The Ministry of Finance has announced the approval of Cabinet Decision No. (153) for the year 2025, which introduces a reverse charge mechanism for the trading of scrap metal among registered entities for Value Added Tax (VAT) purposes. This measure is set to take effect on January 14, 2026, in accordance with Federal Decree-Law No. (8) of 2017 and its amendments, as well as Cabinet Decision No. (52) of 2017 regarding the executive regulations of this law.
This decision is part of the United Arab Emirates government’s ongoing efforts to enhance the efficiency of the tax system, combat fraudulent practices in the scrap metal trade, ensure tax fairness, and improve compliance levels, which in turn supports tax transparency and maintains a competitive business environment in the country.
Under this decision, the reverse charge mechanism will apply to transactions involving scrap metal among registered parties, transferring the responsibility of calculating VAT from the supplier (seller) to the recipient (buyer) in specified situations. Consequently, the buyer intending to resell the scrap metal or use it for processing into reusable materials for new product manufacturing will be responsible for calculating the requisite tax and fulfilling all related tax obligations for the transaction, while the supplier will not calculate the tax related to this transaction.
Additionally, the decision requires both the supplier and the recipient to adhere to certain procedures prior to the date of the supply. These include the submission of written declarations from the recipient to the supplier, indicating that the purpose of receiving the scrap metal is for resale or processing, along with confirmation that the recipient is registered with the Federal Tax Authority. The supplier must retain these declarations, verify the recipient’s registration with the Federal Tax Authority, and include a clear statement in the invoice indicating the application of the reverse charge mechanism for the transaction.
The Ministry of Finance has clarified that implementing this new mechanism will help reduce instances of tax fraud and improve the management of refund processes in the scrap metal trading sector, following the successful implementation of a similar mechanism in the electronic devices, gold, and precious metals sectors.
The ministry emphasized that this decision aligns with the nation’s vision to develop a comprehensive financial system that promotes transparency and sustainability, while also enhancing trust in the tax system within the country.