The implementation framework for Individual Income Tax (IIT) collection and administration remains unchanged, with further clarifications issued on two specific matters: reverse invoicing in resource recycling and IIT treatment for residential home replacement.

• Reverse Invoicing

Under the previous rules, where natural person sellers sold scrap/recyclable materials through reverse invoicing, IIT on business income was subject to provisional collection at 0.5%.

Effective July 1, 2026, for transactions under the three-flow-consistent reverse invoicing mechanism, the portion of annual sales revenue (excluding VAT) up to RMB 600,000 shall be subject to a 0.25% provisional collection rate, while the portion exceeding RMB 600,000 shall remain subject to the 0.5% rate. A 0.5% rate shall continue to apply to other reverse invoicing scenarios.

“Three-flow-consistent reverse invoicing” refers to recyclable-resource transactions conducted via online payment platforms under closed-loop management of the entire process, whereby payment triggers invoicing, invoicing triggers tax collection, and tax collection triggers remittance to the state treasury, ensuring consistency of the three flows: invoice flow, transaction party flow (natural person seller and enterprise purchaser), and fund flow.

• Residential Home Replacement

From January 1, 2026 to December 31, 2027, taxpayers who sell a self-owned residential property and purchase another residential property in the same city within one year after the sale may, in accordance with relevant provisions, apply for a refund of IIT paid on the transfer of the existing residential property. The administrative handling rules shall remain consistent with existing provisions.