The Ministry of Finance has announced Cabinet Decision No. 153 of 2025 on applying the reverse charge mechanism to metal-scrap trading between VAT-registered entities in the UAE. The decision will take effect on 14 January 2026.
The measures are issued pursuant to Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments, as well as Cabinet Resolution No. 52 of 2017 concerning the Executive Regulations. Moreover, the decision forms part of broader efforts to strengthen tax system efficiency and address fraudulent practices within the metal-scrap sector.
Accordingly, the framework aims to promote tax fairness and voluntary compliance. As a result, it supports transparency while preserving the competitiveness of the UAE’s business environment.
Scope and Operational Mechanics
Under the decision, the reverse charge mechanism will apply to eligible supplies of metal scrap between registered businesses. Therefore, the responsibility for VAT accounting will shift from the supplier to the buyer in specified transactions.
As per the mechanism, the buyer becomes responsible for accounting for VAT due on the supply. This applies whether the metal scrap is purchased for resale or for conversion into materials used in manufacturing new products. Consequently, suppliers will no longer charge VAT on these qualifying supplies.
Procedural Requirements and Expected Impact
The decision stipulates specific procedural requirements for both parties before the date of supply. In particular, the recipient must provide a written declaration confirming that the metal scrap is intended for resale or processing, and that the recipient is registered with the Federal Tax Authority.
Meanwhile, the supplier must obtain and retain the declaration, verify the recipient’s registration status, and include a clear statement on the invoice indicating that the reverse charge mechanism applies. Moreover, these steps are intended to ensure consistent application and audit readiness.
The Ministry noted that the mechanism is expected to reduce tax fraud and improve the efficiency of tax refund administration in the sector. Additionally, the rollout follows the successful implementation of similar measures for electronic devices, gold and other precious metals.
Overall, the decision aligns with the UAE’s objective of building an integrated financial framework that enhances transparency, sustainability and trust in the tax system.
