Editor’s Note:In recent years, China’s coffee industry has been expanding rapidly from traditional cultivation into diversified scenarios such as deep processing, branded retail, cross-border trade, and cultural-tourism integration. As the industry chain continues to lengthen and business models become increasingly complex, tax-related issues such as invoice administration, input VAT credit, and applicable tax rates have also emerged across procurement, processing, sales, import, and export activities. The first batch of typical tax compliance cases for the coffee industry chain, jointly released by the tax authorities of Yunnan, Jiangsu, and Shanghai, signals that the focus of tax administration in the coffee industry is shifting from isolated matters to whole-chain governance. This article examines the business characteristics of different segments of the coffee industry chain, identifies the main tax-related risks that coffee enterprises may face, and offers corresponding tax compliance recommendations for reference.

01 New Trends in Coffee Tax Governance Amid Industry Chain Extension

On June 18, 2026, the tax authorities of Yunnan, Jiangsu, and Shanghai jointly released the first batch of typical tax compliance cases for the coffee industry chain. Compared with compliance guidance focused on a single tax type or a single issue, these cases cover multiple business stages of the coffee industry chain, including raw material procurement, processing and R&D, and brand sales. They signal that tax-related governance in the coffee industry is placing greater emphasis on chain-wide coordination, scenario-based identification, and closed-loop documentation.

To understand the tax issues reflected in these cases, it is necessary to first return to the coffee industry chain itself. China’s coffee industry chain is mainly composed of three segments: upstream, midstream, and downstream. It has now developed into a complete chain covering seed breeding and cultivation, deep processing, distribution and consumption, as well as cultural-tourism integration. The upstream segment mainly includes coffee seed breeding, cultivation, and primary processing, and extends to seedling propagation, cultivation technology R&D, and fresh coffee cherry processing. The midstream segment is mainly focused on deep processing, including the production of roasted green coffee beans, ground coffee, and instant coffee powder. The downstream segment primarily serves distribution and consumer markets, covering online and offline retail, domestic and foreign trade, and diversified consumption scenarios. The coffee industry is characterized by an extended industry chain, diversified market participants, and integrated business formats. In addition, many regions in China are developing coffee industry complexes that integrate coffee cultivation, processing experiences, cultural exhibitions, and leisure tourism, further promoting the integration of “coffee + cultural tourism.”

As the coffee industry chain continues to extend, market participants become more diversified, and new business formats continue to emerge, the related tax treatment has become increasingly complex. Different types of participants in the coffee industry need to take into account the differences in tax policies applicable to various segments of the chain. For integrated operators or corporate groups, tax-related risks arising from different segments may further accumulate along the industry chain within the same business entity or corporate group, thereby giving rise to more complex tax consequences. How to maintain tax compliance across different segments and business scenarios has become an important issue for the sustainable development of the coffee industry.

Tax administration of the coffee industry by the tax authorities is also gradually shifting toward refined management based on the classification of business entities, business data analysis, and interdepartmental regulatory coordination. First, tax authorities are placing greater emphasis on the graded and categorized management of coffee business entities. For different types of entities, such as coffee growers, small and micro enterprises, and leading enterprises, tax authorities conduct grid-based surveys through on-site visits, telephone inquiries, and third-party data comparisons, in order to understand their cultivation scale, business scope, production models, sales networks, and other relevant information, and to determine different management priorities based on business scale, entity type, and risk level. Second, tax authorities identify tax-related risks of coffee enterprises through business data, including procurement contracts, production ledgers, sales records, cash flows, revenue and cost structures, and changes in profit margins. Third, tax administration in the coffee industry also reflects a trend of interdepartmental coordination. Where necessary, tax authorities may combine information from relevant departments such as agriculture, market regulation, commerce, and customs, so as to strengthen cross-checking of relevant tax-related data.

02 Analysis of Tax-Related Risks Across the Coffee Enterprise Industry Chain

1. Upstream Segment: Risks Arising from Non-Compliant Issuance of Agricultural Product Purchase Invoices in Fresh Coffee Cherry Procurement

Under the relevant provisions of tax law, agricultural producers are exempt from VAT when selling self-produced agricultural products. To bridge the VAT exemption at the agricultural production stage with the input VAT credit mechanism in the processing and circulation of agricultural products, when a purchasing enterprise buys self-produced agricultural products from agricultural producers, it may lawfully issue agricultural product purchase invoices on its own and calculate input VAT credits based on the prescribed deduction rate. The special feature of agricultural product purchase invoices is that, in this transaction, the purchasing enterprise simultaneously acts as the purchaser, the invoice issuer, and the party claiming the input VAT credit. Accordingly, the compliance basis does not lie merely in the form of the invoice itself, but more importantly in whether the seller is an eligible party, whether the self-produced nature of the products is genuine, and whether the delivery of goods and payment of consideration can corroborate each other. Therefore, if a fresh coffee cherry purchasing enterprise fails to strictly verify the identity of the seller and issues agricultural product purchase invoices to parties other than individual farmers selling their self-produced fresh coffee cherries, the basis for issuing such invoices may be challenged. The corresponding input VAT may be disallowed as a credit, and any input VAT already credited may be required to be transferred out. In addition, inconsistencies among procurement documents may also give rise to risks concerning the authenticity of the procurement transaction. If the purchase invoices cannot be matched with picking records, weighing slips, warehouse receipts, quality inspection records, payment records, procurement ledgers, and accounting records, the insufficiency of the evidentiary chain may weaken the proof of the underlying transaction’s authenticity. This may further lead to risks such as back payment of tax and late payment surcharges. In serious cases, it may also involve the false issuance of agricultural product purchase invoices and even trigger criminal liability risks.

2. Midstream Segment: Risks Relating to R&D Expense Aggregation and Applicable Tax Rates in Deep Processing

The midstream segment mainly corresponds to coffee deep-processing operations, involving the production of products such as roasted coffee beans, ground coffee, extracted coffee products, freeze-dried coffee, and instant coffee powder, as well as related process R&D. Tax-related risks in this segment are mainly reflected in two aspects. First, inaccurate aggregation of R&D expenses may give rise to risks of non-compliant application of the super deduction policy. For processing enterprises that carry out R&D activities such as roasting process improvement, extraction technology, and freeze-drying technology, and that apply the R&D expense super deduction policy, particular attention should be paid to the accuracy of R&D expense aggregation. If an enterprise fails to separately manage R&D material requisitions and production material requisitions, fails to indicate project numbers and purpose descriptions on requisition forms, or fails to establish auxiliary ledgers for R&D expenditures by project, production costs and R&D expenses may become commingled, material consumption may become difficult to trace, and inconsistencies may arise between records and actual use. As a result, the relevant expenses may not be fully included in the scope of the super deduction, giving rise to enterprise income tax adjustments. Second, failure to improve the separate accounting mechanism for different types of coffee beans may give rise to risks in the application of VAT policies in the processing stage. Under the current VAT regime, sales of green coffee beans are subject to a 9% VAT rate, while sales of roasted coffee beans are subject to a 13% VAT rate. For enterprises that engage in both green coffee bean sales and roasted coffee bean sales, failure to conduct separate accounting throughout the procurement, finance, and invoicing processes may result in the commingling of sales revenue, costs, and input VAT relating to products subject to different tax rates. This may further lead to issues such as incorrect application of invoicing tax rates, unclear aggregation of input VAT, inaccurate cost carry-forward, and discrepancies between accounts and actual inventory, and may expose the enterprise to risks such as additional VAT payment.

3. Downstream Segment: Tax Treatment Risks in Multi-Channel Sales and Composite Business Models

Tax-related risks in the downstream segment first arise from the diversification of sales networks. Some coffee enterprises have developed multi-level channel systems covering B-end supply, digital distribution, online sales, and offline consumption. Under a multi-channel operating model, if transaction data are dispersed across different platforms, systems, or business entities, issues may arise such as omitted revenue, timing mismatches in revenue recognition, improper treatment of refund offsets, and inconsistencies between invoice issuance and actual transactions. Second, e-commerce promotions and livestream marketing may amplify risks relating to revenue recognition and expense deduction. For large-scale promotional campaigns, platform discount rules, membership benefits, bundled sales, and giveaway arrangements, if the tax treatment is not clarified before the campaign goes live, disputes may arise over revenue recognition, treatment of discounts and allowances, invoice issuance, and tax filing positions. For expenses such as influencer collaborations, platform promotion, and traffic acquisition, if the contractual arrangements, service content, settlement basis, and invoice information cannot be matched with each other, the relevant expenses may also be challenged in terms of authenticity, business relevance, and the compliance of supporting documentation. Third, composite consumption scenarios such as cultural-tourism integration may give rise to risks in distinguishing the nature of revenue. Integrated primary, secondary, and tertiary industry business formats, such as coffee estates, study-tour experiences, and coffee cultural activities, often involve multiple types of revenue, including product sales, catering services, experiential services, cultural and creative product sales, venue use, and brand licensing. If an enterprise fails to separately account for the relevant revenue streams, the nature of the revenue may become unclear, which may in turn lead to tax disputes over applicable tax items and rates, invoice issuance, revenue recognition, and the aggregation of costs and expenses.

4. Import and Export Trade: Compliance Risks Relating to Customs Duties, Import Taxes, and Export VAT Refunds

In addition to the above segments, import and export trade also warrants attention, given the strong cross-border nature of the coffee industry. First, the import side mainly involves customs compliance and the treatment of import taxes and duties. Different products, such as green coffee beans, roasted coffee beans, and coffee powder, may be subject to different requirements in terms of import access, commodity classification, certificates of origin, tariff preferences, customs valuation, import VAT, and inspection and quarantine. If an enterprise fails to accurately distinguish product types in import procurement, or if contracts, invoices, customs declaration documents, payment records, and warehousing documents cannot be matched with each other, it may face risks such as improper application of tariff preferences, inaccurate calculation and payment of import taxes and duties, and insufficient basis for claiming input VAT credits on import VAT. Second, the export side should focus on compliance with export VAT refund rules. As coffee deep-processing capabilities continue to improve, green coffee beans as well as processed products such as roasted coffee beans and freeze-dried coffee may enter the export sales stage. If an enterprise’s export revenue recognition, customs declaration documents, logistics records, foreign exchange collection records, input VAT, and cost carry-forward cannot form a complete and mutually corroborating chain, the basis for export VAT refund claims may be insufficient, giving rise to disputes over the application of export refund policies. If an enterprise is involved in false exports, false issuance of input invoices, “bill-buying” arrangements, false foreign exchange collection, or similar conduct, the relevant acts may also be identified as fraudulent export VAT refund claims, potentially resulting in administrative penalties or even criminal liability.

03 Full-Chain Tax Compliance Recommendations for Coffee Enterprises

1. Strengthening the Basis of Transaction Authenticity Through a Digital Evidence Chain

Transaction authenticity is the foundation of tax compliance for coffee enterprises, and digital evidence-chain management is an important means of enhancing the completeness, traceability, and verifiability of transaction documents. Enterprises should, across the full industry-chain process covering procurement, processing, sales, imports, and exports, incorporate key data such as transaction counterparties, contracts and orders, movement of goods, fund payments, invoice issuance, business documents, and accounting records into unified management. Through system-based records, document archiving, and data verification, documents and records from different stages can corroborate one another. Specifically, in the upstream procurement segment, enterprises should focus on retaining information such as farmer identity, the self-produced nature of the products, quantities delivered, warehousing records, and payment information, so as to ensure that agricultural product purchase invoices correspond to genuine procurement transactions. In the midstream processing segment, enterprises should retain documents relating to raw material requisition, production and processing, inventory movement, and cost carry-forward, so that changes in product form and cost aggregation are traceable. In the downstream sales and cross-border trade segments, enterprises should bring orders, contracts, logistics records, receipts, invoices, customs declaration documents, and accounting records under unified management, so as to avoid insufficient support for revenue recognition, input VAT credit, export VAT refunds, or pre-tax deductions due to breaks in the documentation chain.

2. Improving the Separate Accounting Mechanism Through Finance–Business Coordination

Given the long coffee industry chain, multiple product forms, and complex revenue types, enterprises should move separate accounting controls forward to the stage at which business transactions occur, rather than relying solely on ex post adjustments by the finance department. Departments such as procurement, warehousing, production, R&D, sales, and finance should establish unified standards based on product type, business purpose, nature of revenue, and applicable tax rates, so that business data can be accurately incorporated into the financial accounting system. This helps avoid insufficient support for the application of tax policies at the back end due to unclear classification at the front end. First, in R&D activities, enterprises should have the R&D, production, warehousing, and finance departments jointly distinguish R&D material requisitions from production material requisitions, and establish auxiliary ledgers for R&D expenditures based on project numbers, purpose descriptions, and requisition records, so as to retain standardized supporting documents for the R&D expense super deduction. Second, for enterprises engaged in both green coffee bean sales and roasted coffee bean sales, separate-line management should be implemented in procurement and warehousing, inventory management, cost carry-forward, revenue recognition, input VAT aggregation, output VAT reporting, and invoice review, so as to avoid the commingling of sales revenue, costs, and input VAT for products subject to different tax rates. Third, for composite consumption scenarios such as coffee estates, study-tour experiences, and cultural and creative product sales, the business department should first distinguish different service contents and revenue types in contracts and sales plans, and the finance department should then conduct invoice issuance, revenue recognition, and cost and expense aggregation accordingly.

3. Improving the Risk Response Mechanism Through End-to-End Controls

For transactions involving relatively large amounts, lengthy chains, or new business models, coffee enterprises should establish an end-to-end tax control mechanism covering the pre-transaction, in-process, and post-transaction stages. At the pre-transaction stage, enterprises should conduct tax assessments before launching new businesses, signing major contracts, finalizing promotional plans, or carrying out import and export activities, so as to clarify in advance the tax treatment rules that may apply to each stage of the business. For transactions where the applicable policy is unclear, the amount involved is substantial, or the transaction structure is complex, enterprises may also engage professional tax support to identify potential risks in advance. During the transaction process, enterprises should use digital tools to continuously track key tax-related data, reduce omissions and errors caused by manual processing, and ensure consistency among business data, financial data, and tax filing positions. At the post-transaction stage, enterprises should regularly review changes in tax-related indicators associated with their business operations, promptly identify abnormal fluctuations, trace them back to specific business causes, and rectify any issues identified in a timely manner. Where a tax dispute has already arisen, enterprises should respond based on the underlying business facts, applicable policy grounds, and evidentiary chain, and where necessary, seek professional tax support to facilitate the proper resolution of the tax dispute.