Individual scrap sellers cannot issue invoices; recycling enterprises buy the goods but have no input VAT, and costs cannot be booked. This is one of the oldest problems in the recycling industry. The 'reverse invoicing' introduced by State Taxation Administration Announcement No. 5 of 2024 is aimed exactly at this: starting April 29, 2024, qualifying resource recycling enterprises may issue invoices to natural persons selling scrapped products and handle taxes and fees on their behalf. Based on the original text of the announcement, this article explains in one go who can issue, how to apply, how to issue invoices, how taxes and fees are handled on behalf, what evidence to keep, and in what situations eligibility will be revoked. It is suitable for owners and finance staff of recycling stations, renewable resource recycling enterprises, and secondary metal processing plants, and also for individual sellers who sell scrap to recycling enterprises over the long term.
1、What Problem Does Reverse Invoicing Solve
In the past, the invoicing direction was 'whoever sells the goods issues the invoice.' But in scrap recycling, a large part of the upstream is individuals: itinerant scrap collectors, people clearing scrapped items from their own homes, and those reselling collected scrap copper and scrap aluminum to recycling stations. They have no business license and cannot issue invoices.
There are three consequences:1. Recycling enterprises have no compliant vouchers for purchases, making it difficult to deduct costs before corporate income tax;2. Processing enterprises engaged in comprehensive resource utilization lack input VAT, and the VAT immediate refund upon collection is also affected;3. Various practices of 'finding invoices' and 'buying invoices' have emerged in the industry, and the risk of false invoicing has remained high.
Reverse invoicing reverses the invoicing direction: resource recycling enterprises issue invoices to natural person sellers, marked 'Purchase of Scrapped Products' on the invoice, and at the same time handle VAT, surtaxes, and individual income tax on behalf of the sellers. For sellers, there is no need to go to the tax authority to apply for invoicing on their own; for recycling enterprises, every purchase has compliant invoices and tax payment records.
Note that reverse invoicing applies only to natural persons. Sellers who have already registered as sole proprietorships or companies should issue invoices themselves and do not use this route.
2、Which Enterprises Can Issue Reverse Invoices
According to the announcement, resource recycling enterprises implementing reverse invoicing (including entities and sole proprietorships) must actually engage in resource recycling business and meet one of the following three conditions:
1. Those engaged in hazardous waste collection must obtain a Hazardous Waste Operating Permit;2. Those engaged in end-of-life motor vehicle recycling must obtain an End-of-Life Vehicle Recycling and Dismantling Enterprise Qualification Certificate;3. Other resource recycling enterprises besides those handling hazardous waste and end-of-life motor vehicles must carry out business entity registration and complete renewable resource recycling operator filing with the commerce department.
For enterprises recycling ordinary scrap metals such as scrap copper, scrap aluminum, scrap steel, and scrap stainless steel, the key is item 3: a business license plus renewable resource recycling operator filing with the commerce department. Many recycling stations have a business license but have never done the filing, which is the most common bottleneck when applying for reverse invoicing.
Those purchasing hazardous waste such as waste lead-acid batteries must hold a hazardous waste operating permit; having only filing without a permit means they cannot reverse-invoice this part of the business.
In addition, sole proprietorships can also be 'resource recycling enterprises'; as long as they meet the above conditions, they can likewise apply.
3、Application Process and Invoicing Operations
Processing is divided into four steps:
1. Submit an application: Submit the Resource Recycling Enterprise 'Reverse Invoicing' Application Form to the competent tax authority, together with a Hazardous Waste Operating Permit, an End-of-Life Vehicle Recycling and Dismantling Enterprise Qualification Certificate, or a commerce department renewable resource recycling operator filing registration certificate (at least one of the three). On the application form, check the category of scrapped products recycled and choose the VAT calculation method applicable to sales of scrapped products.2. Obtain consent for the first time: Before reverse-invoicing a seller for the first time, obtain the other party's consent on both reverse invoicing and tax and fee handling on their behalf, and keep proof. If the other party does not consent, reverse invoicing must not be used; the seller may go to the tax authority to apply for invoicing on their own.3. Issue online: Issue online through the electronic invoice service platform or the VAT invoice management system, mark 'Purchase of Scrapped Products' on the invoice, and select the 'scrapped products' category code in the Table of Tax Classification Codes for Goods and Services, such as scrap iron and steel, scrap nonferrous metals (subdivided into scrap copper, scrap aluminum, scrap lead, scrap zinc, and scrap rare and precious metals), waste batteries (subdivided into waste lead-acid batteries, waste lithium-ion batteries, waste nickel-metal hydride batteries), etc.4. Adjust quota: If business volume is large, apply to the competent tax authority in accordance with regulations to adjust the invoice quota, or the maximum invoicing limit and number of invoices.
If an invoice is issued incorrectly, goods are returned, or there is a discount or allowance, the recycling enterprise fills out a Red-Letter Invoice Information Form or Information Confirmation Form; red-letter invoices must correspond one-to-one with the original blue-letter invoices.
4、Special Invoices, Ordinary Invoices, and Tax Calculation Methods
What invoices can be issued depends on the VAT calculation method applicable when the recycling enterprise sells scrapped products:
1. Those applying the simplified tax calculation method may only reverse-issue ordinary VAT invoices and must not reverse-issue special invoices;2. Those applying the general tax calculation method may reverse-issue special VAT invoices and ordinary invoices, and may, in accordance with regulations, credit the tax stated on the reverse-issued special invoices.
This connects with Ministry of Finance and State Taxation Administration Announcement No. 40 of 2021: general VAT taxpayers engaged in renewable resource recycling may choose the simplified tax calculation at a 3% levy rate for sales of renewable resources they purchase, or may choose the general tax calculation.
Which to choose depends on downstream:1. If downstream is processing enterprises or smelters that need to credit input VAT, the general tax calculation plus reverse-issued special invoices keeps input VAT continuous in the chain;2. If downstream does not want special invoices and the enterprise itself has thin gross margins, the simplified tax calculation makes the tax burden more predictable.
Once chosen, stay stable: the announcement provides that after a resource recycling enterprise chooses the simplified tax calculation, it may not change within 36 months, and after changing to the general tax calculation, it may not choose the simplified tax calculation again within 36 months. If the tax calculation method changes, it must also apply to adjust the invoice type for reverse invoicing.
5、How Are Taxes and Fees Handled on Behalf
The other half of reverse invoicing is handling taxes and fees on behalf. While issuing invoices, recycling enterprises must do three things for sellers:
1. VAT and surtaxes: Sellers may enjoy preferential policies for small-scale taxpayers in accordance with regulations, namely monthly sales of 100,000 yuan or less are exempt from VAT, and the 3% levy rate is reduced to 1% for calculation and payment; if small-scale taxpayer preferences are subsequently adjusted, the adjusted policy applies. If a seller's monthly sales exceed 100,000 yuan, each recycling enterprise that reverse-invoices him or her handles VAT and surtax filing on behalf based on its own reverse invoicing amount for the month.2. Individual income tax: Prepay individual income tax on business income at 0.5% of sales. The seller handles the annual final settlement of business income by himself or herself before March 31 of the following year, and the recycling enterprise must provide the seller with information such as reverse invoicing and taxes already paid.3. Declare and pay on time: Within the filing period of the following month, the recycling enterprise submits the Tax and Fee Handling Report Form and the Detailed Tax and Fee Handling Report Form to the competent tax authority, and pays the handled taxes and fees in accordance with regulations.
For example: an individual seller sells scrap copper to a recycling enterprise through reverse invoicing in a certain month, with total VAT-exclusive sales of 200,000 yuan. Since it exceeds 100,000 yuan, VAT of 2,000 yuan is handled on behalf at 1%, and surtaxes are calculated separately based on the VAT amount; individual income tax of 1,000 yuan is prepaid at 0.5%. This money is usually withheld by the recycling enterprise when settling the payment for goods, and then declared and paid on behalf.
If taxes and fees handled on behalf are not paid on time, the tax authority will suspend the recycling enterprise's reverse invoicing eligibility and recover the taxes, fees, and late fees.
6、The 5 Million Yuan Cap and Compliance Bottom Line
Reverse invoicing is not unlimited; the announcement sets several hard boundaries:
1. 5 million yuan cap: If a seller's cumulative reverse-invoiced sales amount over 12 consecutive months (excluding VAT) exceeds 5 million yuan, the resource recycling enterprise may no longer reverse-invoice that seller. Individuals who sell large quantities over the long term should carry out business entity registration and issue invoices themselves.2. Annual final settlement: If a seller fails to handle the annual final settlement of business income in accordance with regulations, the tax authority will recover the tax and require the recycling enterprise to stop reverse-invoicing that seller.3. Authenticity responsibility: Recycling enterprises are responsible for the authenticity of submitted materials and the recycling business. If false materials are submitted to fraudulently obtain eligibility, or the recycling business itself is fictitious, the tax authority revokes the reverse invoicing eligibility and pursues liability in accordance with law.
Business authenticity relies on evidence. The announcement requires keeping purchase contracts or agreements, transport invoices or vouchers, goods weighbridge tickets, and transfer payment records, and establishing a purchase ledger that records each transaction's time, place, seller and contact information, name of scrapped products, quantity, and price. National Standard GB/T 45085-2024, Specification for Information Evidence Preservation in Renewable Resource Recycling and Utilization Networks, explains this in more detail: contracts, goods, funds, and invoices must correspond to each other; for goods, there must be weighbridge tickets, quality inspection certificates, settlement statements, geotagged delivery images, and vehicle front photos; for funds, there must be transfer records; when reverse-invoicing natural persons, real-name authentication records, letters of commitment, and tax and fee handling authorization agreements must also be kept.
One more reminder: Announcement No. 40 clarifies that those who illegally provide fiscal rebates, rewards, or subsidies to renewable resource recycling enterprises will be held legally responsible. The approach of using 'park rebates' to lower the tax burden is becoming riskier.
If you want to find recycling enterprises that have completed filing and can issue invoices compliantly, or verify whether upstream and downstream parties actually operate, you can search by category and region in the company directory and supply and demand hall of Guilin Nonferrous Metals Network, and check the other party's qualifications and business information before discussing cooperation.
Frequently Asked Questions
Q: Can an individual selling scrap issue invoices themselves?
Natural persons cannot obtain invoices on their own, but there are two routes: first, sell to a qualifying resource recycling enterprise, which will reverse-invoice and handle taxes and fees on their behalf; second, go to the tax authority to apply for invoicing on their own. If they sell a large quantity over the long term and are reverse-invoiced for cumulative sales exceeding 5 million yuan over 12 consecutive months, they must carry out business entity registration and issue invoices themselves.
Q: What conditions must a recycling station meet to apply for reverse invoicing?
An ordinary scrap metal recycling station needs a business license, must complete renewable resource recycling operator filing with the commerce department, and must actually engage in recycling business. Those receiving hazardous waste must have a Hazardous Waste Operating Permit, and those receiving end-of-life motor vehicles must have an End-of-Life Vehicle Recycling and Dismantling Enterprise Qualification Certificate. Meeting any one of the three, it may submit the application form and proof materials to the competent tax authority.
Q: Can reverse invoicing issue special VAT invoices?
It depends on the recycling enterprise's tax calculation method. Those applying the general tax calculation method may reverse-issue special invoices and ordinary invoices, and may credit the tax stated on the special invoices in accordance with regulations; those applying the simplified tax calculation method may only issue ordinary invoices. Once the tax calculation method is chosen, it cannot be changed for 36 months.
Q: What taxes must be paid when selling scrap to a recycling enterprise?
VAT and surtaxes, and individual income tax, are all handled on behalf by the recycling enterprise. VAT follows the small-scale taxpayer policy: monthly sales of 100,000 yuan or less are exempt; for amounts exceeding 100,000 yuan, the full amount is calculated at the prescribed levy rate (3% reduced to 1%); individual income tax on business income is prepaid at 0.5% of sales, and the seller handles the annual final settlement before March 31 of the following year.
Q: How is the 5 million yuan cap calculated?
It is calculated based on the seller's cumulative reverse-invoiced sales over 12 consecutive calendar months, excluding VAT. After exceeding 5 million yuan, the resource recycling enterprise may no longer reverse-invoice this seller and should guide him or her to register as a sole proprietorship or company, after which the seller issues invoices itself.
Q: What if the seller does not agree to reverse invoicing?
If they do not agree, the invoice cannot be issued. The announcement requires recycling enterprises, before the first reverse invoicing to a seller, to obtain the seller's consent on both reverse invoicing and tax and fee handling on their behalf and keep proof. If the seller does not agree, they may apply to the tax authority for invoicing on their own, and the recycling enterprise can book the tax authority-issued invoice as its accounting voucher.
Q: Can invoices issued through reverse invoicing enjoy the immediate VAT refund upon collection?
They can serve as compliant vouchers. The announcement clarifies that for resource recycling enterprises engaged in projects listed in the Catalog of Comprehensive Resource Utilization, invoices issued through reverse invoicing fall under the 'VAT invoices obtained from the seller' referred to in Announcement No. 40. However, the immediate refund upon collection also requires meeting other conditions in the catalog, such as technical standards, environmental protection, and tax payment credit; having an invoice alone does not guarantee the refund.
Q: Can reverse invoicing eligibility be revoked?
Yes. If taxes and fees handled on behalf are not paid on time, reverse invoicing eligibility is suspended; if false materials are submitted to fraudulently obtain eligibility, or the recycling business is fictitious, eligibility is revoked and liability is pursued in accordance with law. Therefore, purchase contracts, weighbridge tickets, transfer records, and purchase ledgers must match, which is key to retaining eligibility.
Key Takeaways
1. Reverse invoicing applies only to individual sellers. It has been in effect since April 29, 2024. Sole proprietors and company sellers should issue invoices themselves.2. The threshold for ordinary scrap metal recycling enterprises is a business license plus renewable resource recycling operator filing with the commerce department; those receiving hazardous waste or end-of-life vehicles additionally need the corresponding permits and qualifications.3. Under general tax calculation, special invoices can be reverse-issued and credited; under simplified tax calculation, only ordinary invoices can be issued. The tax calculation method cannot be changed for 36 months.4. Recycling enterprises must handle VAT and surtaxes and prepay individual income tax at 0.5%, submit the tax and fee handling reports within the filing period of the following month, and will have their eligibility suspended if overdue.5. Contracts, weighbridge tickets, transfer records, and ledgers must correspond one-to-one. Once a seller's cumulative amount exceeds 5 million yuan over 12 consecutive months, reverse invoicing must stop.
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 2026-09-17.*