The orderly operation of the resources recycling industry is of great significance in improving the level of resource recycling, enhancing the ability of resource safety and security, and promoting green, low-carbon and recycling development. In terms of taxation, the policies in the field of recycling and comprehensive utilization of renewable resources are constantly changing, and in order to promote compliant operation and increase profit margins, the business model of the resources recycling industry is constantly adjusted, which is accompanied by a number of tax compliance issues.

      In 2008, the State Administration of Taxation (SAT) issued the Circular on Value-added Tax Policies for Renewable Resources (Caishui [2008] No. 157), which abolished tax exemption and deduction policies for renewable resources recycling industry. The tax burden of renewable resources recycling enterprises has increased dramatically, and the problem of invoices for waste enterprises has been highlighted again. In order to make up for the shortfall of input items and obtain compliant pre-tax deduction vouchers for enterprise income tax, some enterprises obtained VAT invoices by changing their business model, seeking third-party issuance or even purchasing them. With the further development of the campaign against tax violations, a large number of cases of false VAT invoices have erupted in the resources recycling industry, and the enterprises and their persons-in-charge have been facing administrative and even criminal liabilities.

      In order to promote the sustainable and healthy development of the resources recycling industry, the State Administration of Taxation (SAT) issued the Announcement on Improving VAT Policies for the Comprehensive Utilization of Resources on December 30, 2021, which clarifies that general VAT taxpayers engaging in the recovery of recycled resources can choose to apply the simplified tax calculation method to calculate the VAT payment in accordance with the 3% levy rate for the sale of recycled resources they have acquired, and clarifies that fiscal refund should be strictly regulated.Circular No. 40 alleviates to a certain extent the problem of excessive VAT burden of the enterprises engaged in recycling of renewable resources, but has not yet effectively responded to the issue of the vouchers for deduction of pre-tax deduction of EIT.

      In terms of judicial practice, during the handling of criminal cases of false invoicing by recycling industry enterprises in the past two years, there have been cases in which the invoiced enterprises have been punished for the crime of illegally purchasing VAT invoices; the reform of criminal compliance mechanism of the procuratorate has been pushed forward nationwide, and the courts of many places have carried out compliance pilots at the trial stage, and the above changes have brought a new opportunity for the defense of tax-related criminal cases in recycling industry. Based on this, in order to enable the majority of enterprises in the resources recycling industry to carry out tax management in a compliant and legal manner, strengthen internal risk prevention and control and external risk isolation, and effectively cope with and resolve tax-related legal risks in their future business operations, Huashui combines the continuous research of the resources recycling industry with the experience of acting in the latest tax-related cases to write this report, which provides an in-depth analysis of the tax environment of the resources recycling industry under the new situation of tax levy and administration, causes of the tax risks, major tax risks and their manifestations, key points of dispute and defense in the criminal case of false invoicing, as well as the management of tax compliance. This report analyzes the tax environment of the recycling industry under the new situation of tax administration, the causes of tax-related risks, the main tax-related risks and their manifestations, the focus of disputes and key points of defense in criminal cases of false invoicing, as well as the management of tax compliance, with a view to providing useful references and reference for enterprises in the resources recycling industry.

Click to download:《Resources Recycling Industry Tax Compliance Report》（2024）