Editor's Note: The orderly operation of the resources recycling industry is of great significance to improve the level of resource recycling, enhance the ability of resource security, and promote green, low-carbon and recycling development. For a long time, the lack of "source invoices" has been troubling enterprises in the resources recycling industry. In order to make up for the shortfall of VAT inputs and obtain compliant pre-tax deduction vouchers for enterprise income tax, some enterprises obtain VAT invoices by changing their business model, seeking third-party issuance or even purchasing them, which entails a lot of tax-related risks. Recently, the State Administration of Taxation (SAT) convened a seminar for industry associations and enterprises related to the promotion of large-scale equipment renewal and consumer goods trade-in, and made it clear that by the end of April, the "reverse invoicing" of resource recycling enterprises will be realized, so as to further smooth the VAT deduction chain and give resource recycling enterprises standardized and legal pre-tax deduction vouchers for enterprise income tax. Hwuason Law Firm has long been concerned about the tax issues and enterprise tax risks in the field of resources recycling industry. On the issue of "reverse invoicing", Hwuason Law Firm's director, Mr. Liu Tianyong, was interviewed by Hwuason Law Firm, who analyzed the causes of the invoicing dilemma of the resources recycling industry at the source, and further analyzed the principle and circumstances of "reverse invoicing". and further analyzes the principle and situation of "reverse invoicing", the full text is as follows.

[Xinhua interpretation] realize the "reverse invoicing" before the end of April  recycling resources enterprises "source ticket" to seek optimal solutions

Xinhua Finance, Beijing, April 10 (Reporter Dong Daoyong) - On April 9, the State Administration of Taxation (SAT) convened a seminar for industry associations and enterprises related to the promotion of large-scale equipment renewal and consumer goods trade-in, and made it clear that by the end of April, resource recycling enterprises would realize "reverse invoicing", and through the implementation of "reverse invoicing", "reverse invoicing" would further smooth out the VAT deduction chain and give resource recycling enterprises the right to use their source tickets. "to further smooth the VAT deduction chain, to give resource recovery enterprises standardized and legal pre-tax deduction vouchers for enterprise income tax, while allowing natural persons who continue to carry out the business of selling end-of-life products to enjoy VAT exemption or reduction policies in accordance with the provisions of the current tax law.

Industry insiders said that the recycling of renewable resources is a key link in the comprehensive utilization of resources, which is of great significance in promoting the development of circular economy and realizing green, low-carbon and high-quality development. For a long time, the lack of "source invoice" has led to a heavy tax burden on resources recycling industry, which is not conducive to the sustainable and healthy development of the industry. Under the unified deployment of the State Council, the tax department timely implementation, clear "reverse invoicing" implementation points, and allow renewable resources recycling enterprises in the "levy and deduction of tax consistent" principle of offsetting their input tax payments, in order to solve the problem of resource recycling enterprises. Seek the optimal solution to the problem of "source invoice".

The lack of "source invoice" is not conducive to the sustainable and healthy development of resources recycling industry.

Renewable resources recycling is an important part of the comprehensive utilization of resources, in the context of accelerating the development mode of green transformation, China's renewable resources industry system construction continues to improve, but the "source ticket" missing problem has been restricting the development of renewable resources industry.

The reporter interviewed that the procurement of renewable resources (such as copper scrap, scrap iron, etc.), waste-producing enterprises or personal sales of goods, most do not issue VAT invoices, which in turn leads to subsequent recycling enterprises to use the waste enterprise sales of its acquisition of renewable resources when the VAT deduction chain is broken, and corporate income tax without invoices to deduct the cost of the invoice voucher, which will invariably increase the cost of business operations.

In 2021, the Ministry of Finance and the State Administration of Taxation issued the Announcement on Improving VAT Policies for Comprehensive Utilization of Resources, which clarifies that general VAT taxpayers engaged in recycling of renewable resources can choose to apply the simplified tax method to calculate and pay VAT in accordance with the 3% levy rate, which alleviates the problem of excessive VAT burden of the recycling enterprises, but the issue of the vouchers for deduction of the EIT before tax has not been clarified. However, the issue of deductible vouchers before enterprise income tax has not been clarified.

Hwuason Law Firm lawyer, registered tax accountant Liu Tianyong said, in the procurement of waste materials, most of the waste materials in the hands of the retailer, renewable resources recycling enterprises to the retailer procurement of waste materials are usually unable to obtain invoices, in the invoicing chain broken, recycling enterprises to the use of waste enterprises sales of waste materials can only be the full amount of tax. Based on this industry dilemma, since 1994 to 2008, resources recycling industry in different stages to enjoy the first levy and then return, tax exemption and other preferential policies on value-added tax, but the lack of "source invoices" has been a constraint on the development of the industry.

"Reverse invoicing" solves the first ticket problem of renewable resources recycling enterprises

Promoting large-scale equipment renewal and consumer goods trade-in is an important initiative to accelerate the construction of a new development pattern and promote high-quality development, and the CPC Central Committee and the State Council attach great importance to the development of the resource recycling industry. In March of this year, the State Council issued the Action Plan for Promoting Large-Scale Equipment Renewal and Consumer Goods Replacement, proposing to "promote the practice of 'reverse invoicing' by resource recycling enterprises to sellers of end-of-life products to natural persons". What is "reverse invoicing"?

The reporter learned that, in general, the seller (payee) to the buyer (payer) to issue VAT invoices, that is, the common "forward invoicing"; the so-called "reverse invoicing", that is, the invoicing process and the conventional process is the opposite of the buyer (payer) to the seller (payer) to the buyer (payer) to the seller (payer) to the "reverse invoicing" practice, "promote resource recycling enterprises to the natural person seller of scrap products". The so-called "reverse invoicing", that is, the invoicing process is the opposite of the regular process, from the buyer (payer) to the seller (payee) to issue an invoice.

In fact, "reverse invoicing" is not a new thing. The People's Republic of China Invoice Management Measures" Article 18 clearly, the sale of goods, the provision of services, as well as engaged in other business activities of units and individuals, external business operations to collect money, the payee should be issued to the payer invoices; under special circumstances, the payer to the payee invoices. Here "by the payer to the payee to issue invoices", is "reverse invoicing". At present, China has allowed "acquisition units to agricultural producers to purchase personal self-produced agricultural products, enterprises can issue their own invoices for the acquisition of agricultural products" and other circumstances "reverse invoicing.

Liu Tianyong said, according to the reverse invoice can deduct input tax, "reverse invoicing" can be divided into two categories: one has the function of deducting input tax, such as the purchase of agricultural products invoices; the other does not have the function of deducting input tax, mainly as a pre-tax deduction vouchers and financial accounting vouchers used.

It is worth noting that the State Administration of Taxation forum on the "reverse invoicing" can deduct input tax issues have been further clarified. Hu Jinglin, Secretary of the Party Committee and Director General of the SAT, said that for "reverse invoicing", resource recovery enterprises should be allowed to issue VAT special invoices in the reverse direction, as well as ordinary invoices in the reverse direction, and the special invoices issued in the reverse direction of the resource recovery enterprises can be used under the principle of "consistency of levy and deduction of tax". The special invoices issued by resource recycling enterprises in the reverse direction can be offset against the input tax paid by them under the principle of "consistency of tax collection and deduction".

Hu Jinglin said that through the implementation of "reverse invoicing", resource recycling enterprises are given standardized and legal pre-tax deduction vouchers for enterprise income tax, while natural persons who continue to carry out the business of selling end-of-life products are also able to enjoy the VAT exemption or reduction policy in accordance with the provisions of the current tax law.

"The implementation of 'reverse invoicing' for resource recycling enterprises has again given resource recycling enterprises a new choice of path to help them more conveniently obtain the invoices required for purchases from natural persons. After the implementation of the 'reverse invoicing' measure, taking into account that most of the natural persons selling end-of-life products are going concerns, we intend to make it clear that they can enjoy the VAT exemption policy for monthly sales of less than 100,000 yuan as stipulated, and for those exceeding 100,000 yuan, they can also enjoy the policy of a reduction of the VAT levy rate of 3 percent by 1 percent as stipulated. " Hu Jinglin said.

In this regard, renewable resources recycling enterprises are positive and optimistic attitude, and the policy is full of expectations. April 8, listed company Grimmie in the interactive platform to answer investor questions, said, "to promote large-scale equipment renewal and consumer goods to trade-in action program" on behalf of the country's highest decision-making level of the views. This trade-in action program has a clear goal of promoting the recycling economy to a new situation, which will generate a trillion-dollar large market, show good prospects for the recycling industry, and bring a trillion-dollar recycling market scale. Among them, it is proposed to promote the practice of "reverse invoicing" by resource recycling enterprises to sellers of end-of-life products to natural persons, which can effectively solve the problem of high tax burden on formal enterprises, greatly reduce the tax burden on enterprises, and greatly help to improve the efficiency of enterprises.

Continuing to crack down on the use of "reverse invoicing" to carry out false invoicing and tax fraud violations

It is worth paying attention to the fact that although "reverse invoicing" can simplify the transaction process, improve efficiency and solve the problem of the first ticket of the renewable resources recycling enterprises, the risk of fraudulent invoicing and tax cheating that may exist due to the special policy of "reverse invoicing" needs to be strengthened and prevented. However, as the policy of "reverse invoicing" is special, the risk of fraudulent tax invoicing should be prevented.

The SAT said that in order to promote the implementation of the policy, the tax authorities will rely on tax big data, accurately screen taxpayers who meet the conditions for enjoying preferential policies, strengthen publicity and counseling services, ensure that taxpayers understand the policy and can operate, and create a good tax environment for the accelerated development of the whole industrial chain of the resource recycling industry by the smooth operation of tax policies, the continuous optimization of service measures, and the uniformity of law enforcement standards across the country, to help significantly improve the quality of the national economy's recycling quality. Helping to significantly improve the quality and level of the national economic cycle.

Hu Jinglin said that the tax department will continue to monitor and analyze the implementation of policies in various regions, tax types and industries, take effective measures in a targeted manner, further enhance the scientific and refined level of management, and make every effort to ensure that all new and old policies and measures can be implemented as soon as possible.

At the same time, the lawless elements use "reverse invoicing" and local irregularities in investment promotion caused by the "policy pits" for false invoicing and tax fraud illegal behavior, will further play the role of taxation, public security and other 8 departments to jointly combat tax-related crimes of the normalization of the mechanism of work The government will further utilize the role of the standing working mechanism of eight departments, including the tax and public security departments, to jointly combat tax-related crimes. For illegal and irregular taxpayers engaged in the recycling business of renewable resources financial rebates, incentives and subsidies, and actively cooperate with the relevant departments to intensify the handling of the law and investigate the corresponding responsibility, and strive to maintain the rule of law and a fair market competition environment, and promote the formation of a benign cycle of "good money expelling bad money".