The UAE Ministry of Finance has announced Cabinet Decision No. 153 of 2025, introducing a reverse charge mechanism for VAT on metal scrap trading between registered businesses, effective January 14, 2026.
The move aims to strengthen the efficiency of the tax system, curb fraudulent practices in the metal scrap sector, and promote tax transparency and voluntary compliance, while maintaining the country’s competitive business environment.
Under the new mechanism, VAT accounting responsibility will shift from the supplier to the buyer for eligible scrap transactions between VAT-registered entities. Buyers purchasing scrap for resale or for processing into new products will be required to account for and pay the VAT, while suppliers will no longer charge VAT on such supplies.
Both parties must meet specific procedural requirements before the transaction. Buyers must provide a written declaration confirming the purpose of purchase and their registration with the Federal Tax Authority (FTA). Suppliers are required to verify this registration, retain the declaration, and clearly state on invoices that the reverse charge mechanism applies.
The Ministry said the measure is expected to significantly reduce tax fraud and improve the efficiency of VAT refund administration in the metal scrap sector. It follows the successful implementation of similar mechanisms for electronic devices, gold, and other precious metals, and aligns with the UAE’s broader goal of building a transparent, sustainable, and trusted tax system.
