Ministry of Finance: Implementation of Reverse Charge Mechanism on Metal Scrap Trade for Value Added Tax

The Ministry of Finance announced the issuance of Cabinet Resolution No. (153) of 2025 concerning the implementation of the reverse charge mechanism on metal scrap trade between registered persons in the country for Value Added Tax purposes, effective from January 14, 2026. This is based on the provisions of Federal Decree-Law No. (8) of 2017 and its amendments, and Cabinet Resolution No. (52) of 2017 regarding the executive regulations of this decree-law.

This decision is part of the UAE government's efforts to enhance the efficiency of the tax system, combat fraudulent practices related to the metal scrap trade sector, ensure tax fairness, and raise levels of voluntary compliance, supporting tax transparency and maintaining the competitiveness of the business environment in the country.

The resolution stipulates applying the reverse charge mechanism to supplies made between registered persons in the metal scrap sector by transferring the responsibility for calculating VAT to the recipient (buyer) instead of the supplier (seller) in cases specified by the resolution. Under this mechanism, the recipient who intends to resell the metal scrap or use it in the process of converting metal scrap into materials usable in manufacturing new products is responsible for calculating the due tax and fulfilling all tax obligations related to the supply, while the supplier does not calculate the tax related to that transaction.

The resolution also requires both the supplier and the recipient to comply with specific procedures prior to the supply date. These procedures include the recipient providing written declarations to the supplier indicating that the purpose of receiving the metal scrap is for resale or processing, in addition to confirming that the recipient is registered with the Federal Tax Authority. The supplier must receive these declarations from the recipient, keep them, verify that the recipient is registered with the Federal Tax Authority, and include an explicit statement on the invoice clarifying the application of the reverse charge mechanism on the supply in question.

The Ministry of Finance explained that implementing the new mechanism contributes to reducing cases of tax fraud and improving the management of refund operations in the metal scrap trade sector, following the successful application of a similar mechanism in the electronic devices, gold, and precious metals trade sectors.

The ministry affirmed that this decision aligns with the country's vision to develop an integrated financial system that supports transparency and sustainability and enhances confidence in the tax system in the UAE.