Original text + Kailing interpretation: STA announcement on "reverse invoicing" by resource recycling enterprises

Original text:

Kailing interpretation:

To help resource recycling enterprises develop, the State Taxation Administration issued Announcement [2024] No. 5, clarifying the relevant provisions on "reverse invoicing" by resource recycling enterprises to individuals selling scrapped products.

I. Background and Purpose

With economic and social development, large-scale equipment upgrades and consumer goods trade-ins have generated many scrapped products. To standardize the operations of resource recycling enterprises, safeguard tax collection and administration, and facilitate invoice issuance when individuals sell scrapped products, the State Taxation Administration, in accordance with relevant State Council action plans, issued the "reverse invoicing" policy.

II. Applicable entities and conditions

  ▪ Seller: refers to a natural person who sells used or purchased scrapped products, and whose cumulative sales via reverse invoicing over 12 consecutive months do not exceed 5 million yuan (excluding VAT).

  ▪ Resource recycling enterprise: must meet any of the following conditions and actually engage in resource recycling business, including enterprises engaged in hazardous waste collection that have obtained a hazardous waste operating license; enterprises engaged in end-of-life vehicle recycling that have obtained the qualification certificate for end-of-life vehicle recycling and dismantling enterprises; and other resource recycling enterprises that meet the requirements of the renewable resource recycling management measures and have completed business entity registration and commerce department filing.

III. Invoicing process and requirements

  1. Application: eligible resource recycling enterprises submit the Resource Recycling Enterprise "Reverse Invoicing" Application Form to the competent tax authority and provide corresponding supporting materials, such as a hazardous waste operation permit.

  2. Invoicing: Through the electronic invoice service platform or the VAT invoice management system, issue invoices online to sellers in reverse marked with "scrap product purchase", and correctly select the "scrap product" category code according to the new Commodity and Service Tax Classification Code Table.

  3. Limit adjustment: enterprises may, according to actual business needs, apply to the competent tax authority for adjustment of invoice limits, or the maximum invoicing limit and number of copies, in accordance with regulations.

IV. Tax Treatment and Preferential Policies

  ▪ VAT: Enterprises applying the simplified taxation method can only issue ordinary invoices in reverse; enterprises applying the general taxation method can issue both VAT special invoices and ordinary invoices in reverse. If an enterprise's VAT taxation method changes, it needs to apply to adjust the "reverse invoicing" invoice type. In addition, where a VAT general taxpayer sells scrapped products and had already chosen the simplified taxation method before the announcement took effect, it may switch to the general taxation method before July 31, 2024, but subsequent changes must follow the 36-month restriction.

  ▪ Incentive policy: Sellers who sell scrapped products through "reverse invoicing" can enjoy tax incentives such as VAT exemption for small-scale taxpayers with monthly sales of less than 100,000 yuan and VAT calculated and paid at a reduced levy rate of 1% instead of 3%. If monthly sales exceed 100,000 yuan, resource recycling enterprises need to handle relevant tax filing on behalf of the seller.

  ▪ Individual income tax: Sellers prepay individual income tax on business income at 0.5% of the sales amount and must file the annual reconciliation with tax authorities themselves before March 31 of the following year; resource recycling enterprises must provide necessary information.

V. Other provisions

  ▪ Red-letter invoice issuance: in situations such as sales returns that require issuing a red-letter invoice, the resource recycling enterprise fills out the relevant form, and the red-letter invoice must correspond one-to-one with the original blue invoice.

  ▪ Tax and fee agency and filing: resource recycling enterprises need to handle VAT and surcharges and individual income tax filing on behalf of sellers, pay the agency taxes and fees as required, and submit the corresponding report forms. If not paid on time, the tax authority will suspend their "reverse invoicing" qualification.

  ▪ Seller does not agree to processing: The enterprise must obtain the seller's consent for the first reverse invoicing; otherwise, the seller may apply to the tax authority for invoice issuance.

  ▪ Validity of invoice vouchers: Invoices reversely issued by enterprises that comply with regulations can be used as pre-tax deduction vouchers for income tax; those that do not comply will be handled in accordance with relevant tax laws and regulations.

  ▪ Material Retention and Responsibility: Enterprises must retain materials that can prove the authenticity of the business, such as acquisition contracts and transportation invoices, and establish an acquisition ledger. At the same time, they are responsible for the submitted materials and business authenticity. If there is falsification, the tax authority will cancel qualification and pursue responsibility.

  ▪ Tax service optimization: Tax authorities will continue to use new information technology means to improve the convenience of "reverse invoicing" and tax payment on behalf of resource recycling enterprises.

The Kailing Technology Reverse Invoicing Solution, with its advantages of convenience, precision, efficiency, and completeness, brings an innovative invoicing model to the renewable resource recycling industry. It effectively solves the pain points of the traditional electronic tax bureauReverseThe pain points of the invoicing process are significantly improved through innovative technology and system integration capabilities, enhancing enterprise efficiency and value.

Contact Us now,Learn more：https://www.kailingteck.com/ 。

As a comprehensive business-finance-tax digitalization solution service provider, Kailing Technology provides business-finance-tax management digital transformation products and operational services for various government agencies, institutions, and large, medium, and small enterprises. The product line includes:

Solutions for sales contract management system, procurement contract management system, fully digitalized Leqi interface project, automatic output VAT invoicing system, invoice issuance for individuals system, employee expense control and reimbursement system, input VAT invoice management system, supply chain collaborative reconciliation system, imaging OCR recognition system, automatic financial bookkeeping system, electronic accounting archives system and other businesses, comprehensively advancing the digitalization process across various fields.

If you have any business-finance-tax digital transformation needs, welcome to contact us. Beijing Kailing Technology will serve you wholeheartedly.