UAE Introduces Reverse Charge Mechanism for VAT on Scrap Metal Trading
- 26.12.2025
- Posted by: Uwe Hohmann
- Categories: Tax, Dubai
The MoF (Ministry of Finance) has issued Cabinet Decision No. 153 of 2025, introducing a reverse charge mechanism for VAT (Value Added Tax) on scrap metal transactions between registered businesses in the UAE. The new rules will come into effect on 14.01.2026.
What Is Changing
Under the current VAT system, suppliers charge VAT on their sales and remit the tax to the FTA (Federal Tax Authority). The reverse charge mechanism changes this by shifting the VAT accounting responsibility from the supplier to the buyer.
This means that when a VAT-registered business purchases scrap metal from another VAT-registered supplier, the buyer will account for the VAT instead of the seller. The supplier will no longer charge VAT on these transactions.
Who This Applies To
The reverse charge mechanism applies to eligible supplies of scrap metal between VAT-registered businesses. Specifically, it covers buyers who acquire scrap metal either for resale or for processing into materials used in manufacturing new products.
Both parties must meet certain procedural requirements before the supply takes place.
Requirements for Buyers
The buyer must provide a written declaration to the supplier before the transaction. This declaration must confirm that the scrap metal is being purchased for resale or processing purposes. The buyer must also confirm their registration with the FTA.
Once the mechanism applies, the buyer becomes responsible for accounting for the VAT due and meeting all related tax obligations.
Requirements for Suppliers
Suppliers must obtain and retain the written declarations from their buyers. They are also required to verify that the buyer is registered with the FTA before applying the reverse charge treatment.
Every invoice issued under this mechanism must include a clear statement indicating that the reverse charge applies to that supply.
Why the Change
The MoF has stated that this measure is part of broader efforts to improve tax system efficiency and address fraudulent practices in the scrap metal trading sector. By making the buyer responsible for VAT accounting, the government aims to reduce opportunities for tax fraud and simplify the administration of VAT refunds within the sector.
This approach has already been applied successfully in the UAE for transactions involving electronic devices, gold, and other precious metals. The extension to scrap metal follows the same model.
What Businesses Should Do Now
Companies involved in scrap metal trading should review their current processes and prepare for the 14.01.2026 implementation date. Key steps include updating invoicing systems to include the required reverse charge statement, establishing procedures for obtaining and storing buyer declarations, and ensuring staff understand the new VAT accounting responsibilities.
Buyers in particular should ensure their internal accounting systems can handle the reverse charge treatment and that they are prepared to report the VAT correctly in their returns.
TME Services - Your Complete Business Partner
If you trade in scrap metal or work with businesses in this sector, understanding these changes is important. TME Services can assist with reviewing your VAT compliance procedures, updating your invoicing and record-keeping processes, and advising on the practical application of the reverse charge mechanism to your specific operations.
For questions about how Cabinet Decision No. 153 of 2025 affects your business, contact our team for guidance tailored to your situation.
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