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Interpretation of the New Tax Policy: Adoption of the “Three-Flow Integration” Model for Precious Metal Scrap Recycling
Release time:
30 Jun,2026
Precious metal scrap recycling
The State Taxation Administration (STA) has recently issued Announcement No. 12 of 2026, introducing major adjustments to the individual income tax withholding rates applicable to business income generated from individuals’ sales of scrap products to resource recycling enterprises via the three-in-one reverse invoicing mechanism. The revised provisions shall come into force on July 1, 2026. Building on the reverse invoicing tax administration system launched under Announcement No. 5 of 2024, this update represents another targeted policy refinement by the tax authority for the resource recycling industry.
Overview of the Three-in-One Reverse Invoicing Mechanism
The three-flows-in-one reverse invoicing mechanism integrates tax supervision into online payment platforms and establishes a direct data linkage with waste recycling transaction records. When resource recycling enterprises disburse payments to individual sellers through authorized online platforms, the system automatically computes, withholds and remits applicable taxes to the national treasury, and generates invoices in advance. This unified workflow integrates payment processing, taxpayer-enterprise verification and fund settlement, enabling full-process standardized management. The mechanism realizes the institutional effect of invoice issuance upon payment, tax remittance upon invoicing, and treasury crediting upon tax payment.
Compared with the traditional reverse invoicing model, the three-in-one mechanism delivers notable improvements in compliance efficiency and risk control. For precious metal recycling enterprises, it eliminates the need for monthly agency tax filing and standalone acquisition ledger maintenance, standardizes operational procedures, and substantially mitigates compliance risks. For individual sellers, tax settlement is completed concurrently with invoicing, which simplifies procedural requirements and reduces individual tax-related operational risks.
Core Adjustments to the Revised Policy
The centerpiece of this policy revision is the adoption of a tiered reduced withholding tax rate framework exclusively for transactions under the three-in-one reverse invoicing mechanism, designed to drive wider adoption of standardized tax settlement procedures among recycling enterprises and individual sellers.
The policy clearly stipulates that under the compliant three-in-one invoicing system, individual sellers with an annual transaction volume of no more than RMB 600,000 will enjoy a 50% reduction in withholding tax burden relative to the previous standard. This preferential policy benefits individual market participants, incentivizing formal-channel sales of scrap precious metals and regulating the offline recycling market.
Tax Calculation Illustration
In 2026, Individual Seller Li has completed cumulative three-in-one reverse invoicing transactions totaling RMB 400,000 with Enterprise B. Subsequently, Seller Li issues a new invoice of RMB 300,000 to Enterprise A for the first time in the tax year. The payable tax for this transaction is calculated as follows:
(600,000 − 400,000) × 0.25% + (300,000 + 400,000 − 600,000) × 0.5% = RMB 1,000
Policy Impacts on Precious Metal Recycling Enterprises
1.Supply Side Optimization
Individual sellers, including private vendors of obsolete jewelry, electronic waste and industrial by-products, constitute a major source of scrap precious metal supply for the recycling industry. The 50% tax reduction for annual transactions below RMB 600,000 will guide individual sellers previously engaged in informal scrap disposal to shift to standardized compliant platforms. This expansion of formal supply sources will effectively ease the structural shortage of high-quality recycled precious metal feedstock and optimize the industry’s supply structure.
2.Standardized Invoice Management and Reduced Comliance Risks
Under the three-in-one mechanism, invoices are generated automatically upon payment execution. This obviates the need for resource recycling enterprises to collect and submit supporting documents separately after transactions, greatly improving the completeness, accuracy and timeliness of input tax invoices. The standardized workflow also optimizes the VAT deduction chain management and ensures full compliance with corporate income tax pre-deduction regulatory requirements.
3.Accessible Onboarding Process and Low Technical Barriers
Recycling enterprises eligible for activating the three-flows-in-one reverse invoicing function may complete onboarding via four standardized steps with manageable technical adaptation requirements:
First, select qualified third-party payment platforms (including UnionPay Business, WeChat Pay, Alipay, China Merchants Bank, Industrial and Commercial Bank of China and other authorized institutions) and open dedicated corporate settlement accounts.
Second, accept platform-initiated authorization invitations to become qualified Leqi user entities via the Electronic Tax Bureau, and complete official confirmation through the bureau’s system portal.
Third, complete interface docking and functional integration developed by the payment platform based on the enterprise’s actual business scenarios and operational demands.
Fourth, upon completion of system integration, the three-in-one reverse invoicing function will be automatically triggered for all subsequent online payment transactions processed by the enterprise.
Non-negotiable Annual Final Tax Settlement Obligations
It is critical to clarify that the reduced withholding tax rate does not exempt individual taxpayers from statutory annual final settlement obligations. Individual sellers shall complete the annual final tax filing for business income with the competent tax authority at their place of business management by March 31 of the year following the tax year in which reverse invoicing transactions occur.
Recycling enterprises are advised to proactively remind their individual seller partners of statutory annual tax reconciliation and final settlement requirements in daily operations, so as to prevent unreported filings and resultant tax compliance risks.
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