UAE VAT Update: Reverse Charge Mechanism for Metal Scrap Trading Effective 2026

Cabinet Decision No. 153 of 2025 | Effective 14 January 2026

The UAE Cabinet has issued Cabinet Decision No. 153 of 2025, introducing the Reverse Charge Mechanism (RCM) for specific supplies of metal scrap between VAT-registered persons within the UAE. The Decision was issued on 14 November 2025 and will come into effect on 14 January 2026.

This measure aims to strengthen VAT compliance, reduce cash-flow risks, and address tax leakage within the metal scrap trading sector.

1. Scope of the Decision

The Reverse Charge Mechanism applies where all of the following conditions are met:

The supply is of metal scrap (ferrous or non-ferrous metal waste with commercial value).
The recipient is registered for VAT with the Federal Tax Authority (FTA).
The recipient intends to resell the metal scrap or use it in processing, such as recycling, repairing, or manufacturing.
The supply is not zero-rated under Article 45 of the UAE VAT Law.

If these conditions are satisfied, the responsibility to account for VAT shifts from the supplier to the recipient.

2. Key Definitions

Metal Scrap:
Ferrous or non-ferrous metal waste that has commercial value and is usable after processing.
Processing:
Any operation through which metal scrap is converted into usable materials for manufacturing new products, including recycling, repairing, or similar methods.

3. VAT Treatment Under the Reverse Charge Mechanism

Supplier Responsibilities

Where RCM applies, the supplier must:

Not charge or account for VAT on the supply.
Exclude VAT on the transaction from their VAT return.
Obtain and retain written declarations from the recipient.
Verify the recipient’s VAT registration using FTA-approved methods.
Issue a tax invoice clearly stating that the Reverse Charge Mechanism applies.

Recipient Responsibilities

The VAT-registered recipient must:

Account for the VAT due on the supply under the reverse charge.
Report the output VAT in their VAT return.
Claim input VAT, subject to normal recovery rules.
Fulfil all VAT compliance obligations arising from the transaction.

4. Mandatory Declarations

Prior to the supply, the recipient must provide the supplier with written declarations confirming:

The intention to resell or process the metal scrap, and
Their VAT registration status with the FTA.

If these declarations are not provided, the Reverse Charge Mechanism will not apply, and the recipient may also lose the ability to treat the goods as used for taxable purposes under the VAT Law.