Editor's Note：The renewable resources industry serves as the core pillar of the circular economy system and a strategic industry for advancing green and low-carbon development, ensuring the supply of strategic resources, and promoting the achievement of the "dual carbon" goals. With the in-depth development of the national unified market and the comprehensive upgrading of digitalized and intelligent tax collection and administration, the renewable resources industry is in a critical period of transformation from extensive expansion to compliance-oriented survival. Covering the entire chain of waste materials recycling, sorting, processing, and comprehensive utilization, the industry connects a large number of scattered natural individual suppliers and various waste-generating enterprises upstream, and manufacturing, construction, metallurgy, chemical and other real industries downstream, acting as a vital hub linking production and consumption to realize resource recycling. Affected by the inherent characteristics of the industry—scattered upstream entities and non-invoiced collection of recycling business—the lack of input invoices and excessively high comprehensive tax burden have long been prominent pain points restricting industrial development. Coupled with the superimposed supervision of the joint normalized crackdown on tax-related crimes by eight departments and the liquidation of illegal local fiscal rebates, tax-related risks such as false invoicing, income concealment, split income to illegally enjoy preferential treatment, and illegal access to fiscal incentives have erupted intensively. Combining typical tax-related cases of the industry and current tax collection and administration policies, this paper systematically analyzes the common tax dilemmas and potential risks of the renewable resources industry, and provides practical suggestions for enterprises in the industry to prevent and control tax-related risks.

I. Typical Tax-Related Cases in the Renewable Resources Industry

(1) Entity Splitting and Off-Book Concealment for Illegal Access to Tax Preferences

The Tax Inspection Bureau of Chizhou Taxation Bureau, State Taxation Administration (STA) investigated and punished a tax evasion case involving a renewable resources recycling station and Sheng Moumou in Dongzhi County, a typical case of mass registration of shell entities and income splitting for tax evasion in the renewable resources industry. Upon investigation, Sheng Moumou, the actual controller, borrowed identity information of others to establish 85 shell recycling stations to avoid the high tax burden of general taxpayers. These shell entities were centrally registered in the same industrial park without actual business premises, personnel, or equipment, and were only used for invoicing and accounting. Sheng Moumou split the waste paper sales income of 111 million yuan originally belonging to a certain renewable resources recycling station among the 85 shell recycling stations, strictly controlling the quarterly sales volume of each entity below 300,000 yuan to illegally enjoy the VAT exemption policy for small-scale taxpayers, resulting in underpayment of VAT, individual income tax and other taxes totaling 2.1584 million yuan. In accordance with the relevant provisions of the *Tax Collection and Administration Law*, the tax authority recovered the taxes, imposed late payment surcharges and fines, totaling 3.3974 million yuan. Meanwhile, clues involving Sheng Moumou and the 85 shell recycling stations in false invoicing were transferred to public security organs for further investigation. In addition, a scrap steel sales income concealment and tax evasion case of Xi'an a certain Steel Structure Co., Ltd. is also of warning significance. As a waste-generating enterprise, the company transferred scrap steel sales proceeds directly to personal accounts from 2021 to 2024, concealed real sales income through off-book operations, falsely declared to obtain tax preferences for small and micro enterprises with the total assets reflected in the books stably around 48 million yuan, resulting in underpayment of taxes of 1.8819 million yuan. It was eventually ordered by the tax authority to recover taxes, impose late payment surcharges and fines totaling 3.3734 million yuan.

2. Fabricating Closed Transaction Circles and Conducting Two-Way False Invoicing Crimes

Through Shell Enterprises The Third Tax Inspection Bureau of Yulin Taxation Bureau, STA investigated and punished a false VAT invoice case of Shaanxi a certain Materials Recycling and Renewable Resources Utilization Co., Ltd., a typical case of false invoicing by shell enterprises. The enterprise involved disguised itself as a biodiesel-producing renewable resources enterprise, forged the appearance of production by using old factory areas and placing old equipment, and without real goods transactions from 2020 to 2023, obtained 214 VAT special invoices and 10 ordinary invoices falsely issued by others, and falsely issued 183 VAT special invoices to 10 downstream enterprises. It collected invoicing fees through "false inflow and false outflow" two-way false invoicing, and underpaid VAT and other taxes of 3.2484 million yuan through false declaration. Eventually, the tax authority recovered taxes and fines totaling 6.4103 million yuan and imposed late payment surcharges, and clues involving criminal offenses were transferred to public security organs, with 16 affiliated upstream and downstream enterprises placed on file for inspection. Furthermore, the Second Tax Inspection Bureau of Qingdao Taxation Bureau, STA, based on precise analysis clues, investigated and punished a false VAT special invoice case of Qingdao a certain Renewable Resources Materials Recycling Co., Ltd. Upon investigation, the enterprise falsely obtained 20 VAT special invoices from others and falsely issued 20 VAT special invoices to others without real transactions, with a total price and tax of 4.5586 million yuan. The tax authority imposed a fine of 170,000 yuan on the company and transferred the case to public security organs.

3. Invalidity of Illegal Fiscal Rebate Agreements and Full Recovery of Illegal Fiscal Incentives

Since the launch of the special rectification of illegal local fiscal and tax preferences, all regions have fully implemented fair competition review requirements, and regional fiscal rebates, tax incentives, industrial subsidies and other illegal policies directly linked to taxes have been abolished intensively. Many economic development zones and industrial parks have pursued enterprises through judicial channels to recover illegally granted incentive funds. A case of fiscal rebate recovery involving five renewable resources affiliated enterprises in a certain economic and technological development zone is an example. The enterprises involved signed investment agreements with the administrative committee of a certain economic development zone and enjoyed fiscal incentive subsidy policies directly linked to corporate tax payments, obtaining a total of over 50 million yuan in rebate funds. The administrative committee sued to terminate the agreement and recover the incentive funds in accordance with the *Regulations on Fair Competition Review* and its implementation measures. The court rendered a judgment, ruling that the fiscal rebate clauses involved violated fair competition review requirements and ordering the five enterprises to return all subsidy funds.

II. Policy Iteration: Comprehensive Reshaping of Tax Supervision Rules for the Renewable Resources Industry

(1) Comprehensive Elimination of "Invoicing Economy" and Exit of Illegal Local Fiscal and Tax

Preferences from the Stage The 2026 National Tax Work Conference clearly listed in-depth correction of illegal investment promotion-related tax issues and severe crackdown on the "invoicing economy" as key annual supervision tasks, focusing on prominent situations such as cluster registration, affiliated companies, and long-chain invoice passing. Relying on the big data management system, tax authorities carry out normalized risk scanning and precise crackdown on shell invoicing, false trade and other acts in the renewable resources field. At the institutional level, the *Regulations on Fair Competition Review* and the *Measures for the Implementation of the Regulations on Fair Competition Review* clearly draw a red line, prohibiting local governments from issuing fiscal rebates, tax incentives and other policies without legal basis and directly linked to corporate tax payments, eradicating the soil for the survival of the "invoicing economy" from the institutional source. For renewable resources enterprises that have long relied on fiscal incentives, the disappearance of policy dividends has directly led to a sharp rise in comprehensive operating costs and the unsustainability of the original profit model, forcing the entire industry to accelerate business adjustment and fiscal and tax restructuring.

(2) Full Implementation of Reverse Invoicing as a Core Measure to Solve the Industry's Non-Invoicing Pain Point

To address the long-standing industry problem of a high proportion of natural individual suppliers upstream and non-invoiced deduction for waste materials sales, STA Announcement No. 5 of 2024 officially established the waste materials reverse invoicing system, a core policy to standardize industrial collection and administration and improve the deduction chain. The policy clarifies that renewable resources recycling enterprises meeting qualification requirements may issue VAT special invoices in reverse to natural individual sellers of scrap products, and such invoices can be used for VAT input tax deduction and pre-tax cost deduction of enterprise income tax, structurally solving the industry's long-standing problem of "no invoices at the source and difficulty in listing costs". By the end of 2025, more than 10,000 resource recycling enterprises eligible for reverse invoicing nationwide had effectively standardized industrial transactions, reduced the tax burden of compliant enterprises, and promoted the standardized collection and administration of natural individual suppliers. However, during the policy implementation run-in period, enterprises face many practical pains. Some enterprises have insufficient understanding of policy application conditions, natural individual identity verification, transaction authenticity control and other requirements, leading to problems such as fabricating natural individual supply information, illegal over-limit invoicing, and transaction splitting. Reverse invoicing has turned from a policy dividend into a new tax-related risk point for some enterprises, making standardized, compliant and accurate policy application an urgent need for enterprise operations.

（3）Implementation of the Regulations on the Implementation of the VAT Law and More Standardized Tax Collection and Administration for Scattered Natural Individual Transactions

The *Regulations on the Implementation of the VAT Law* officially came into force on January 1, 2026, further improving the VAT collection and administration rules for taxable transactions of natural persons and clarifying the statutory withholding and payment obligations of paying entities. The regulations stipulate that when natural persons conduct taxable transactions such as sales of waste materials, domestic enterprises and units paying the purchase price shall perform VAT withholding and payment obligations in accordance with the law, bringing scattered natural individual transactions long on the edge of collection and administration into a standardized and legal tax management system. In past operations, some natural individual suppliers still neither issued invoices on their own nor accepted reverse invoicing by recycling enterprises when selling waste materials, with relevant taxes and fees implicitly borne by enterprises. With the implementation of the new regulations, the gradual opening of natural individual self-invoicing channels, full coverage of reverse invoicing by recycling enterprises, and legalization of paying entities' withholding and payment obligations have formed a closed loop of collection and administration, continuously compressing the operating space for non-invoiced transactions of natural persons. Renewable resources enterprises also need to synchronously adapt to the new regulations on natural person collection and administration, perform withholding and payment obligations in accordance with the law, and reorganize cooperation models, pricing mechanisms and settlement rules with natural individual suppliers.

III. Tax Dilemmas and Risk Perspective for Renewable Resources Enterprises Under Strict Supervision

(1) Business Model Restructuring Under the Situation of Strict Crackdown on the "Invoicing Economy"

Under the multiple constraints of strict tax supervision, strict invoice control and liquidation of fiscal incentives, the traditional business model of the renewable resources industry is unsustainable, and business restructuring has become a mandatory option for enterprises. The industry's previous extensive operation model relying on fiscal rebates for profits and multi-link trade circulation seemingly reduced tax costs, but was actually unsupported by real business, easily identified by tax big data and touching the red line of tax-related violations. With the normalization of strict supervision, enterprises must completely abandon the invoicing model without substantive business, return to the industrial essence of resource recycling and utilization, and find a development path driven by real business and based on tax compliance. This means enterprises need to reorganize the supply chain, restructure the transaction chain, standardize the entire operation process, abandon short-term arbitrage thinking, and shift to a long-term compliant operation model. For enterprises long dependent on traditional models, this transformation process faces multiple pressures such as changing operation habits, increasing cost input, and facing market competition.

2. Tax-Related Risks in the Practical Implementation of Reverse Invoicing

While the reverse invoicing policy solves the industry's invoice pain point, new tax-related risks have emerged in its application. The most prominent one is the dilemma of the 5 million yuan annual sales limit for individual natural person sellers. Bulk renewable resources such as scrap steel and waste non-ferrous metals have high unit prices, and the annual sales volume of natural individual suppliers easily exceeds the 5 million yuan limit, leading to operations such as transaction splitting and payment splitting, which are highly likely to trigger risks such as false invoicing and tax evasion. Meanwhile, there are chaos in the industry such as borrowing others' identity information to split invoices, forming illegal situations of unauthentic entities. As the issuer of reverse invoices, recycling enterprises may even be implicated and identified as illegal false invoicing due to unauthentic transaction entities without subjective intent of false invoicing. Compliance risks of reverse invoicing have become a high-incidence risk in the industry at this stage.

(3) Insufficient Input Deduction, Prominent Contradiction Between Tax Burden Fluctuation and Cost Control

The upstream of the renewable resources industry is dominated by natural persons and individual suppliers. Even with the full implementation of reverse invoicing, there are still practical problems such as low cooperation willingness of some suppliers, difficulty in negotiating withholding and payment, and cumbersome invoicing procedures, making it impossible to completely resolve the structural problem of insufficient input deduction in the short term. At the same time, the review of the VAT refund upon collection policy for resource comprehensive utilization is becoming increasingly strict, with comprehensive tightening of rigid conditions such as raw material proportion, production process, and independent accounting, and continuous raising of the threshold for policy enjoyment. On the one hand, compliance costs continue to rise; on the other hand, downstream manufacturing enterprises press down prices and product profits are meager. Under the double squeeze, enterprise tax burden fluctuations increase and fiscal and tax control difficulty rises significantly. In addition, some enterprises have weak fiscal and tax foundations, imperfect internal controls, and non-standard document retention, which are highly likely to trigger chain risks such as abnormal tax burden rate, non-standard cost listing, and incorrect application of preferential policies.

IV. Tax Management Compliance Recommendations for the Renewable Resources Industry

(1) Pre-Event Prevention: Consolidate the Bottom Line for Policy Compliance Application Pre-event risk prevention is the first line of defense for tax compliance of renewable resources enterprises, with the core of avoiding risks and standardizing models from the business source. Enterprises should base on their own business reality, abandon short-term arbitrage thinking, and design transaction structures and cooperation models centered on real business and substantive operation. Establish a standardized supplier access and due diligence mechanism, comprehensively verify the qualifications and operation authenticity of natural individual suppliers and cooperative enterprises, and focus on preventing risks such as identity borrowing for invoicing and fabricating supply entities; complete qualification filing and independent accounting planning in advance for VAT refund upon collection business for resource comprehensive utilization, ensure that raw material proportion, product standards and other requirements meet policy conditions, and eliminate hidden dangers of illegal enjoyment of preferences; complete reverse invoicing qualification filing and limit measurement, lock in natural individual supply scale in advance, and avoid over-limit invoicing risks.

(2) In-Event Control: Implement Consistency of Three Flows to Achieve Full-Chain Traceable Management

In-event control focuses on compliance implementation in the business execution link, with the core of achieving consistency of invoice flow, fund flow, and goods flow. Standardize the whole-process review of reverse invoicing, verify natural person identity information, goods information and transaction amount one by one, ensure that invoicing content is consistent with actual business, and strictly prohibit acts such as fabricating transactions, over-limit invoicing, and separation of invoices and goods; settle all transactions through public accounts, strictly prohibit personal account collection and capital return, fully retain transfer vouchers, and ensure that fund flow is consistent with transaction entities; standardize goods flow management, retain weighbridge slips, transportation vouchers, on-site images, electronic data storage and other materials to corroborate business authenticity. Unify contract management, sign formal written contracts for all purchase and sales businesses, clarify transaction subjects, pricing rules, invoicing obligations, tax bearing, and delivery methods, solidify transaction facts through contracts, and reduce the risk of tax-related disputes.

(3) Post-Event Disposal: Risk Screening, Dispute Resolution and Criminal Defense

Enterprises should establish a normalized risk screening and emergency disposal mechanism, conduct regular tax self-inspections, focusing on high-frequency risks such as income recognition, cost listing, input deduction, use of reverse invoicing, enjoyment of preferential policies, and recording of fiscal incentives. Monitor core indicators such as tax burden rate, input composition, and invoicing amount, and dispose of abnormalities immediately. Standardize the retention of documents for future reference, retain natural individual supply commitments, entrusted agency agreements, transaction contracts, invoices, transportation and weighbridge vouchers and other materials for inspection to meet regulatory verification requirements. In case of tax inspection, fix compliant business evidence immediately and cooperate with the inspection proactively to properly resolve tax disputes. For complex tax disputes and potential criminal risks, seek professional support in a timely manner to minimize the risk of criminal liability and protect the legitimate rights and interests of enterprises.