On August 1, 2024, the Regulations on Fair Competition Review (Decree No. 783 of the State Council of the People's Republic of China) (herein after referred to as "Regulations") came into force, clarifying for the first time in the form of administrative regulations the object of fair competition review, review standards, review mechanism and supervision and guarantee, filling the legislative gap of the fair competition review system. It fills the legislative gap of the fair competition review system. Chapter II of the Regulations sets out the review criteria for local governments to formulate financial incentive policies, which also suggests that enterprises obtaining financial incentives should pay attention to the compliance of the policies and measures they enjoy. The fiscal subsidy policy has a facilitating effect on the development of the renewable resources industry, and its compliance and stability will have an impact on the business model of renewable resources enterprises. In the period of high-quality development, renewable resources enterprises should take into account the relevant provisions of the Regulations to sort out potential risks and actively adapt to the new development model.

Editor's Note: On 9 February 2024, the State Council proposed to "initially build a waste recycling system by 2025"; on 7 March 2024, the "Action Plan for Promoting Large-scale Equipment Renewal and Consumer Goods Trade-in" was released, ushering in new development opportunities for the renewable resources industry. However, with the implementation of the new policy of "reverse invoicing" and the outbreak of the financial refund issue, the renewable resources industry has also ushered in new challenges. China Tax will launch a series of articles on tax compliance in the renewable resources industry. Based on the business model of the renewable resources industry, this series will analyse the tax risks of the key nodes in the upstream and downstream chains in the light of the new tax policies in the industry in recent years, so as to help taxpayers to clarify the direction of business adjustment and tax compliance. As the first part of the series of tax compliance in the renewable resources industry, this article will analyse the business models of "retailer - recycling", "recycling - recycling", "recycling - purchasing/selling/producing", and "recycling - production". This article will summarise the typical tax risks in the "retailer-recycling", "recycling-recycling", "recycling-recycling", "recycling-recycling", and "purchasing/selling/production" segments, providing reference for enterprises to identify their own tax risks.

Since the implementation of the value-added tax policy, in order to strengthen the comprehensive utilization of resources and protect the environment, China has given preferential tax policy support to enterprises engaged in the recycling and operation of waste materials, and has successively implemented preferential policies such as tax exemption, immediate refund, first levy and then return, and simple levy. Changes in policy have led to changes in the business model of enterprises. In the past, under the tax exemption policy, the industry did not need to bear the VAT, the design and construction of the transaction mode need not consider the tax factor, steel mills and other waste enterprises usually directly grasp the first-hand source of goods, from the local operation of the recycling of waste materials from the retailer to purchase. In the context of taxation, the sale of goods need to pay 13% value-added tax, but due to the general low willingness of the retailer to pay taxes on their own, not willing to declare taxes and issue invoices, resulting in the procurement of goods with the waste enterprises at the same time can not obtain legal and effective input credit and pre-tax deduction vouchers, which bear the overall sales of 13% of the tax burden, the emergence of a fundamental obstacle to the purchase of enterprises with the waste of the tax link, the first-hand The sourcing model fails to satisfy the demand of enterprises using waste to obtain input invoices.

Recycling of renewable resources is a key link in the comprehensive utilization of resources, and is of great significance in promoting the development of circular economy and realizing green, low-carbon and high-quality development. This year, the State Council has issued a number of documents to promote the construction of waste recycling system, accelerate the green transformation of the development mode, "to promote large-scale equipment renewal and consumer goods for the old for the new action program" (State Development [2024] No. 7) put forward the promotion of resource recycling enterprises to the natural person of end-of-life product sellers "reverse invoicing" practice, and the promotion of resource recycling enterprises to the natural person of end-of-life product sellers "reverse invoicing" practice. Improve tax policy support. For a long time, the lack of "source invoices" has been restricting the development of resources recycling industry. Based on the aforementioned policy guidance and industry difficulties, on April 24, the State Administration of Taxation issued the "Announcement on Matters Relating to "Reverse Invoicing" by Resource Recycling Enterprises to Sellers of End-of-Life Products to Natural Persons". "(SAT Announcement No. 5 of 2024, hereinafter referred to as "Announcement No. 5"), which makes specific provisions on the scope of invoicing parties, invoicing requirements, invoice functions and tax supervision of the policy of "reverse invoicing". Notice No. 5 makes specific provisions on the scope of the "reverse invoicing" policy, invoicing requirements, invoice functions and tax supervision. Reverse invoicing in the resource recycling segment involves the tax payment of the seller and the VAT input credit and pre-tax deduction of the recycling enterprise, so it is important to correctly understand the requirements and responsibilities of the main parties in the "reverse invoicing" business, Correctly understanding the requirements and responsibilities of each subject in the business of "reverse invoicing" and the impact of "reverse invoicing" on the recycling business are of great significance for improving the degree of business compliance and avoiding and preventing tax-related risks.

This year, the State Council has repeatedly issued documents to promote the construction of a waste recycling system, accelerate the green transformation of the development mode, "on accelerating the construction of a waste recycling system of opinions" (State Council [2024] No. 7) pointed out that we should promote the fine management and effective recovery of waste, improve the level of waste resourcing and reuse, and cultivate and grow the resource recycling industry; "to promote the large-scale The Action Program for Promoting Large-scale Equipment Renewal and Consumer Goods Trade-in (Guo Fa [2024] No. 7) improves the quality and level of recycling in the national economy by implementing the four-pronged initiatives of equipment renewal, consumer goods trade-in, recovery and recycling, and standard upgrading. At the local level, Sichuan Province issued the "Sichuan Province Renewable Resources Recycling Industry Development Plan (2023-2025)", Hefei City issued the "Hefei Waste Material Recycling System Construction Implementation Plan" and other documents to promote the construction of waste material recycling system. The resources recycling industry is of great significance in improving the level of resource recycling and promoting green, low-carbon and recycling development, and it is an industry field that governments around the world attach importance to and encourage the development of. In terms of taxation, the recycling of renewable resources, comprehensive utilization of the field of policy changes, in order to promote compliance, improve profit margins, the business model of the resources recycling industry has also been adjusted, and at the same time also accompanied by a number of tax compliance issues. Recently, new tax regulatory developments such as strict investigation of tax rebates and promotion of reverse invoicing have triggered heated discussions in the renewable resources recycling industry. Previously, Hwuason Law Firm has analyzed the tax risks of recycling enterprises, and this article extends downstream of the renewable resources recycling industry to analyze the tax-related risks and compliance suggestions of waste-using enterprises under the new regulatory trends.

Recycling of renewable resources is a key link in the comprehensive utilisation of resources, which is of great significance in promoting the development of circular economy and realising green, low-carbon and high-quality development. However, for a long time, the lack of "invoices at source" has led to a heavy tax burden for recycling enterprises, which restricts the sustainable and healthy development of the renewable resources industry. No. 40, hereinafter referred to as "Document No. 40"), stipulating that renewable resources recycling enterprises may choose to apply the simplified tax calculation method to calculate and pay VAT in accordance with the 3% levy rate, which to a certain extent alleviated the problem of high VAT burden of renewable resources recycling enterprises, but the problem of pre-tax deduction vouchers has not been solved, and the tax dilemma and tax-related risks of the recycling enterprises still exist. However, the problem of pre-tax deduction vouchers has not been solved, and the tax predicament and tax-related risks of recycling enterprises still exist. This year, the deputies to the National People's Congress of the two sessions of the National People's Congress put forward four proposals to solve the problem of "source invoicing" in the recycling industry, and more importantly, the State Council issued the "Action Programme for Promoting Large-scale Equipment Renewal and Consumer Goods Replacement with New Goods" (No. 7 of the State Council [2024], hereinafter referred to as "No. 7 More importantly, the State Council issued the Action Programme for Promoting Large-scale Equipment Renewal and Consumer Goods Replacement (Guo Fa [2024] No. 7, hereinafter referred to as "Document No. 7"), which proposes to "promote the practice of 'reverse invoicing' by resource recycling enterprises to sellers of end-of-life products to natural persons," in order to improve the supporting measures for the collection and management of income tax. Can the above proposal solve the problem of "invoicing at source" in the recycling industry? The text is to be discussed.

The issuance and deduction of VAT special invoices are necessary matters for the production and operation of most enterprises. VAT invoices, as important legal documents for VAT input deduction, are the basis for the normal operation of the VAT chain and the realization of national tax collection. False invoicing has not only damaged the order of invoice management, but also caused the loss of national tax, and has become the key target of tax, public security and other departments for a long time. In the recent Supreme People's Court, the Supreme People's Procuratorate tax-related crimes judicial interpretations and typical cases of the press conference, the Ministry of Public Security, Economic Crime Investigation Bureau, deputy director of the first level inspector Wu Di pointed out that in the past five years, the procuratorial organs to accept the examination and prosecution of cases of jeopardizing the administration of tax collection, the crime of fraudulent opening of special invoices for value-added tax accounted for about 80%. Wu Di also pointed out that precious metals, agricultural products, waste materials and other industries are the high incidence of fraudulent tax crimes in the field of renewable resources industry, for example, because of the inherent tax dilemma, renewable resources industry business model construction and invoicing the legitimacy of the existence of a number of disputes, the problem of false invoicing is prominent. This time, the judicial interpretation of the two high courts has made more changes to the crime of false invoicing of VAT and sentencing, and enterprises should pay attention to the changes in the risk of false invoicing brought by the judicial interpretation, adjust the business model in time and do a good job in compliance management. Based on the author's continuous research and agency experience in the field of false invoicing and the resources recycling industry, the author discusses the important revised clauses of the crime of false VAT invoices in the judicial interpretation of the two high courts and analyzes the changes and impacts on the enterprises in the resources recycling industry for the readers' reference.

Since this year, audit, taxation and other departments in the form of meetings or documents clearly to strictly investigate local investment in the form of tax-related violations, Jiangxi, Shanxi, Zhejiang and other places have also carried out remedial action to clean up undue interference in the market and subsidies or rebates linked to tax revenue. Due to the inherent source invoice dilemma of the industry, resources recycling industry mostly exists in the business operation mode relying on the financial rebate policy, recycling enterprises through the enjoyment of financial rebates to reduce the tax burden due to the impossibility of obtaining input invoices and the full amount of tax. Under the background of strict investigation of tax rebates, recycling enterprises applying the financial rebate policy are facing serious tax-related risks. This article analyzes the tax-related risks under this business model from the motivation for recycling enterprises to set up a trade chain in the park to enjoy the fiscal rebate, and further puts forward tax compliance suggestions for enterprises' reference.