The policy allowing for a tax refund when selling and repurchasing a home has been extended until the end of 2027. The State Taxation Administration recently issued an "Announcement on Certain Individual Income Tax Collection and Administration Matters," which clarifies two key areas of personal income tax administration.

The announcement was issued to further implement the requirements of the "State Council Notice on Issuing the Action Plan for Promoting Large-Scale Equipment Renewal and Consumer Goods Trade-Ins" and the "Ministry of Finance, State Taxation Administration, Ministry of Housing and Urban-Rural Development Announcement on Extending the Implementation of the Individual Income Tax Policy Supporting Residents in Selling and Repurchasing Housing." The specific details are outlined below.

First, starting from July 1, 2026, when individual sellers of scrapped products sell their collected products to resource recycling enterprises via the "Three-Flows-in-One Reverse Invoicing" system, the portion of their annual sales revenue (excluding VAT) from this method that does not exceed 600,000 yuan will be subject to a reduced prepayment rate of 0.25% for business income individual income tax. The portion exceeding 600,000 yuan will still be subject to a prepayment rate of 0.5%. All other services and collection/administration rules will follow the "State Taxation Administration Announcement on Matters Concerning 'Reverse Invoicing' by Resource Recycling Enterprises to Individual Sellers of Scrapped Products."

Second, in accordance with the "Ministry of Finance, State Taxation Administration, Ministry of Housing and Urban-Rural Development Announcement on Extending the Implementation of the Individual Income Tax Policy Supporting Residents in Selling and Repurchasing Housing," for the period from January 1, 2026, to December 31, 2027, taxpayers who sell their own home and repurchase another home in the same city within one year of the sale may apply for a refund of the individual income tax paid on the sale of the original home. Specific services and collection/administration rules should refer to the "State Taxation Administration Announcement on Collection and Administration Matters Concerning the Individual Income Tax Policy Supporting Residents in Selling and Repurchasing Housing."

Clarification on the Announcement Regarding Individual Income Tax Collection and Administration Matters

1. Why was the prepayment rate for business income tax under the "Three-Flows-in-One Reverse Invoicing" system adjusted?

The "Three-Flows-in-One Reverse Invoicing" system primarily involves embedding tax rules into online payment platforms and directly linking them to information on waste recycling activities. This allows resource recycling enterprises to initiate payments to individual sellers of scrapped products through these platforms, with the system automatically calculating the seller's tax liability, withholding and remitting the tax, and pre-filling the invoice. This achieves the integration of the invoice flow, enterprise-individual flow, and capital flow ("three flows in one"), enabling "invoicing upon payment, tax payment upon invoicing, and tax remittance upon payment." This model offers advantages for recycling companies, such as eliminating the need to file declarations on behalf of individual sellers the following month, reducing the need to maintain separate ledgers to prove transaction authenticity, and standardizing the process. For individual sellers, it also offers benefits like paying tax immediately upon invoicing and lower tax-related risks. To encourage more recycling enterprises and individual sellers to adopt this model, and considering its technical advantage of enabling real-time cumulative sales tracking, the prepayment rate for business income tax under this system has been appropriately lowered.

2. How does this announcement adjust the prepayment rate for the "Three-Flows-in-One Reverse Invoicing" system?

According to this announcement, starting July 1, 2026, when individual sellers sell collected scrapped products to resource recycling enterprises via "Three-Flows-in-One Reverse Invoicing," the portion of their annual sales revenue from this method that does not exceed 600,000 yuan will be subject to a reduced prepayment rate of 0.25% for business income tax. The portion exceeding 600,000 yuan will remain subject to a 0.5% prepayment rate. Individual sellers using other "reverse invoicing" methods to sell scrapped products will still be subject to a 0.5% prepayment rate on their sales revenue.

For example, seller Li makes his first sale of collected scrapped products via "Three-Flows-in-One Reverse Invoicing" to recycling enterprise A on November 25, 2026, for 300,000 yuan. Between July 1, 2026, and this sale, he had already sold 400,000 yuan via the same method to another recycling enterprise B and prepaid tax of 400,000 × 0.25% = 1,000 yuan. The tax to be prepaid for this new transaction would be: (600,000 - 400,000) × 0.25% + (300,000 + 400,000 - 600,000) × 0.5% = 1,000 yuan.

3. Do individual sellers need to file an annual tax reconciliation for business income derived from "Three-Flows-in-One Reverse Invoicing"?

As stipulated in this announcement, aside from the difference in prepayment rates, all other services and collection/administration rules for "Three-Flows-in-One Reverse Invoicing" follow the existing "State Taxation Administration Announcement on Matters Concerning 'Reverse Invoicing' by Resource Recycling Enterprises to Individual Sellers of Scrapped Products." Therefore, sellers must file their annual business income tax reconciliation with the competent tax authority in the location of their business operations by March 31 of the year following the "reverse invoicing" year.

Using the example of Li above, when filing his annual business income tax reconciliation the following year, if he has no other "reverse invoicing" income or other business income for that year, and cannot obtain complete and accurate cost/expense documentation to correctly calculate annual taxable income, the tax authority will levy tax based on a 5% taxable income rate and apply the progressive tax rates of 5% to 35%. The total annual tax payable would be: (400,000 + 300,000) × 5% × 10% - 1,500 = 2,000 yuan. Since the prepaid tax amount equals the total annual tax payable, no additional payment or refund is required upon reconciliation.

4. How can resource recycling enterprises prepare to use the "Three-Flows-in-One Reverse Invoicing" system?

Resource recycling enterprises wishing to use the "Three-Flows-in-One Reverse Invoicing" system need to undertake the following preparatory steps:

1. Select a suitable payment platform (e.g., China UnionPay Merchant Services, WeChat Pay, Alipay, China Merchants Bank, Industrial and Commercial Bank of China) and open the relevant accounts.

2. The payment platform will invite the recycling enterprise to become a "Le Qi" user via the electronic tax bureau, and the enterprise must confirm its acceptance through the same system.

3. Based on the enterprise's specific business needs, the payment platform will organize interface development and functional integration.

4. Once integration is complete, "Three-Flows-in-One Reverse Invoicing" will be automatically triggered during the enterprise's online payment process.

5. What is the process for individual sellers when a recycling enterprise uses "Three-Flows-in-One Reverse Invoicing"?

The operational process for individual sellers varies slightly across different payment platforms. Using Alipay as an example, the process is as follows:

1. The recycling enterprise purchases scrap from the individual seller, enters transaction details (product name, unit price, weight), and the platform automatically calculates the payment amount, pre-fills the invoice, and generates the tax payment information.

2. The recycling enterprise displays a "payment QR code" to the individual seller.

3. The individual seller scans the code, pays the tax (which is remitted to the treasury), and the payment for the goods is automatically transferred to the seller's account. The invoice is automatically issued and uploaded.

6. Has the individual income tax policy supporting home sale and repurchase been adjusted?

According to the relevant joint ministry announcement, the implementation of the individual income tax policy supporting residents in selling and repurchasing homes has been extended until December 31, 2027. The specific regulations and declaration procedures remain unchanged from previous rules. Eligible taxpayers should refer to the "State Taxation Administration Announcement on Collection and Administration Matters Concerning the Individual Income Tax Policy Supporting Residents in Selling and Repurchasing Housing" for guidance on the application process.