Developing resource recycling industry is an inherent requirement of high-quality economic and social development, which is conducive to improving the level of resource recycling, alleviating the pressure on resources and environment, enhancing the national resource security guarantee capacity and cultivating new kinetic energy for economic growth. At present, China has set up a complete and progressive medium-and long-term policy system for resource recycling, which provides clear planning guidance for industrial development. At the tax level, 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, with the great improvement of the efficiency of digitalization and accuracy of tax collection and management, it has become the key premise and inevitable requirement to have a comprehensive insight into the industry tax policy trends and systematically examine their own potential tax risks.

The long-term objective situation of renewable resources industry is that waste products are sold at the source without tickets, and waste materials are collected by natural persons and retail investors layer by layer, which leads to the tax dilemma of missing invoices at the source of recycling links. With the macro-control of the renewable resources industry and the promotion of the reform of the value-added tax system, the renewable resources field has successively introduced preferential tax policies, such as calculating the deduction based on the purchase certificate, collecting it first and then returning it, and exempting it from taxes, until the Notice on the Value-added Tax Policy of Renewable Resources (Caishui [2008] No.157) in 2008 cancelled the tax exemption and deduction policy of recycling enterprises, and the tax burden of recycling enterprises rebounded, and the problems of source invoices in recycling links, related VAT deduction and pre-tax deduction certificates of enterprise income tax were again. In order to promote the sustained and healthy development of the industry, in December 2021, the Ministry of Finance and State Taxation Administration of The People's Republic of China issued the Announcement 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), which made it clear that the general VAT taxpayers engaged in recycling renewable resources can choose to apply the simple taxation method to pay VAT at the rate of 3%, thus alleviating the problem of excessive VAT burden of recycling enterprises. In April, 2024, State Taxation Administration of The People's Republic of China issued 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), which made it clear that qualified resource recycling enterprises can "reverse invoice" to Sellers of Scrap Products from Natural Persons when purchasing waste materials from April 29, 2024, and the special VAT invoice issued in reverse can be used as a voucher for VAT input deduction of resource recycling enterprises and pre-tax deduction of enterprise income tax.

Since the tax exemption policy was abolished in Caishui [2008] No.157, due to the inherent characteristics that most recycling sources are natural persons, the tax burden of recycling links of enterprises in renewable resources industry is heavy, and some enterprises in some industries have obtained special VAT invoices by relying on financial awards or seeking a third party to open or even purchase them. In recent years, the tax authorities have carried out the "strong foundation project" of tax collection and management under the condition of digital transformation, the digital upgrade and intelligent transformation of tax collection and management have been comprehensively promoted, the joint action of multi-departments to crack down on tax-related crimes has been normalized, and many actions have been carried out to clean up improper market intervention and subsidies or return policies linked to tax revenue. Under this background, a large number of cases of false opening and tax evasion have broken out in the renewable resources industry, and enterprises and their responsible persons are facing severe administrative and criminal liability risks.

In addition, the Regulations on the Implementation of the Value-added Tax Law, which came into effect on January 1, 2026, clarified the rules for the collection and management of taxable transactions of natural persons. If a natural person has a taxable transaction that meets the requirements, the domestic unit that pays the price is the withholding agent. For the resource recycling business involving a large number of natural persons, this regulation further strengthens the tax collection and management of natural persons' sales of waste materials, and also puts forward higher requirements for tax compliance of recycling enterprises. Based on the latest regulatory situation and tax policy orientation, China Tax has written this report in combination with the continuous research on renewable resources industry and the latest experience in handling tax-related cases, and made an in-depth analysis on the tax environment of renewable resources industry under the new situation of tax collection and management, the practice of "reverse invoicing" policy, key tax-related risks, the controversial focus and defense points of tax-related criminal cases, and corporate tax compliance management, with a view to providing useful reference for enterprises in renewable resources industry.