VAT invoices is one of the prerequisites for waste-using enterprises to enjoy the policy of instant tax and refund for the comprehensive utilization of resources. Under the mode of "retailer-recycling enterprise-waste-using enterprise", waste-using enterprises can obtain VAT invoices from the upstream recycling enterprises for input deduction and enjoy the policy of instant tax and refund. Under the model of "retailer-recycling enterprise-waste-using enterprise", waste-using enterprises can obtain VAT invoices from upstream recycling enterprises for input deduction, enjoying instant tax refund and pre-tax deduction of enterprise income tax.

II. Strict investigation of tax return violations under the recycling enterprises or the risk of false opening will be transmitted to the use of waste enterprises

In the recent two high tax-related crimes judicial interpretation and typical cases press conference, the Ministry of Public Security Economic Crime Investigation Bureau, deputy director, first-class inspector Wu Di pointed out that "the new industry, industry tax evasion problem is prominent. Precious metals, agricultural products, waste materials, electronic products, petrochemicals, coal and other industries are still the high incidence areas of false tax evasion crimes." The problem of false invoicing in the resources recycling industry has long been the focus of multi-departmental crackdowns.

The transaction model of "retailer - recycling enterprise - waste enterprise" has multiple links, multiple subjects, and recycling enterprises are not involved in the transportation and warehousing of goods, etc., so the case-handling authorities may deny the reasonableness of the existence of the recycling enterprise on the ground that there is no transaction of the real goods and then deny the legitimacy of the whole chain of purchase and sale transactions. The legitimacy of the entire chain of purchase and sale transactions, the chain involved in the purchase and sale transactions and the issuance and acceptance of invoices of the various subjects to file a case for investigation or investigation. In the case of false invoicing in the resources recycling industry, a considerable part of the cases is due to the false invoicing problem of the recycling enterprises and then implicated in the waste enterprises, the competent tax authority of the recycling enterprises sends the "letter of coordination of investigation of tax violation cases" and the "notification of confirmed false invoicing" to the competent tax authority of the downstream waste enterprises, and the waste enterprises will be faced with the tax audit, and they may be asked to do the transfer of inputs, late payment charges, and payment of the enterprise income tax, etc., and may even be handed over to the public security authorities for false invoicing. They may even be handed over to the public security organs for investigation of criminal cases of false opening.

In the "retailer - recycling enterprises - waste enterprises" trading chain, recycling enterprises are set up in the park to enjoy financial rebates. This year, the audit, tax and other departments proposed to seriously investigate and deal with the problem of illegal tax rebates, 2024 eight departments across the country to jointly combat tax-related crimes, one of the key areas of focus is the fraudulent tax rebates by means of false openings, financial rebates and government subsidies. Under the current regulatory situation, recycling enterprises are facing serious tax-related risks, and the financial rebates obtained based on invoicing and tax payment are facing the risk of being reversed and recovered, while the issue of false invoicing by recycling enterprises to downstream waste-using enterprises is also one of the important manifestations of tax-related risks, and the tax-related risks of recycling enterprises may be transferred to waste-using enterprises.

III. How to do a good job of compliance management of enterprises using waste under the new trend of tax regulation?

(I) Grasp the authenticity of the business and keep the information well

Enterprises using waste should take business authenticity as the criterion and keep relevant business information for inspection. In order to save transportation costs, improve transaction efficiency, the goods are usually transported directly from the retailer to the waste business, recycling companies are not actually involved in the transportation of goods and easy to be questioned with the waste business with no real business between the occurrence of the invoice and the impact of the waste business with the authentication of the deduction. Therefore, supporting the authenticity of the acquisition of waste materials business is the key: in the transportation of goods, waste enterprises should pay attention to the transportation documents, vehicle information retention; in the acceptance of goods, waste enterprises should be retained and recycling enterprises signed the purchase and sale contract, commissioned the bill of lading, while filming photos of the delivery vehicle, record the delivery time and other information, retain a good weighbridge, quality inspection reports and other materials, if necessary, can be asked to If necessary, the recycling enterprises can be requested to send resident staff to participate in the acceptance and settlement of goods.

In May 2023, the China Association of Recycling Resources Recycling released the group standard "Technical Specification for Recycled Resources Operational Electronic Data Deposit" (hereinafter referred to as the "Technical Specification") to standardize the construction and management of the industry's transaction information deposit platform in the form of a group standard, so as to deposit information on the business flow, logistics, capital flow and bill flow in the course of transaction through the platform and to ensure that information on the business flow, logistics, capital flow and bill flow is deposited through the platform. The information of business flow, logistics, capital flow, bills flow and other information in the transaction process will be deposited through the platform, and digital technology will be used to record the whole process of waste materials recycling and utilization transactions, forming a complete and tamper-proof evidence chain, which can alleviate the problem of difficult to prove the authenticity of the transactions to a certain extent, and help the waste enterprises to form a complete chain of evidence of the transactions. However, because the construction of the evidence platform is still in the exploratory stage, whether it can be recognized by tax, public security and other case-handling organs, and whether it can support the authenticity of the business is still to be explored. At present, two enterprises have already obtained the certificate of certification of electronic data deposit service for renewable resources operation issued by China Renewable Resources Recycling and Utilization Association. Enterprises using waste can pay attention to this industry trend and look for tax compliance paths.

(II) Correctly applying the policy of immediate levy and refund for products of comprehensive utilization of resources

Circular 40 stipulates that general VAT taxpayers selling self-produced products of comprehensive utilization of resources and providing labor services of comprehensive utilization of resources (in compliance with the Catalogue) can enjoy the policy of instant VAT refund. Taxpayers shall calculate the amount of tax refund that can be applied for after excluding the part of sales revenue that shall not be subject to the policy of immediate tax refund from the sales revenue of comprehensive utilization products and services during the current period: the amount of tax refund that can be applied for = [(sales revenue from the sales of comprehensive utilization products and services during the current period - the sales revenue that shall not be subject to the provisions of immediate tax refund) × applicable tax rate - input tax amount of the items that shall be subject to the immediate tax refund during the current period] × the corresponding refund ratio.

1. The comprehensive utilization of resources that is the return of regulatory tightening

No. 40 of the application of the policy of immediate refund of waste enterprises with the application of strict regulatory requirements. On the one hand, it is the daily publicity requirement that the tax authorities of each province, autonomous region, municipality directly under the central government and municipalities directly under the central government and cities with separate plans should publicize the information of all taxpayers enjoying the policy of immediate refund or exemption of value-added tax in the previous year on their websites by the end of March every year, and the content of the publicity includes the name of the taxpayer, the identification number of the taxpayer, the name of the resources comprehensively utilized, and the name of the comprehensively utilized products and services; on the other hand, No. 40 stipulates the review system of large tax refund. No. 40 stipulates the review system for large tax rebates. If the taxpayer's tax rebate amount exceeds 5 million yuan in a single belonging period, the competent tax authority shall, within 30 working days after the completion of the tax rebate, send the tax rebate information to the same level of the finance department for review, and after the finance department's review at each level, the provincial finance department shall send the local supervisory bureau of the Ministry of Finance to issue the final review opinion.

2. Attention to the applicable conditions of the tax refund policy and correctly enjoy the tax benefits.

The prerequisite for enterprises to enjoy the tax rebate is to use the resources stipulated in the Catalogue to produce products for comprehensive utilization of resources in accordance with the regulations. Taking waste plastics as an example, enterprises using waste to acquire waste plastics and produce comprehensive utilization products such as modified recycled plastics as listed, which also meet the technical standards and relevant conditions, can enjoy 70% tax rebate ratio.

In addition to engaging in the comprehensive utilization of resources listed in the "directory" of the project, No. 40 provides for the application to enjoy that is to be refunded need to meet the seven conditions at the same time, the enterprise needs to pay attention to the following key points: First, the acquisition of waste materials should be obtained from the legal vouchers, not in accordance with the provisions of the legal vouchers, the part of the sales revenue shall not be refunded, in the future after the landing of the policy of reverse invoicing, the qualification of recycling business with the waste business with the direct acquisition of waste materials. If they meet the conditions for issuing invoices on their own, whether the invoices issued by them belong to the legal vouchers stipulated in Document No. 40 is also subject to further observation; secondly, they should set up acquisition ledgers with detailed requirements on the contents of the ledgers, and comprehensively collect and record information on the acquisition of renewable resources; and thirdly, they should do a good job in the daily tax compliance management, so as to avoid that their tax credit rating does not comply with the requirements of the policy.