Ministry of Finance announces Cabinet Resolution on implementing reverse charge mechanism for VAT on scrap-metal trading

Abu Dhabi, December 19 2025

The Ministry of Finance (“MoF”) has announced the issuance of Cabinet Decision No. 153 of 2025 regarding the application of the reverse charge mechanism on trading of metal-scrap between registrants in the UAE, effective from 14 January 2026.

The measures taken pursuant to the provisions of Federal Decree‑Law No. 8 of 2017 on Value Added Tax and its amendments, and Cabinet Resolution No. (52) of 2017 Regarding the Executive Regulations of the said Decree‑Law.

The Ministry stated that the new decision falls within the government’s efforts to strengthen the efficiency of the tax system and crack down on fraudulent practices in the metal-scrap trading sector. It is also designed to promote tax fairness and voluntary compliance, thereby supporting tax transparency and preserving the business-environment competitiveness in the country.

Under the decision, the reverse-charge mechanism will apply to eligible supplies between registrants within the metal-scrap sector. This measure is tailored to improve operational efficiency by shifting the responsibility of VAT accounting from the supplier to the buyer in certain cases.

As per this mechanism, the buyer, whether purchasing scrap-metal for resale or in the process of converting scrap into materials that can be used in the manufacture of new products, becomes responsible for accounting for the VAT due and meeting all tax obligations arising from the supply. While the suppliers will no longer be required to charge VAT on these supplies.

The decision further stipulates that both the supplier and the recipient of goods must fulfil specific procedural requirements prior to the date of supply. These procedures include the recipient of goods providing a written declarations to the supplier, confirming that the purpose of receiving the metal scrap is for resale or for use in processing, in addition to confirming that the he is registered with the Federal Tax Authority (“FTA”), the supplier is required to obtain and retain these declarations, verify that the recipient is registered with the FTA, and include an explicit statement on the invoice indicating that the reverse charge mechanism applies to the supply.

The Ministry noted that the implementation of the new mechanism is expected to significantly reduce instances of tax fraud and enhance the efficiency of tax refund administration within the metal-scrap trading sector. This strategic rollout follows the successful application of an identical mechanism across the sectors for electronic devices, gold, and other precious metals.

It added that the decision aligns with the UAE’s vision of building an integrated financial framework that enhances transparency, sustainability and trust in the tax system.