Understand in one article what the "reverse invoicing" policy for resource recycling enterprises is and how to comply (with Kailing Technology's solution)

On April 29, 2024, the State Taxation Administration issued an announcement, officially launching the "reverse invoicing" policy for the renewable resource recycling industry. This is not only an innovation in tax administration models, but also a key measure for the state to standardize industry order and promote the development of the circular economy. For resource recycling enterprises, understanding and compliantly executing this policy directly relates to operating costs, tax risks, and even survival and development.

I. Core interpretation of the "reverse invoicing" policy

1. Definition

It overturns the traditional invoicing process. Under the "reverse invoicing" model, the buyer (resource recycling enterprise) issues an invoice to the seller (natural person or other operator selling waste products), and the invoice is marked with the words "scrap product purchase."

2. Policy basis

Formulated by the State Taxation Administration in accordance with relevant tax laws and regulations, it aims to promote the healthy development of the resource recycling industry, regulate market transaction behavior, and solve the difficulty for recycling enterprises in obtaining compliant input VAT invoices.

3. Industry reference

Similar models have already been operating in other fields, such as agricultural product procurement, used car procurement, and photovoltaic power procurement.

4. Practical key points

▪ Invoicing system: Resource recycling enterprises must use the electronic invoice service platform orThird-party business-finance-tax service platforms (for example, Kailing Technology reverse invoicing system)。

▪ Invoice type: enterprises using the general calculation method may issue VAT special invoices or ordinary invoices: Enterprises using the simplified taxation method can only issue general invoices.

▪ Applicable tax rate: mainly the 3% levy rate; in some cases, the reduced 1% levy rate applies.

▪ Red-letter invoice: in cases such as sales returns, invoicing errors, and sales allowances, the resource recycling enterprise fills out the "Information Form" or "Confirmation Form" to issue a red-letter invoice.

II. Key points of compliant operations and responsibilities of all parties

The convenience of "reverse invoicing" comes with strict compliance requirements. Resource recycling enterprises, sellers, and regulators need to clarify their respective responsibilities:

1. Obligations of natural persons (sellers)

▪ Individual income tax: prepay individual income tax on business income at 0.5% of sales amount, and the annual reconciliation and settlement must be handled before March 31 of the following year. Enterprises must clearly inform of this obligation.

▪ VAT: If monthly sales are ≤100,000 yuan, VAT is exempt; if exceeding 100,000 yuan, VAT is paid at a reduced rate of 1% instead of the 3% levy rate.

▪ Agency filing: when monthly sales > RMB 100,000, VAT and surcharges are filed and paid by the resource recycling enterprise on behalf.

▪ Business entity registration: if sales exceed RMB 5 million for 12 consecutive months, business entity registration must be completed and the entity must switch to self-issuance of invoices.

2. Core responsibilities of resource recycling enterprises (purchasers)

▪ Consent for first invoicing: before the first reverse invoicing, the seller's consent must be obtained regarding invoicing and tax payment on behalf, and written proof materials (such as authorization letters or electronic agreements) must be retained.

▪ Agency filing and tax payment: within the filing period of the month following invoicing, submit the "Agency Tax Fee Report Form" and "Agency Tax Fee Detail Report Form" to the competent tax authority, and pay the agency VAT, surcharges, and prepaid individual income tax.

▪ Input VAT deduction: the tax amount indicated on reverse-issued special VAT invoices can be deducted as required, effectively reducing the tax burden.

▪ Evidence chain management (top priority): strictly follow the requirements of the Tax Administration Law and completely preserve materials proving the authenticity of the business:

- Purchase contract/agreement.

- Transportation invoices/vouchers.

- Goods weighbridge slip (weight certificate).

- Transfer payment records (fund flow).

- Establish a purchase ledger (or ensure the existing system includes one): detailed records of each transaction's time, location, seller information (name, contact information), product name, quantity, price, etc. The ledger is the core basis for tax audits.

▪ Risk Prevention: Ensure business authenticity and eliminate fraudulent invoicing.

3. Regulator (Tax Authority) Objectives:

▪ Through "reverse invoicing," fully grasp the input VAT invoice data of recycling enterprises and the sales data of individuals.

▪ Through strict evidence chain requirements and inspections, crack down on false invoicing, prevent tax loss, and achieve full-chain traceable supervision.

III. Kailing Technology: Compliant and Implementable Digital Solutions

Facing complex policy requirements and heavy compliance work, professional digital tools are the inevitable choice for resource recycling enterprises to implement "reverse invoicing" efficiently and compliantly. Professional service providers represented by Beijing Kailing Technology provide full-lifecycle solutions:

1. Closed-loop management of core business processes

▪ Identity verification and agreement signing: individuals complete real-name authentication via mini-program/APP, sign invoicing and agency authorization agreements online, with electronic traces retained.

▪ Intelligent project and tax item maintenance: intelligent matching of product SKUs with tax codes, built-in preferential policy management and tax rate configuration to prevent invoicing errors.

▪ Order processing and intelligent invoicing:

- Integrate with the weighbridge system: automatically obtain key data such as gross weight, tare weight, net weight, vehicle information (photos, license plate), and time to generate basic order information.

- Order pricing integration: connect to enterprise ERP and push orders and payable amounts.

- Real-time blocking verification: Before invoicing, automatically verify whether the individual is blocked and whether this order plus cumulative 12-month sales exceed RMB 5 million.

- Automated invoicing: after verification passes, automatically issue the specified type of invoice to individuals via reverse invoicing.

▪ Invoice pool and evidence chain management:

- Centrally manage all input VAT invoices issued in reverse.

- Automatic archiving of business evidence: key evidence such as purchase contracts, authorization letters, logistics vouchers, weighbridge tickets, and payment records is stored in association with each invoicing transaction, automatically generating compliant electronic ledgers (or connecting to existing systems), meeting the regulatory requirements of "authentic, complete, and traceable" and available for inspection at any time.

- Prepayment tax calculation: automatically calculates VAT surcharges withheld and remitted and individual income tax prepayment based on sales amount.

2. Efficient collaborative management

▪ Customer/supplier management: centrally maintain customer and supplier information, supporting qualification review and convenient registration.

▪ System integration capabilities: provide standard interfaces to flexibly connect with weighbridge systems, ERP, fund payment systems, tax-control invoicing systems, etc., breaking down information silos.

3. Flexible deployment and continuous upgrades

▪ Supports private deployment, ensuring secure and controllable data.

▪ In the early stage, RPA-assisted invoicing may be adopted as a transitional solution.

▪ Equipped with the ability to upgrade to more advanced interfaces such as "Leqi Direct Connection", keeping pace with policy and technological developments.

IV. Compliance value and successful practices

▪ After a certain large metal recycling enterprise applied this solution:

- Achieve full-process digital management of online identity verification, agreement signing, data collection, invoice issuance, and evidence chain archiving for individuals.

- Invoicing efficiency improvement80% or more, with manual operation error rates significantly reduced.

- Established a complete, standardized, and instantly accessible electronic evidence chain and ledger, successfully responding to multiple tax audits with controllable risk.

- Input VAT deduction is more timely and standardized, and the overall tax burden is optimized.

▪ Why choose a professional business-finance-tax digitalization service provider?

The compliant implementation of the "reverse invoicing" policy involves complex business processes, strict tax requirements, and detailed technical integration. Choosing a service provider like Kailing Technology, which is deeply engaged in the business-finance-tax digitalization field and has professional qualifications and rich industry experience, is crucial:

- Professional understanding: deep understanding of business-finance-tax policies and pain points in the renewable resource industry.

- Mature products: provide proven, full-featured solutions.

- Integration capability: Rich experience in connecting with external systems.

- Reliable delivery: senior industry experts provide full-process on-site service to ensure accurate implementation of requirements and efficient project launch.

- Continuous service: providingImmediacy and continuityProfessional operations and maintenance support, with rapid response to issues.

The "reverse invoicing" policy of the State Taxation Administration has brought new opportunities for standardized development to the renewable resource recycling industry, but it also imposes higher compliance requirements. Only by deeply understanding the essence of the policy, especially the strict requirements for evidence chain management and the responsibilities of all parties, and using professional digital tools (such as Kailing Technology solutions) to achieve business process reshaping and compliance control, can enterprises effectively reduce risks, optimize tax burdens, and achieve sustainable development on the track of compliance.

Consult Kailing Technology to learn about detailed industry solutions:https://www.kailingteck.com/h-col-127.html 。

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.