The Ministry of Finance announced the issuance of Cabinet Decision No. (153) of 2025 regarding the application of the reverse charge mechanism to the trade in scrap metal between registered persons in the state for Value Added Tax (VAT) purposes. The decision will come into effect as of January 14, 2026, based on the provisions of Federal Decree-Law No. (8) of 2017 and its amendments, and Cabinet Decision No. (52) of 2017 concerning the executive by-law of this Decree-Law.
This decision is part of the efforts of the UAE government to enhance the efficiency of the tax system, combat fraudulent practices associated with the scrap metal trade sector, ensure tax fairness, and increase voluntary compliance, which supports tax transparency and maintains the competitiveness of the business environment in the state.
The decision stipulates the application of the reverse charge mechanism to supplies made between registered persons in the scrap metal sector by transferring the responsibility for calculating VAT to the recipient 'buyer' instead of the supplier 'seller' in the cases specified by the decision.
Under this mechanism, the recipient who intends to resell the scrap metal or use it in a process to convert scrap metal into materials that can be used in manufacturing new products becomes responsible for calculating the due tax and fulfilling all tax obligations arising from the supply, while the supplier does not calculate the tax related to that transaction.
The decision also requires both the supplier and the recipient to carry out specific procedures prior to the date of the supply. These procedures include the recipient providing written permits to the supplier indicating that the purpose of receiving the scrap metal is for the purpose of resale or its use in processing, in addition to confirming that they are registered with the Federal Tax Authority.
The supplier is required to receive and retain the permits from the recipient, verify that the recipient is registered with the Federal Tax Authority, and include a clear statement in the invoice clarifying that the reverse charge mechanism is applied to the supply in question.
The Ministry of Finance clarified that the application of the new mechanism contributes to reducing cases of tax fraud and enhancing the management of refund processes in the scrap metal trade sector, following the successful application of a similar mechanism in the trade of electronics, gold, and precious metals sectors.
The Ministry confirmed that this decision comes within the state's vision to develop an integrated financial system that supports transparency and sustainability and enhances trust in the tax system in the country.
