The UAE government has introduced a streamlined way of treating Metal Scrap under UAE VAT Law. Cabinet Decision No. 153 of 2025 changes the tax rules for buying and selling metal scrap between VAT registrants in the State. Effective from 14 January 2026, businesses registered for VAT in the UAE must follow these updated rules to ensure they remain compliant with the continuously evolving UAE Tax Laws.
Application of the Reverse Charge Mechanism
Where a VAT-registered supplier makes a supply of metal scrap to a VAT-registered recipient, and the recipient intends to resell the scrap or use it for processing, the Reverse Charge Mechanism shall apply.
Under this mechanism:
- The supplier is not required to charge or account for VAT to the supply in their Tax Return.
- The recipient becomes responsible to account for the output VAT and fulfilling all related tax obligations in respect of the transaction.
The Reverse Charge Mechanism does not apply where the supply of metal scrap is subject to zero-rated VAT under Article 45(1) of the Federal Decree-Law No. 8 of 2017.
Compliance Prerequisite
Recipient’s Declarations: Prior to the date of supply, the recipient must provide the supplier with:
- A written declaration confirming the intended use of the metal scrap for resale or processing.
- A written declaration evidencing valid VAT registration.
Supplier’s Due Diligence Obligations: The supplier is required to:
- Receive and retain the recipient’s declarations as part of tax records.
- Verify the recipient’s VAT registration using Federal Tax Authority–approved methods.
- Issue an invoice explicitly stating that the Reverse Charge Mechanism applies.
Consequences of Non-Compliance
Where the recipient fails to provide the required declarations:
- The Reverse Charge Mechanism shall not apply.
- The recipient cannot claim that the metal scrap is used or intended to be used for eligible purposes under Article 54 of the VAT Law.
RVG recommends that businesses involved in metal scrap transactions review their VAT processes and documentation in light of Cabinet Decision No. 153 of 2025 and contact RVG’s indirect tax team for implementation and compliance support.
