Editor's Note

In 2026, China’s coal industry has entered a new stage of systematic regulation, stringent enforcement and precise supervision in the tax regulatory landscape. The rule-based and digital tax supervision system keeps improving; the eight ministries’ joint mechanism for regular crackdowns on tax-related illegal crimes has been fully implemented, and supporting tax administration policies have been refined. Longstanding illegal acts in the sector—including false invoicing, falsely listed costs, concealed income and unfair pricing in related-party transactions—are now subject to full verification.

With the full rollout of Golden Tax Phase IV full-domain penetrating supervision, multi-dimensional data linkage and cross-checking have been realized for enterprise production capacity, logistics circulation, fund settlement and invoice issuance. The extensive financial and tax management model of coal enterprises can no longer adapt to the increasingly comprehensive tax administration regime, and whole-chain tax-related risks have become increasingly prominent.

Based on new tax policies and typical tax-related cases, this document systematically dissects key tax risk points across core business links of the coal industry, and provides professional practical guidance for coal business entities to prevent tax risks and standardize financial and tax management.

I. New Tax Regulatory Environment and Policy Changes in the Coal Industry (2026)

(I) Deepened Rectification of False Invoicing Urges Standardization of Coal Business Models

For a long time, some coal producers have mined coal beyond official quotas and cannot issue compliant VAT invoices, leaving downstream operators short of input invoices. Some market players rely on local fiscal incentive policies to ease tax burdens; in this process, a small number of illegal actors use shell trading firms to conduct false invoicing for illegal profits, triggering a string of false invoicing and tax evasion cases.

As a bulk commodity, coal features large transaction volumes, widespread intermediary matchmaking and high participation by individual transporters. Even compliant large-scale coal traders occasionally face mismatches between invoices, goods, funds and logistics due to industry-specific trading patterns, which easily trigger alerts in tax big-data risk screening.

According to data from the State Taxation Administration (STA) press conference on April 1, 2026, tax authorities have ramped up special rectification in mineral products and coal wholesale. From January to March 2026, initial progress was made in curbing circular invoicing and mutual invoicing: invoicing amounts in coal & product wholesale and metal & metal ore wholesale fell by 8.7% and 5.2% year-on-year, respectively. Traditional non-compliant models—such as invoicing without goods, separation of invoices and goods, and off-site affiliated operation—no longer meet regulatory requirements. The coal industry must fully transition to a refined, compliant model featuring consistency of capital flow, invoice flow, goods flow and contract flow.

(II) Eight-Ministry Joint Crackdown Mechanism Operates Regularly; Coal Industry Listed as Key Regulatory Sector

On April 16, 2026, eight authorities—the STA, Ministry of Public Security, Supreme People’s Court, Supreme People’s Procuratorate, People’s Bank of China, General Administration of Customs, State Administration for Market Regulation and State Administration of Foreign Exchange—held a meeting to advance the regular joint crackdown on tax-related illegal crimes. It was 明确 that efforts will focus on key industries and sectors, strengthen the two-way linkage between administrative law enforcement and criminal justice, and maintain a high-pressure stance against false invoicing, tax fraud and other tax crimes.

Over the past two years, China has inspected over 130,000 enterprises suspected of false invoicing, confirming 7.38 million falsely issued VAT invoices; 4,850 export tax fraud enterprises were inspected, recovering RMB 24.6 billion in lost export tax rebates.

Under the high-pressure, cross-departmental supervision and coordinated law enforcement, the coal industry—designated as a key regulated sector—faces harsher accountability for tax violations. Cross-domain penetrating audits and whole-chain associated liability have become the norm, sharply raising the cost of tax non-compliance for enterprises.

(III) Refined Mining Tax Administration; Clearer Rules for Related-Party Transactions and Restructuring

In 2026, the tax administration policy system for the mining sector has been further optimized. Two key documents—Announcement No. 12 of 2025 and Announcement No. 13 of 2026 issued by the Ministry of Finance and the STA—have refined sector-specific administration rules and clarified legal boundaries for tax-related acts.

Stricter supervision of related-party transactions Rules for verifying abnormally low pricing in coal enterprises’ related-party transactions are clarified, alongside the scope of justifiable defenses for enterprises. Internal pricing, cost allocation and profit distribution of coal groups are regulated, and evasion of resource tax via unfair related-party transactions is strictly prohibited.

Expanded VAT exemption for asset restructuringAnnouncement No. 13 of 2026 unifies the applicable scope of VAT non-taxable income for asset restructuring, including the transfer of intangible assets in qualified restructuring. Transfers of mineral exploration rights and mining rights by coal enterprises are explicitly eligible for VAT exemption on asset restructuring, resolving longstanding inconsistencies in local policy implementation and frequent tax disputes in mining right M&As. The policy requires three statutory prerequisites: reasonable commercial purpose, overall transfer of assets, liabilities and personnel, and substantive operational integration.

II. Typical Tax-Related Cases in the Coal Industry (2026)

(I) Underpayment of Resource Tax via Unfair Internal Related-Party Transactions (Coal Group)

Per China Taxation News, tax authorities in Shuangyashan, Heilongjiang, conducted a resource tax audit on a large local coal energy group using a coal-industry-specific risk model. Data comparison revealed a material discrepancy between the group’s internal raw coal transfer price and the industry market price index. The group supplied raw coal to its affiliated power plants at an internal cost-based price (far below the external market price, with a gap of over 8% at peak) as the tax basis.

Tax authorities clarified that related-party transactions must comply with the arm’s length principle, and the tax basis shall be verified at market value. Following guidance, the enterprise paid RMB 600,000+ in back resource tax.

(II) Tax Evasion via Falsely Listed Intermediary Service Costs

In February 2026, the Hegang Municipal Tax Bureau (STA) publicized a tax evasion case involving Heilongjiang Yaoyuan Coal Washing Co., Ltd. Tax big data flagged abnormally large “information service fees” (RMB 2.6761 million) booked in 2022—far out of line with the enterprise’s actual operations and industry norms.

Investigation confirmed: in 2022–2023, the entity obtained 18 VAT ordinary invoices from two individual industrial and commercial households without genuine intermediary services, and accrued these non-compliant fees to management expenses. It artificially reduced taxable income to RMB 2.9886 million to fraudulently qualify for small and micro enterprise (SME) corporate income tax (CIT) incentives, causing a CIT shortfall of RMB 1.29 million.

The tax bureau ruled the act constituted tax evasion, ordering payment of back taxes, late payment surcharges and fines totaling RMB 2.14 million.

(III) Tax Evasion by Concealing Sales Income

In March 2026, the Inspection Bureau of Wuhai Municipal Tax Bureau (STA) publicized a case against Wuhai Liuyuan Coal Trading Co., Ltd. The enterprise mainly traded coal and coke. In 2022–2023, it supplied coke to Ningxia Haofeng Weiye Iron and Steel Co., Ltd. worth RMB 122,364,544.76 and received full payment of RMB 122.8 million.

Despite genuine transactions and full settlement, the enterprise only issued VAT special invoices worth RMB 110,628,614.07. The remaining sales income of RMB 11,735,930.69 was unrecorded and undeclared, constituting off-book income concealment and tax evasion. Tax authorities ordered payment of back taxes and fees totaling RMB 1,453,281.

III. Special Analysis of Tax-Related Risks by Business Link

(I) Production Link: Non-Compliant Declaration of Water Resources Tax and Resource Tax

The coal production link is a core area of multi-department collaborative supervision, with high risks of non-standard tax declaration and inaccurate tax bases.

Water resources tax risks Since the national water resources tax reform in December 2024, mine dewatering has been legally subject to water resources tax. Common non-compliance includes: unqualified metering equipment, untruthful declaration of water intake/drainage, underreporting/zero-reporting, and reliance on expired approval standards. Tax and water conservancy authorities now share data, using coal output, per-ton drainage coefficients and soil and water conservation fees to cross-verify declarations and spot anomalies.

Resource tax risks Pursuant to Announcement No. 12 of 2025, tax authorities may verify the taxable sales value of raw coal. Acts such as falsely inflating washing losses, failing to tax self-used raw coal and non-compliant conversion ratios will be deemed misstated tax bases, exposing enterprises to tax verification, back taxes and late payment surcharges.

(II) Purchase & Sale Link: Invoice-Goods Separation, Concealed Income and False Invoicing

This is the highest-risk link for tax violations in the coal sector:

Input invoice shortageOver-quota coal cannot be invoiced compliantly, leaving downstream traders short of input VAT invoices. Some enterprises fabricate transactions or obtain illegal third-party invoices to fill the gap, triggering risks of invoice-goods separation and false invoicing.

Concealed income For retail/small-customer transactions that do not require invoices, some SMEs keep off-book accounts, fail to maintain books or declare taxes—an industry-wide common violation.

Shell-company false invoicing Non-operating shell firms forge contracts, circulate funds fictitiously and fake logistics to issue false VAT special invoices, helping downstream enterprises falsely offset inputs and inflate costs, then reduce illegal costs via local fiscal rebates. Such acts are targeted for severe crackdowns.

(III) Transaction Link: Unfair Pricing in Related-Party Transactions

Large/medium coal enterprises frequently violate the arm’s length principle in intra-group transactions (e.g., low-price raw coal transfers). Under Golden Tax Phase IV’s penetrating supervision, tax authorities cross-check pricing against market indices, external transaction prices, related-party end-sale prices and industry fair values.

If related-party pricing deviates materially from market value without supporting valuation or commercial rationale, tax authorities may make tax adjustments, requiring enterprises to pay back taxes.

(IV) Transportation Link: False Transportation Invoices and Inflated Transportation Costs

Coal’s large transportation volume, high freight costs and high individual-transporter participation make this a key target for big-data screening:

False transportation invoicing Many coal enterprises use individual drivers/fleets for scattered transport and cannot obtain compliant VAT transportation invoices, so they illegally procure false freight invoices from third parties.

Inflated transportation costs Enterprises falsely list freight by inflating mileage, raising unit rates or booking costs inconsistent with actual cargo volumes—often at year-end to manipulate profits and underpay taxes.

These acts are easily detected via full-chain penetrating cross-checking. Violators face back taxes, surcharges and administrative penalties; criminal cases are transferred to judicial authorities.

IV. Building a Tax Compliance Management System for Coal Enterprises

(I) Improve Internal Controls for Financial & Tax Compliance

Against the backdrop of strict false-invoicing rectification and standardized fiscal incentives, coal enterprises must establish a systematic, end-to-end compliance system:

Supplier due diligence Screen and manage suppliers, traders and service providers by qualification, operational capacity and registration status; avoid cooperation with non-operating, underqualified or high-risk entities.

Prudential use of fiscal incentives Accurately understand eligibility for tax incentives and conduct dynamic compliance reviews to prevent improper enjoyment of preferences.

Sector-specific tax controls Standardize metering and declaration of mine dewatering/production water to avoid water resources tax/resource tax errors; strictly follow the arm’s length principle for related-party transactions and retain supporting documentation.

(II) Establish a Tax Risk Self-Inspection & Response Mechanism

To adapt to the eight-ministry joint crackdown and data-driven strict supervision:

Regular self-inspection Conduct periodic whole-chain self-checks on high-frequency risks: false invoicing/offsetting, concealed income, inflated costs, misstated declarations and unfair related-party pricing; rectify issues promptly.

Professional risk response Set up a dedicated compliance team to organize production, logistics, fund, contract, invoice and declaration records, ensuring logical consistency and evidentiary closure across business, invoice, capital and logistics flows. Cooperate with tax audits in accordance with the law; engage professional firms if needed to exercise statement and defense rights, mitigate administrative/criminal liability and resolve compliance crises