Editor's Note: In recent years, the policies in the field of recycling and comprehensive utilization of renewable resources have been constantly changing, which has brought new development opportunities for industrial enterprises and also put forward higher tax compliance requirements. At the same time, the efficiency of digital and accurate tax collection and management has been greatly improved. It has become the key premise and inevitable requirement for renewable resources enterprises to ensure the sustainable and healthy development of their business to gain a comprehensive insight into the industry tax policy trends and systematically examine their own potential tax risks. Based on the regulatory situation of renewable resources industry in 2025, this paper focuses on typical cases of renewable resources industry notified by local tax authorities, and analyzes the tax risks of renewable resources industry under the current regulatory trend.

I. Regulatory trends: Intensify efforts to correct illegal tax returns and continuously maintain a high-pressure situation against tax fraud.

The press conference held in State Taxation Administration of The People's Republic of China on December 8 revealed four aspects of the tax and fee policies related to the renewable resources industry and the regulatory trends: First, there are 14,800 resource recycling enterprises with reverse invoicing at present, and the amount of reverse invoicing this year is nearly 900 billion yuan; Second, focus on policies with high risk of illegal cheating, especially to prevent small-scale taxpayers from cheating on tax benefits by splitting income, and to strictly investigate the illegal enjoyment of regional tax benefits by enterprises without substantive operations; Third, intensify efforts to correct the tax-related problems of illegal investment promotion and capital introduction, and increase monitoring and verification of local illegal tax rebates to engage in "policy depression" and illegal recruitment of "shell enterprises" to engage in "invoicing economy"; Fourth, relying on the normalization of the eight departments to jointly crack down on tax-related crimes, we will continue to maintain a high-pressure situation against tax fraud.

Renewable resources industry has long been a key area of tax supervision. Due to the problems of source invoices, there are frequent risks such as the rationality of the model and the legality of financial awards and subsidies, and all the subjects in each link are faced with different degrees of compliance risks. For the front-end sellers of scrapped products, some retail investors split their income to multiple natural persons or multiple self-employed households to cheat and enjoy the preferential tax policy in order to avoid paying taxes. After "reverse invoicing", some natural person sellers also control the sales of each entity by splitting their income to avoid the invoicing limit. For renewable resources enterprises, due to the existence of multi-link transaction, one-stop transportation and relying on financial reward and compensation mode, coupled with the doubts that some enterprises have not played their trade functions and have capital backflow, the whole chain is falsely opened and the risk of tax evasion is triggered; In the application of the comprehensive utilization policy of resources, some enterprises face the risk of being recovered because they do not meet the policy conditions. Based on the above risks, combined with the case information publicized in various places this year, the following three typical cases are extracted.

II. the latest case: many tax-related cases in renewable resources industry involve criminal responsibility.

(1) the authenticity of the transaction of scrapped products is in doubt, and the tax bureau determines that the enterprise does not meet the requirements of "reverse invoicing"

According to an article published in China Tax News in July 2025, Company M mainly deals in the sales of integrated circuit chips and products, and its business model is to buy waste chips from natural persons or other enterprises and sell them after processing. When examining the application for "reverse invoicing" of Company M, the tax authorities found that the information of three natural person sellers submitted by the company was doubtful. First, the sales of one natural person was 4.78 million yuan, which was close to the limit of "reverse invoicing" of 5 million yuan; Second, the bank cards used by the three natural person transactions are all from the same bank. Further investigation by tax officials found that the three natural persons were actually employees of G Company, the upstream supplier of M Company, and the three natural persons could not reasonably explain how to distinguish the business of the company where they were employed from the personal business, and M Company could not provide the purchase ledger and business data to prove that the purchased scrapped products came from these three natural persons. Finally, the tax authorities decided that M Company did not meet the requirements of "reverse invoicing".

(2) Falsification and tax evasion: involving retail investors splitting income, recycling enterprises issuing invoices on their behalf, etc.

Individual recycling stations borrowed 85 ID cards to set up self-employed households, and the split income was invoiced to waste enterprises for more than 111 million yuan, which was qualitatively tax evasion.

In April, 2025, State Taxation Administration of The People's Republic of China announced the tax evasion case of Rongmou Renewable Resources Recycling Station and Shengmou splitting up and operating hidden income to cheat small-scale taxpayers. Rong's renewable resources recycling station operated by Sheng Moumou bought waste paper and sold it to a paper company. In order to pay less taxes, Sheng Moumou borrowed someone else's ID card to set up 85 recycling stations. By splitting the operating income of Rong's renewable resources recycling station into 85 recycling stations, he enjoyed the small-scale taxpayer's VAT reduction and exemption policy in violation of regulations, and paid less VAT, personal income tax and other taxes of 2,158,400 yuan. The tax authorities recovered taxes and fees from Rongmou Renewable Resources Recycling Station and Shengmoumou, added late fees and imposed a fine totaling 3,397,400 yuan. At the same time, the clues about Shengmoumou and 85 Renewable Resources Recycling Stations suspected of falsely invoicing were transferred to the public security organs for further investigation.

Recycle the company's "false entry and false exit", make a qualitative false entry and transfer it to the public security.

In March, 2025, a case published by Qingdao Taxation Bureau showed that a recycling company of renewable resources and materials in Qingdao asked others to falsely issue 20 special VAT invoices for themselves and 20 special VAT invoices for others, with a total of 40 false VAT invoices and a total price tax of 4,558,600 yuan. The inspection department of Qingdao Taxation Bureau fined the company 170,000 yuan according to the Measures for the Administration of Invoices and other relevant regulations, and transferred it to the public security organ according to law.

Subsidiaries of listed companies have been taxed qualitatively by obtaining invoices from third-party companies after purchasing waste household appliances by individuals.

In November, 2025, a listed company announced that its wholly-owned subsidiary had received the Decision on Tax Administrative Punishment made by the Inspection Bureau, which stated that it had purchased used household appliances from individual sellers from September to October, 2015, and obtained 350 special VAT invoices issued by a third-party renewable resources company other than the seller, which certified and deducted the tax amount of 3,855,625.86 yuan, and charged the main business cost of 22,680 yuan. According to the first paragraph of Article 63 of the Law on Tax Collection and Administration, the Inspection Bureau determined that the subsidiary's under-listing of income in the accounts had caused tax evasion, and imposed a fine of 0.5 times of the tax evaded at the place where it acted, totaling 2,024,203.58 yuan.

(3) Non-ferrous metal processing enterprises falsely issue invoices for transportation fees, and enjoy the policy of immediate withdrawal upon violation of regulations.

In June, 2025, a case published by Jiangxi Provincial Taxation Bureau showed that the main business of a copper company was to buy scrap copper and then carry out pressing processing, and then transport the processed copper rods, copper bars and other finished products to all parts of the country for sale, but transport invoice all came from a local logistics company. Further verification by the tax authorities found that a copper company fabricated transportation business, obtained false special VAT invoices, falsely listed transportation costs, falsely credited the input, made false tax returns, and evaded VAT and corporate income tax, totaling 2.076 million yuan; At the same time, the income from the sale of non-self-produced copper rods was included in the sales income of the immediate withdrawal project, and the preferential tax policy for comprehensive utilization of resources was enjoyed in violation of regulations, and the tax refund was defrauded by 173,200 yuan. In view of its illegal behavior, the inspection bureau made a decision to recover taxes and fees, add late fees and impose a total fine of 4,646,900 yuan. At the same time, the issue of logistics companies suspected of falsely invoicing was handled separately.

III. Tax-related risks: split income, false invoicing, illegal application of tax incentives, and tax-related risks broke out at many points.

(1) split income tax evasion, false invoicing, natural person retail tax risk can not be ignored.

Under normal circumstances, sales of waste materials, whether as a natural person or as a self-employed, are required to pay VAT, additional taxes, personal income tax and other taxes. Those who meet the requirements can enjoy relevant preferential tax policies. In practice, some retail investors sell waste materials without tickets. In response to this behavior, the press conference of the State Administration of Taxation pointed out that the tax authorities should focus on promoting the standardized development of the recycling industry, broaden the scope of compliance management for sellers of scrapped products through the implementation of "reverse invoicing", and effectively reduce the trading space without invoicing; As shown in the above case, some retail investors split their income in order to enjoy tax incentives and pay less taxes in violation of regulations. However, after the implementation of the "reverse invoicing" policy, some natural person scrap product sellers borrowed other people's identity information to enter into purchase and sale contracts with resource recycling enterprises, and the resource recycling enterprises issued reverse invoices to individuals.

The main body of split income often has the empty shell characteristics of multiple entities registered in the same place, not actually participating in the business, and confusing personnel, finance and assets. In recent years, tax authorities in many places have also used big data to connect with multi-department information to crack down on the fraudulent use of preferential taxes and fees for "split income". For example, the tax authorities in one place have carried out inspections on the situation of "one address and multiple certificates" in which multiple business entities use the same address as their registered residences, and screened tax-related doubts about "split income" by comparing the actual business operations of enterprises with the declared data, verifying the ownership relationship of equipment assets, verifying the consistency of labor contract entities, and tracking the fairness of product transfer pricing. Deepen the cooperation mechanism with municipal supervision, public security, social security and other departments, collect data fields such as registration and financial statements, and carry out the "five-in-one" inspection of enterprises, such as verification photos, assets, employment, transactions and correlation, and sort out 1325 pieces of abnormal data feedback from various departments, thus breaking through the data coordination barrier.

Apart from paying back taxes, charging late fees and evading taxes, the split income of retail investors may also lead to the risk of falsely issuing invoices to downstream enterprises by using other individuals who are not actually involved in the business, such as inconsistent purchase and sale subjects and separation of tickets and goods. At the same time, the legitimacy of invoices obtained by downstream bill-receiving enterprises is also facing doubts.

(2) Multi-link transactions, one-stop transportation, relying on financial incentives and other modes cause doubts about the authenticity of the business.

Because the recycling sources are mostly scattered individuals, there is always a big difference in the tax burden of purchase and sale in the recycling chain of renewable resources, and the tax burden of value-added tax in the recycling link is heavy, and most enterprises can not meet the applicable conditions of the policy of comprehensive utilization of resources. In the long-term practice, the recovery link has basically formed a trade model that relies on financial rewards and subsidies. Under the current regulatory trend of strengthening efforts to correct tax-related problems of illegal investment promotion, strictly investigating illegal tax introduction and tax return to engage in "policy depression" and illegal recruitment of "shell enterprises" to engage in "invoicing economy", the legitimacy and rationality of the recovery model are questioned, and the related recovery business authenticity and invoice compliance issues also lead to related tax-related risks.

In addition, in order to improve transportation efficiency and reduce losses, the renewable resources industry generally adopts the method of "instructed delivery" to deliver the goods rights, and the waste materials are directly transported from retail investors to end-use waste enterprises. Because this mode of transportation presents the appearance that the resource recycling enterprises in the intermediate link do not actually participate in the transportation of goods, and all the purchase and sale links are based on the weighing bills of waste enterprises after the delivery of goods, and there are some problems in some businesses, such as abnormal capital flow and doubts about the authenticity of weighing bills, the tax authorities may think that the intermediate trade links are fictitious and do not have real goods transactions, thus identifying the recycling enterprises in the chain as false, while the terminal waste enterprises are faced with obtaining invoices of "separation of tickets and goods" and cannot make input.

(3) The application of the policy of refund upon demand in violation of regulations will lead to risks such as tax payment and late payment fees.

The Announcement of the Ministry of Finance and the State Administration of Taxation on Improving the Value-added Tax Policy for Comprehensive Utilization of Resources (Announcement No.40 of the Ministry of Finance and the State Administration of Taxation in 2021) stipulates the applicable conditions of the policy of immediate withdrawal of products for comprehensive utilization of resources and the proportion of tax refund. Enterprises should not only judge whether they meet the resource name, comprehensive utilization product and service name, technical standards and related conditions stipulated in the Catalogue of Value-added Tax Preferences for Products and Services for Comprehensive Utilization of Resources (2022 Edition), but also pay attention to whether they have obtained compliant invoices, whether their tax credit rating meets the requirements and other conditions. In practice, there are many cases in which enterprises' qualification for immediate withdrawal is affected because the invoices they have obtained are found to be falsely issued.

IV. Compliance Suggestions: Consolidate business authenticity and raise awareness of tax compliance.

Retail investors should declare and pay taxes on their operating income according to law. Retail investors, whether operating as natural persons or self-employed, are required to declare their operating income truthfully and completely, and avoid splitting their income by borrowing other people's identities and making false claims. In the course of business development, transactions should be conducted by means of bank transfer, etc., to ensure that the transactions are traced and traceable, and at the same time, settlement materials should be retained to provide strong support for the authenticity of their own business.

Resource recycling enterprises should issue and accept invoices based on real business. Before the business is launched, it is necessary to strengthen the qualification review of upstream partners, pay attention to the tax credit rating, check whether there are abnormal households, etc., and stipulate the terms of compensation for breach of contract issued by invoices in the acquisition contract to prevent and control potential economic losses; In the process of business development, it is necessary to clarify the trading links in which it is located, give full play to its trade functions, and ensure the consistency of contract flow, goods flow, capital flow and invoice flow in business development; After the business is started, relevant materials should be kept. For those who apply the "reverse invoicing" policy, the materials should be sorted out and kept according to the requirements of the Announcement on Relevant Matters Concerning "Reverse Invoicing" by Resource Recycling Enterprises to Sellers of Scrap Products from Natural Persons (State Taxation Administration of The People's Republic of China Announcement No.5, 2024).

Accurately understand and apply the policy of comprehensive utilization of resources. Enterprises should establish a dynamic management mechanism to check whether their business meets the applicable conditions of the policy of immediate withdrawal. For example, it is necessary to strengthen invoice management and apply for verification in time in case of abnormal vouchers; Pay attention to the change of tax credit rating dynamically to avoid losing the qualification of tax refund due to the decline of credit rating.