Put that scrap down, flip it, and reverse it
A minor tweak to the tax code could provide a windfall for China's recycling industry.
On April 29, the State Taxation Administration (STA) rolled out reverse invoicing for companies that recycle scrap metal.
ICYDK: Reverse invoicing shifts the responsibility of billing for a transaction from the seller (in this case, sellers of scrap metal, vehicles, or equipment) to the buyer.
- It's typically adopted in industries involving a large number of individuals or informal micro-enterprises that struggle to issue invoices – like the hard-working folks collecting recyclables in every major city in China.
The implications are significant: Reverse invoicing will better enable recycling companies to record their expenses – i.e., the scrap materials they are purchasing – against which they can reclaim their value-added tax (VAT) payments.
- This could result in a 13% VAT tax break for resource recycling companies that buy from informal scrap collectors.
- It also allows recyclers to offer better prices for scrap and traded-in goods.
STA says the tweak is designed to support the State Council's stimulus plan to encourage industrial equipment upgrading and consumer goods trade-ins.
Get smart: This simple invoicing tweak will reduce the cost of doing business for recycling enterprises.
- That, along with an influx of scrapped equipment and traded-in appliances, will significantly boost the supply of recycled metal this year.
The bigger picture: Supporting the recycling industry aligns with broader efforts to reduce dependence on imported ores and cut emissions from sectors like steelmaking and copper processing.