Whether VAT can be refunded for smelting metal, making alloys or metal salts from scrap, how much can be refunded, and what conditions must be met are unavoidable questions when recycled metal companies run their numbers. The current basis is the Ministry of Finance and State Taxation Administration Announcement No. 40 of 2021 and its attachment, the Catalog of VAT Preferences for Comprehensive Resource Utilization Products and Labor Services (2022 Edition), effective from March 1, 2022. This article only covers the items related to nonferrous metals, steel, and battery recycling: which categories in the catalog can be refunded, the refund ratios, the seven application thresholds, how the refund amount is calculated, and when it will be suspended. It is suitable for owners and finance staff of recycled copper, aluminum, lead, and zinc smelters, battery recycling hydrometallurgical plants, and scrap steel processing enterprises, and also for recyclers supplying such enterprises to understand what downstream cares about.
1. What Is VAT Refund upon Collection?
VAT refund upon collection is a VAT preference: the enterprise first declares and pays VAT at the normal tax rate, and the tax authority then refunds the paid tax to the enterprise at the prescribed ratio. It is not tax exemption; invoices are still issued and tax is still paid, and what is refunded is part of what has been paid.
For comprehensive resource utilization, there are three prerequisites, and if any one is missing, it does not apply:
1. The entity must be a general VAT taxpayer. The catalog notes clearly state that 'taxpayer' means a general VAT taxpayer engaged in the comprehensive resource utilization projects listed in the table; small-scale taxpayers do not qualify.2. It must be the sale of self-produced comprehensive resource utilization products or the provision of labor services. Pure recycling trade that buys waste and resells waste is not covered here; that is governed by Article 1 of Announcement No. 40: a general taxpayer engaged in recycled resource recycling that sells purchased recycled resources may choose simplified taxation at a 3% levy rate or general taxation.3. The comprehensively utilized resources, products, technical standards, and related conditions must all correspond to a specific line in the catalog.
So for those also in scrap copper, a recycling station selling scrap copper does not involve VAT refund upon collection; only a smelter that smelts copper ingots or copper rods from waste motors and waste wires may qualify.
2. Metal-Related Items in the Catalog
The catalog is divided into five major categories. The items related to the metal industry are mainly concentrated in Category III, 'Recycled Resources,' and there are also several in Category II:
1. 3.1 Waste batteries and their dismantled parts: production of metals and nickel-cobalt-manganese hydroxide, nickel-cobalt-manganese lithium oxide, lithium carbonate, lithium chloride, lithium fluoride, cobalt chloride, cobalt sulfate, nickel sulfate, manganese sulfate, lithium hydroxide, lithium iron phosphate. 95% or more of raw materials come from the listed resources; refund ratio 50%.2. 3.3 Waste motors, waste wires and cables, waste aluminum cans, end-of-life vehicles, end-of-life motorcycles, end-of-life ships, waste electrical and electronic products, waste solar photovoltaic devices, waste light bulbs (tubes) and their dismantled parts: metals and alloys produced through smelting and refining (excluding iron and iron alloys). 70% or more of raw materials come from the listed resources; refund ratio 30%.3. 3.4 Waste catalysts, electrolysis waste, electroplating waste, waste circuit boards, flue dust, hydrometallurgical sludge, smelting slag, circuit board etching waste liquid, tin foil ash: metals, alloys, and metal compounds (excluding iron and iron alloys), and cryolite produced through smelting, refining, or chemical combination. 70% or more of raw materials come from the listed resources; refund ratio 30%.4. 3.5 Scrap steel generated or dismantled from end-of-life vehicles, end-of-life machinery and equipment, industrial offcuts, construction demolition materials, etc.: production of steelmaking furnace charges. 95% or more of raw materials come from the listed resources; refund ratio 30%.5. 3.2 Waste developing (fixing) solutions, waste film, and other waste photosensitive materials: production of silver; refund ratio 30%.6. 3.6 Rare earth product processing waste, discarded rare earth products and dismantled parts: production of rare earth metals and rare earth oxides; refund ratio 30%.7. 3.14 Cadmium slag: production of cadmium metal; 99% or more of raw materials come from cadmium slag; refund ratio 100%.8. 2.5 Fly ash and coal gangue for producing alumina, etc.; 2.7 alumina red mud for producing iron oxide, sodium aluminate, etc.; refund ratios are both 50%.
In the catalog, 'or more' includes the stated figure itself. Raw material proportions are calculated by weight.
3. Technical Conditions for Each Item
The ratio is only half of it; the 'technical standards and related conditions' after each line are the key points of review:
1. Battery recycling (3.1): Products must comply with the corresponding national standards, such as nickel-cobalt-manganese ternary composite hydroxide, lithium carbonate, lithium hydroxide monohydrate, refined cobalt sulfate, refined nickel sulfate, etc.; enterprises engaged in recycling must have a comprehensive recovery rate of nickel, cobalt, and manganese of not less than 98%, a lithium recovery rate of not less than 85%, and a comprehensive recovery rate of other major valuable metals such as rare earths of not less than 97%; if material repair technology is used, the material recovery rate must be not less than 90%; the process wastewater recycling rate must be 90% or more.2. Waste motors, wires, cans, end-of-life vehicles, etc. (3.3): If laws, regulations, or rules set qualification conditions for the dismantling of the relevant waste products, the corresponding qualifications must be obtained, such as end-of-life motor vehicle dismantling.3. Waste catalysts, flue dust, smelting slag, etc. (3.4): The taxpayer must pass ISO9000 and ISO14000 certification.4. Scrap steel furnace charges (3.5): The furnace charges must meet the technical requirements of the national standard for scrap steel; the taxpayer must meet the access conditions of the Ministry of Industry and Information Technology for the scrap steel processing industry; the sales target of the furnace charges must be steel enterprises that meet the MIIT steel industry standard conditions and have been announced, excluding foundry enterprises.5. Rare earths (3.6): The taxpayer must meet the technical requirements of the clean production evaluation index system for the rare earth smelting industry.
There are also two general requirements: Products listed in the table shall comply with the corresponding national or industry standards; where both exist, the relatively higher one applies; where neither exists, the filed enterprise standard applies; where the national or industry standards applicable to the projects listed in the catalog are updated or replaced during implementation, the new standards shall apply uniformly.
Several easy pitfalls: 3.3 and 3.4 explicitly exclude iron and iron alloys; 3.5 does not count furnace charges sold to foundries; 3.4 directly fails to qualify without both ISO certifications.
4. Seven Application Thresholds
In addition to matching the catalog, Announcement No. 40 sets seven thresholds for all taxpayers applying for VAT refund upon collection, and all must be met at the same time:
1. For recycled resources purchased domestically, VAT invoices shall be obtained from the seller as required; where the tax exemption policy applies, ordinary invoices shall be obtained. If the seller is an entity that cannot apply for invoices according to laws and regulations, or a natural person engaged in small-amount sporadic business, obtain payment receipts and the purchaser's internal vouchers, or invoices issued by the tax authority on its behalf. For purchases from overseas, obtain the customs import VAT special payment certificate, or payment receipts in the nature of invoices and relevant tax and fee payment vouchers.2. Establish a recycled resource purchase ledger recording the supplier's entity name or individual name and ID number, recycled resource name, quantity, price, settlement method, and whether a VAT invoice or compliant voucher has been obtained.3. The comprehensive resource utilization products and labor services sold are not projects in the eliminated or restricted categories of the Guiding Catalog for Industrial Structure Adjustment.4. They are not high-pollution, high-environmental-risk products or heavily polluting processes marked 'GHW/GHF' in the Comprehensive Catalog for Environmental Protection, unless the exception clauses are met.5. If the comprehensively utilized resource is hazardous waste listed in the National Hazardous Waste Catalog, a hazardous waste business permit issued by the provincial or municipal ecological and environmental department must be obtained, and the permitted business scope must include the utilization of that hazardous waste.6. The tax credit rating is not Grade C or Grade D.7. Within the 6 months before the tax period to which the refund application belongs (including the current period), there has been no administrative penalty for violating ecological and environmental protection laws and regulations, no penalty imposed by the tax authority for violating tax laws and regulations, and no fraudulent export tax refund or false invoicing. Exceptions include environmental penalties of warnings, circulars of criticism, a single fine of 100,000 yuan or less (inclusive), confiscation of illegal gains, or confiscation of illegal property; tax penalties exclude a single fine of 100,000 yuan or less.
When processing the refund, a written declaration must also be submitted to the competent tax authority, stating that the above conditions and the catalog technical standards are met, and truthfully noting any failure to obtain invoices or vouchers and any environmental or tax penalties. If the written declaration is not submitted, the tax authority shall not refund the tax.
Article 3 deserves separate mention: small furnaces in the recycled metal industry, such as crucible furnaces for smelting recycled aluminum alloy and recycled lead, recycled aluminum melting furnaces below 15 tons, and traditional fixed reverberatory furnaces below 50 tons for recycled copper, are all in the eliminated category of the Guiding Catalog for Industrial Structure Adjustment (2024 Edition); enterprises using such processes do not qualify for VAT refund upon collection.
5. How Is the Refund Amount Calculated?
Announcement No. 40 provides a clear calculation formula, the core of which is 'the portion of revenue for which no invoice has been obtained cannot be refunded':
1. Sales revenue not eligible for VAT refund upon collection = current-period sales revenue from comprehensive resource utilization products and labor services × (cost of purchased recycled resources for which invoices or vouchers should have been obtained but were not obtained ÷ total current-period cost of purchased recycled resources)2. Refundable amount = [(current-period sales revenue from comprehensive resource utilization products and labor services − sales revenue not eligible for VAT refund upon collection) × applicable tax rate − current-period input VAT of the VAT refund upon collection project] × corresponding refund ratio
For example. A recycled copper enterprise uses waste motors and waste wires to produce copper ingots, applies catalog 3.3, and the refund ratio is 30%. In a certain reporting period:1. Tax-exclusive revenue from copper ingot sales 10 million yuan, applicable tax rate 13%;2. Total current-period cost of purchased recycled resources 8 million yuan, of which 800,000 yuan should have had invoices but did not, accounting for 10%;3. Current-period input VAT of the VAT refund upon collection project 800,000 yuan.
Calculation: revenue not eligible for VAT refund upon collection = 10,000,000 × 10% = 1,000,000 yuan; refundable amount = [(10,000,000 − 1,000,000) × 13% − 800,000] × 30% = (1,170,000 − 800,000) × 30% = 111,000 yuan.
If all of that 800,000 yuan of raw materials had obtained invoices, the refundable amount would be [10,000,000 × 13% − 800,000] × 30% = 150,000 yuan. The difference of 39,000 yuan is the direct cost of missing invoices. This is also why recycled metal enterprises increasingly care about whether upstream can issue invoices.
6. Upstream Invoicing and Subsequent Management
There are two outlets for the missing-invoice problem:
1. Reverse invoicing: State Taxation Administration Announcement No. 5 of 2024 provides that qualifying resource recycling enterprises may issue invoices in reverse to natural person sellers. For enterprises engaged in the comprehensive resource utilization projects listed in the catalog, the invoices they issue in reverse fall within the 'VAT invoices obtained from the seller' referred to in Announcement No. 40.2. Imported raw materials: For recycled resources purchased from overseas, obtaining the customs import VAT special payment certificate is sufficient. Imported recycled copper and aluminum raw materials, lithium battery black mass, and similar materials that meet import standards are naturally complete in terms of vouchers.
Management after enjoying the benefit is equally important:1. From the month in which the conditions of the announcement or the catalog technical standards are no longer met, VAT refund upon collection shall no longer be enjoyed;2. If any penalty listed in Article 7 occurs during the enjoyment period, it may not be enjoyed for 6 months from the month in which the penalty decision is made; if it occurs more than twice within 12 consecutive months, it may not be enjoyed for 36 months from the month in which the second penalty decision is made; if the penalty is revoked, changed, confirmed illegal, or invalid according to law, a new application may be made;3. If the refund amount for a single tax period exceeds 5 million yuan, the competent tax authority shall, within 30 working days after the refund is completed, send the materials to the finance department at the same level for re-inspection; the re-inspection shall be completed within 3 months after the refund;4. Provincial tax authorities shall, before the end of March each year, publicly announce the names, taxpayer identification numbers, comprehensively utilized resource names, and product names of taxpayers in their region that enjoyed VAT refund upon collection or tax exemption policies in the previous year; before the public announcement, they shall, together with the ecological and environmental department, re-verify environmental protection penalty situations.
Announcement No. 40 also clarifies: if finance departments, competent departments, and their staff at all levels illegally grant fiscal rebates or awards/subsidies to recycled resource recycling taxpayers, liability shall be pursued according to law. Compliant tax refunds and illegal rebates are two completely different paths.
Enterprises doing supply chain can search upstream and downstream by category in the enterprise directory of Guilin Nonferrous Metals Network, connect with supply sources that can issue invoices in a compliant manner in the supply and demand hall, and the market page can also help verify price trends of raw materials and products.
Frequently Asked Questions
Q: Can a recycling station selling scrap copper enjoy VAT refund upon collection?
No. VAT refund upon collection applies only to general taxpayers selling self-produced comprehensive resource utilization products and labor services. A recycling station purchasing and reselling scrap copper is recycled resource recycling and, under Announcement No. 40, may choose 3% simplified taxation or general taxation, but it is not within the scope of VAT refund upon collection.
Q: How much VAT can recycled copper and aluminum smelting refund?
For smelting waste motors, waste wires and cables, waste aluminum cans, end-of-life vehicles, etc., and their dismantled parts to produce metals and alloys, and meeting conditions such as 70% or more of raw materials coming from the listed resources, the refund ratio is 30%, corresponding to catalog 3.3. Iron and iron alloys are not in this item.
Q: What is the refund ratio for battery recycling enterprises?
50%. For using waste batteries and their dismantled parts to produce metals, nickel-cobalt-manganese hydroxide, lithium carbonate, cobalt sulfate, nickel sulfate, and other products, with 95% or more of raw materials coming from the listed resources, products complying with the corresponding national standards, and a comprehensive nickel-cobalt-manganese recovery rate of not less than 98% and a lithium recovery rate of not less than 85%, catalog 3.1 applies.
Q: Can I still get a refund if raw materials have no invoices?
The revenue corresponding to the portion without invoices cannot be refunded. The announcement excludes sales revenue according to 'the proportion of purchase costs without invoices to total purchase costs,' and then calculates the refund amount. Small sporadic business by natural persons may use payment receipts plus internal vouchers, and individuals selling goods may also obtain invoices through reverse invoicing.
Q: How are vouchers calculated for imported recycled raw materials?
For recycled resources purchased from overseas, obtaining the customs import VAT special payment certificate, or obtaining payment receipts in the nature of invoices and relevant tax and fee payment vouchers from the seller, counts as obtaining compliant vouchers, and the corresponding revenue can be included normally in the refund calculation.
Q: Can I still get a refund after receiving an environmental penalty?
It depends on the type and amount of penalty. If an administrative penalty for environmental protection was received within the 6 months before the tax period to which the refund application belongs, no refund may be made, except for warnings, circulars of criticism, a single fine of 100,000 yuan or less, and confiscation of illegal gains and illegal property. If penalized during the enjoyment period, enjoyment is suspended for 6 months; if more than twice within 12 months, enjoyment is suspended for 36 months.
Q: Can scrap steel furnace charges sold to foundries get a refund?
No. Catalog 3.5 requires that the sales target of steelmaking furnace charges be steel enterprises that meet the MIIT steel industry standard conditions and have been announced, and explicitly excludes foundry enterprises. In addition, the taxpayer itself must meet the access conditions for the scrap steel processing industry, and the furnace charges must meet the national scrap steel standard.
Q: Can small-scale taxpayers apply for VAT refund upon collection?
No. The catalog notes clearly state that 'taxpayer' means a general VAT taxpayer engaged in the listed comprehensive resource utilization projects. If a small-scale taxpayer wants to enjoy it, it must first register as a general taxpayer and simultaneously meet the catalog conditions and the seven thresholds of Announcement No. 40.
Key Takeaways
1. First distinguish the business: buying and reselling for recycling follows 3% simplified taxation or general taxation; only self-produced comprehensive resource utilization products can discuss VAT refund upon collection, and it must be a general taxpayer.2. Find the line in the catalog: battery recycling 50%, smelting metals from waste motors, wires, and cans 30%, waste catalysts, flue dust, and smelting slag 30% and requiring both ISO certifications, scrap steel furnace charges 30% and can only be sold to announced steel enterprises.3. Pass the seven thresholds: invoice vouchers, purchase ledger, not in eliminated/restricted categories, not in the high-pollution catalog, hazardous waste permit, tax credit not C/D, and no large environmental or tax penalties within 6 months.4. Missing invoices directly reduce the refund: exclude revenue according to the proportion of costs without invoices; reverse invoicing and import payment certificates can both supplement vouchers.5. After enjoying the benefit, supervision continues: penalties immediately suspend enjoyment, large refunds are subject to finance department re-inspection, and there is provincial public announcement every year.
Further reading
- Daily nonferrous metal prices: https://www.guilinmetals.com/en/prices
- Nonferrous company directory: https://www.guilinmetals.com/en/companies
- Supply & demand marketplace: https://www.guilinmetals.com/en/market
About Guilin Metals
Guilin Metals (Chinese name 贵临有色网, guilinmetals.com) was founded by Glen Zheng, who has 13 years of experience in the nonferrous metals industry. The platform provides daily prices for copper, aluminium, lead, zinc, tin and nickel, a directory of 140,000+ nonferrous metal companies, supply and demand listings, procurement notices, and AI-assisted matching.
- Daily prices: https://www.guilinmetals.com/en/prices
- Company directory: https://www.guilinmetals.com/en/companies
- Marketplace: https://www.guilinmetals.com/en/market
*Data as of 2026-09-27.*