China's Shandong advances efforts to implement 'reverse invoicing' for recycling sector

• New system allows buyers to issue invoices for tax purposes
  
  
• Firms wary about adoption, scheme may up operational costs
  
  

Mysteel: The 'reverse invoicing' policy for Chinese recycling companies has been in place for nearly seven months, but overall implementation results have been underwhelming. Nevertheless, some provincial governments are making efforts to move the policy forward, Mysteel Global has learnt.

For example, Mysteel's latest survey covering steel scrap recycling and processing companies in East China's Shandong province suggests that the provincial government has been actively promoting the reverse invoicing scheme. The survey findings show that among 41 sampled steel scrap recycling and processing companies in the province, 17 firms have received notifications from relevant authorities via meetings or phone calls, encouraging them to participate in the new invoicing system.

The reverse invoice policy scheme launched on 29 April this year, allows recycling enterprises, including ferrous scrap processors, to issue invoices to individual sellers when buying waste materials (a procedure opposite to the usual practice where payers receive invoices from payees), and the companies can use the invoices as legitimate deduction certificates for the taxes they need to pay.

In Shandong, most companies were required to submit an application form that verifies the types of scrap products they process and applicable VAT calculation methods, while those that had already submitted the application should issue the invoice as soon as possible, the survey showed.

However, the authorities have not mandated that companies adhere to the practice in future transactions, probably considering the widespread reluctance regarding this policy felt among local recycling companies, according to the survey.

This is partly because the policy also requires scrap recyclers to handle tax procedures on behalf of the sellers, which in fact will increase their operational costs, Mysteel Global noted.

Since most scrapyards in the country are struggling with meagre profits, it will be more difficult for businesses to survive if they are strictly obliged to comply with the policy, market sources observed.

China's recycling industry has long been plagued by tax loopholes, and achieving "leapfrog" development is a challenge, according to survey respondents. The central government may need to upgrade the overall tax system and introduce more supporting policies for the policy to be adopted more widely by industry, they suggest.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.