UAE Cabinet Decision No. 153 of 2025: Reverse Charge Mechanism for VAT on Metal Scrap
The United Arab Emirates Cabinet has issued Cabinet Decision No. 153 of 2025, marking a significant update to the nation’s Value Added Tax (VAT) framework. Effective 14 January 2026, the decision introduces a Reverse Charge Mechanism (RCM) for the domestic supply and trading of metal scrap between VAT-registered businesses. This measure aims to enhance tax compliance, fairness, and transparency in a sector prone to VAT risks.
What Is the Reverse Charge Mechanism?
Under the newly introduced RCM:
- VAT responsibility shifts from the supplier to the recipient of eligible metal scrap supplies, provided both parties are registered for VAT in the UAE.
- Suppliers no longer charge or collect VAT on qualifying transactions; instead, recipients (buyers) must account for VAT on their VAT returns and fulfil all related reporting obligations.
This mechanism is designed to streamline VAT processes and mitigate risks where traditional VAT collection procedures may be prone to error or abuse.
Applicability and Conditions
The RCM applies only when:
- Both supplier and recipient are registered for VAT in the UAE.
- The recipient intends to resell, recycle, or otherwise process the metal scrap into usable materials.
- Specific documentation requirements — including written declarations confirming the buyer’s VAT status and intent — must be completed before the date of supply and retained by the supplier.
The decision also excludes supplies that qualify as zero-rated under UAE VAT law, as these are treated under existing VAT provisions.
Implementation
As of 14 January 2026, all qualifying scrap metal transactions between VAT-registered entities in the UAE should follow the reverse charge procedures outlined under Cabinet Decision No. 153 of 2025. Businesses dealing in metal scrap — whether for resale or processing — should update their VAT reporting systems, documentation practices, and compliance policies accordingly.
This decision underscores the UAE Government’s proactive approach to evolving its tax framework, making it more robust and aligned with international norms, while safeguarding the economic environment by promoting fiscal transparency and fairness.
Disclaimer
This update is provided for information purposes only and does not constitute legal or tax advice. Businesses potentially affected by these changes should seek advice from qualified professionals or consult the Federal Tax Authority (FTA) for official guidance.
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