The Ministry of Finance (MoF) has announced the issuance of Cabinet Decision No. 153 of 2025 on the use of the reverse charge mechanism on the trading of metal-scrap between registrants in the UAE to be issued, which will take effect on 14th January 2026.
The actions undertaken in the context of the provisions of the 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.
According to the Ministry, the new decision is within the framework of attempts of the government to improve the efficiency of the tax system and suppress fraudulent activities in the metal-scrap trading industry.
It is also meant to enhance the fairness of taxes and voluntary compliance in order to facilitate tax transparency and maintain the business-environment competitiveness in the country.
However, within the ruling, the reverse-charge system will be utilized on qualifying supplies among registrants in the metal-scrap industry. This drive has enhanced to improve operational efficiency by shifting the responsibility of VAT accounting from the supplier to the buyer in certain cases.
According to this mechanism, the buyer, when he buys scrap metal to resell it or when he converts scrap into materials that can be used in the production of new products, will assume responsibility for paying the amount of the VAT due and all other tax liabilities that will be occasioned by this supply.
Therefore, the suppliers will no longer be expected to charge VAT on these supplies. The decision also provides that the supplier and the recipient of the goods must meet certain procedural requirements before the date of supply.
These processes involve the recipient of the goods offering a written declaration to the supplier confirming that the purpose of receiving the metal scrap is to be resold or to be used in processing, and also confirming that they are registered with the Federal Tax Authority (FTA).
The supplier is bound to obtain and maintain the declarations and ensure that the recipient is also registered with the FTA and that there is a clear statement on the invoice that the reverse charge mechanism is applied to the supply.
The Ministry observed that the new mechanism will play an imperative role in minimizing cases of tax fraud and improving the efficiency of administering tax refunds in the metal-scrap trading sector.
The adoption of this strategic implementation is based on the successful implementation of the same mechanism in the electronic device, gold, and other precious metal sectors.
It even further stated that this decision coincides with the UAE’s vision of establishing an integrated financial infrastructure that will increase transparency, sustainability, and confidence in the tax system.
