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On 04^thNov 2025, Federal Tax Authority (FTA) have issued Cabinet Decision No. 153 of 2025 on Application of the Reverse Charge Mechanism on Metal Scrap Trading effective from 14^th January 2026.

Overview of the Reverse Charge Mechanism

The UAE Ministry of Finance has introduced Cabinet Decision No. 153 of 2025, which applies the Reverse Charge Mechanism to the local supply of metal scrap between VAT-registered persons. This decision aims to enhance VAT compliance, reduce administrative burdens, and combat tax fraud in the metal scrap sector.

Key aspects of the Decision and applicable conditions:

Definitions​

1. 1. Scrap Metal: Refers to waste of ferrous or non-ferrous metals that retain commercial value and can be reused after processing. ​
   2. Processing: The conversion of scrap metal into usable materials for manufacturing new products through methods such as repair, recycling, or other approved processes.​

Application of RCM as per Cabinet Decision No. 153:

2. 1. VAT-registered suppliers of metal scrap will not charge VAT on supplies made to VAT-registered customers who intend to resell or process the scrap. They are required to obtain written declarations from the recipients confirming their VAT registration and the purpose of the transaction.
   2. Point A shall not apply if the supply of the Metal Scrap is subject to Value Added Tax at the zero rate in accordance VAT Decree Law Article 45 on Export of Goods
4. Recipient’s obligations:
5. 1. Before the supply date, recipients must provide written declarations to the supplier confirming:
   2. Purpose of purchase: Goods will be used for resale or processing as defined in the Decision.
   3. VAT registration status: Recipient is registered with the Federal Tax Authority (FTA).
   4. Failure to provide these declarations means the reverse charge mechanism does not apply, and the supplier becomes liable for VAT.
7. Supplier’s obligations:
8. 1. Receive and retain the declarations
   2. Verify that the Recipient of the Metal Scrap is a Registrant, in accordance with the means approved by the Authority in that respect
   3. The invoice must contain an explicit statement indicating the application of the reverse charge mechanism.

Key take aways:

• The new framework is designed to streamline VAT compliance for businesses engaged in scrap metal transactions, making it easier to manage tax obligations.
• In summary, the Reverse Charge Mechanism for VAT on metal scrap trading represents a significant regulatory change aimed at improving tax compliance and reducing fraud risks in the UAE’s metal scrap sector. Businesses involved in this trade should prepare for the upcoming changes by ensuring they understand their new responsibilities and maintain proper documentation.

Click here to read the official announcement