UAE Introduces Reverse Charge VAT on Local Scrap Metal Supplies

UAE, 23 December, 2025: The UAE Ministry of Finance has issued Cabinet Decision No. 153 of 2025, introducing the reverse charge mechanism (RCM) for the local supply of scrap metal between VAT-registered businesses. The Decision was published in the Official Gazette on 26 November 2025 and will take effect from 25 January 2026.

Under the new framework, VAT-registered suppliers will not charge VAT on scrap metal supplied to VAT-registered customers who intend to resell or process the material. Instead, the recipient will account for VAT under the reverse charge mechanism in their VAT return. The measure aims to simplify compliance and reduce administrative burdens in the scrap metal sector.

The Decision applies to ferrous and non-ferrous scrap metal with commercial value and does not apply to zero-rated exports. To apply RCM, recipients must provide a written declaration confirming their VAT registration and intended use of the scrap metal. If such declaration is not provided, the supplier remains liable to charge VAT.

Suppliers are required to verify the customer’s VAT registration with the FTA and clearly mention “VAT under Reverse Charge Mechanism” on the invoice.

Key takeaway: Businesses dealing in scrap metal should review contracts, invoicing systems, and internal controls, ensure proper declarations are obtained, and train teams to comply with the new RCM requirements ahead of the effective date.