The Ministry of Finance has announced a major change to the VAT treatment of metal scrap trading in the UAE, introducing a reverse charge mechanism aimed at tightening compliance and curbing tax fraud across the sector.
Under Cabinet Decision No. 153 of 2025, the new rules will take effect from January 14, 2026, and apply to eligible transactions between VAT-registered businesses involved in metal scrap trading. The decision is issued in line with the UAE’s VAT law and its executive regulations.
The reverse charge mechanism shifts the responsibility for accounting for VAT from the supplier to the buyer in specific transactions. Buyers who purchase metal scrap either for resale or for processing into new materials will be required to account for VAT and meet all related tax obligations. Suppliers, in turn, will no longer charge VAT on such supplies.
Both parties must meet defined procedural requirements before completing a transaction. Buyers are required to provide a written declaration confirming their VAT registration with the Federal Tax Authority and the intended use of the scrap. Suppliers must verify this registration, retain the declaration, and clearly state on invoices that the reverse charge mechanism applies.
The Ministry said the decision supports broader government efforts to enhance the efficiency of the tax system, promote fairness, and encourage voluntary compliance. It is also expected to reduce fraudulent practices and improve the administration of tax refunds in the metal scrap sector.
The move follows the successful implementation of similar mechanisms in sectors such as electronic devices, gold, and other precious metals, reinforcing the UAE’s commitment to transparency and trust within its tax framework.
News Source: Emirates News Agency
