UAE Ministry Of Finance Introduces Reverse Charge VAT For Scrap Metal Trading

The Ministry of Finance has issued Cabinet Decision No. 153 of 2025, introducing a reverse charge mechanism for trading metal scrap between VAT-registered businesses in the UAE, with effect from 14 January 2026. The measure targets domestic transactions and adjusts how Value Added Tax is reported within this specific supply chain.

The decision is adopted under Federal Decree Law No. 8 of 2017 on Value Added Tax, along with its amendments, and Cabinet Resolution No. 52 of 2017, which sets the Executive Regulations. These legal references provide the framework for shifting VAT accounting duties from certain suppliers to buyers within eligible transactions.

Under the new rules, the reverse charge mechanism applies to qualifying supplies of metal scrap between UAE registrants operating in the sector. Instead of suppliers charging VAT on the invoice, eligible buyers will record the tax due. This change aims to streamline tax collection while keeping metal scrap supplies within the VAT system.

When purchasing metal scrap either for resale or to convert it into inputs for manufacturing new products, the buyer becomes responsible for calculating and reporting the VAT due. The supplier does not add VAT on the invoice for such supplies. The buyer must also ensure all related VAT obligations are met in line with Federal Tax Authority requirements.

The decision sets procedural steps that both supplier and recipient must complete before the date of supply. The recipient of the metal scrap must issue a written declaration to the supplier, confirming that the scrap is acquired for resale or processing. The declaration must also state that the recipient is registered with the Federal Tax Authority.

Suppliers are required to obtain and keep these written declarations, and must verify that the recipient is indeed registered with the Federal Tax Authority. In addition, suppliers must place a clear statement on the tax invoice confirming that the reverse charge mechanism applies to the relevant supply. These steps are designed to provide documented evidence for audit and compliance checks.

Reverse charge mechanism impact on metal-scrap trading sector

The Ministry of Finance indicated that this mechanism is expected to reduce tax fraud cases linked to metal scrap trading and improve the handling of VAT refunds in the sector. The approach mirrors systems already adopted for electronic devices, gold and other precious metals, where similar rules have been implemented across the domestic supply chain.

According to the Ministry, the decision supports the government’s wider agenda to strengthen tax system efficiency, promote voluntary compliance and enhance tax fairness. It is also intended to reinforce transparency and sustain the competitiveness of the UAE business environment, by embedding the metal scrap sector more firmly within an integrated and trusted financial framework.

With inputs from WAM