The United Arab Emirates has unveiled a significant tax policy shift targeting the scrap metal industry, with Cabinet Decision No. 153 of 2025 introducing a reverse charge mechanism for Value Added Tax (VAT) on transactions between registered businesses. Effective January 14, 2026, this reform fundamentally alters tax accountability by transferring VAT calculation responsibilities from suppliers to purchasers in qualified scrap metal trades.
The Ministry of Finance emphasized that this strategic initiative forms part of broader governmental efforts to enhance tax system efficiency and eliminate fraudulent activities within the metal recycling sector. The mechanism specifically applies to transactions where buyers acquire scrap metal either for resale purposes or for processing into raw materials suitable for manufacturing new products.
Under the new framework, purchasing entities must assume complete responsibility for VAT accounting and fulfill all associated tax obligations. Suppliers, conversely, will be exempt from charging VAT on these transactions. Both parties must adhere to stringent procedural requirements, including written declarations from recipients confirming their intended use of materials and FTA registration status. Suppliers must verify these registrations, retain documentation, and explicitly note the reverse charge application on all invoices.
This regulatory development follows successful implementations of similar mechanisms in the electronic devices and precious metals sectors. Authorities anticipate substantial reductions in tax evasion and improved administration of tax refund processes. The policy aligns with the UAE’s vision of establishing a transparent, sustainable financial ecosystem that fosters voluntary compliance and maintains competitive business environments.