Reverse charge mechanism set for VAT on scrap-metal trading

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 14th 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.

A day earlier, the Ministry of Finance (MoF) announced the issuance of Cabinet Resolution No. (198) of 2025, amending certain provisions of Cabinet Resolution No. (37) of 2017 regarding the Executive Regulation of Federal Decree-Law No. (7) of 2017 on Excise Tax, based on the recent amendments to Federal Decree-Law No. (7) of 2025, which introduced certain amendments to the provisions of the Excise Tax.

The amendments come as part of the UAE’s efforts to update the Excise Tax legislative framework and align the legal provisions between the Decree-Law and its Executive Regulation, particularly with respect to tax registration, excise tax deduction, and refund requests, in addition to introducing certain improvements to some provisions of the Executive Regulation.

The Ministry emphasised that the amendments aim to enhance tax compliance efficiency and improve procedural clarity for taxable persons, contributing to a stable business environment and the sustainability of public revenues, and supporting the country’s direction towards developing a more efficient, flexible, and sustainable tax system.

The Ministry noted that these amendments form part of a comprehensive plan to enhance the country’s tax systems, aligning it with international best practices, therefore reinforcing transparency and efficiency in the implementation of Excise Tax.

Earlier this month, the Ministry of Finance has announced the issuance of Federal Decree-Law No. (16) of 2025 amending certain provisions of Federal Decree-Law No. (8) of 2017 on Value Added Tax, which will enter into force as of January 1, 2026. The move comes as part of the UAE’s ongoing efforts to develop its tax system and enhance administrative and regulatory efficiency.

The amendments aim to simplify tax procedures for taxpayers while ensuring transparency and compliance with international standards.

The Ministry of Finance (MoF) announced the issuance of Cabinet Resolution No. (198) of 2025, amending certain provisions of Cabinet Resolution No. (37) of 2017 regarding the Executive Regulation of Federal Decree-Law No. (7) of 2017 on Excise Tax, based on the recent amendments to Federal Decree-Law No. (7) of 2025, which introduced certain amendments to the provisions of the Excise Tax.

WAM