UAE VAT domestic reverse charge for scrap-metal trading Jan 2026
- From 14 January 2026, VAT on qualifying scrap-metal supplies between VAT-registered businesses in the UAE will shift from the supplier to the customer under a mandatory reverse charge.
- The change is aimed at reducing fraud in the scrap-metal sector and aligning its VAT treatment with existing reverse-charge regimes for electronics and precious metals.
The United Arab Emirates has confirmed a further expansion of its VAT reverse charge framework, this time targeting the scrap-metal trading sector. Under Cabinet Decision No. 153 of 2025, the reverse charge mechanism (RCM) will apply to specified domestic supplies of metal scrap between VAT-registered businesses, with effect from 14 January 2026.
The announcement, made by the Ministry of Finance, positions the measure as part of a broader effort to strengthen VAT system integrity, address sector-specific fraud risks and improve the efficiency of tax administration. The UAE domestic reverse charge is already in place for valuable metals.
VAT reporting obligations flip to customer
Under the new decision, responsibility for accounting for VAT on qualifying scrap-metal transactions will move from the supplier to the purchaser.
In practical terms:
- Suppliers of eligible scrap metal will no longer charge VAT on their invoices.
- The VAT-registered buyer will be required to self-account for VAT under the reverse charge, declaring both output and (subject to normal recovery rules) input tax in their VAT return.
The regime applies where scrap metal is supplied for resale or for processing into materials used in manufacturing, and only where both parties are VAT-registered in the UAE.
UAE replicates anti-VAT fraud global measure
Scrap-metal trading has long been identified internationally as a sector vulnerable to VAT fraud, including missing-trader and carousel-type schemes. By removing VAT cash-flow from the supply chain, the UAE authorities are seeking to eliminate opportunities for abuse while maintaining neutrality for compliant businesses.
The UAE has already applied similar reverse-charge rules successfully to other higher-risk sectors, including electronic devices, gold and precious metals. Extending the mechanism to scrap metal reflects a consistent policy approach rather than an isolated change.
VAT requirements for businesses
The decision introduces specific compliance steps that must be completed before the date of supply:
- Customer declaration: The buyer must provide a written declaration to the supplier confirming that:
- the scrap metal is being acquired for resale or processing; and
- the buyer is registered for VAT with the Federal Tax Authority (FTA).
- Supplier verification: The supplier must:
- obtain and retain the customer’s declaration;
- verify the buyer’s VAT registration status; and
- clearly state on the invoice that the reverse charge mechanism applies.
Failure to meet these procedural conditions may expose businesses to compliance risks, particularly where VAT is incorrectly charged or omitted.
Impact on cash flow and administration
For suppliers, the removal of VAT from invoices should simplify cash-flow management and reduce exposure to refund delays. For buyers, the change increases responsibility for accurate VAT reporting but is designed to be VAT-neutral where full recovery is available.
From a tax authority perspective, the reverse charge is expected to:
- reduce fraudulent VAT refund claims;
- simplify audit activity in the sector; and
- improve overall compliance levels without increasing headline VAT rates.
As with earlier reverse-charge introductions, early preparation will be critical to ensuring a smooth transition when the new rules take effect.
