UAE Moves VAT Liability to Buyers in Scrap-Metal Trades
Reverse charge to apply from January 2026 under Cabinet Decision No. 153 of 2025
The UAE is changing how VAT works in scrap-metal trading. Not in a dramatic, system-wide way. More like a quiet but deliberate shift.
Under the new rules, the VAT burden moves from the seller to the buyer in certain transactions. Same tax. Different responsibility. The Ministry of Finance confirmed the change this year. It kicks in on 14 January 2026, through Cabinet Decision No. (153) of 2025.
Why scrap metal? Because it’s one of those sectors that looks simple on the surface but leaks VAT when no one’s watching too closely. Thin margins. Fast trades. Refund exposure. You can see the pressure points. What’s notable is what the decision doesn’t do. It doesn’t widen the tax net. It doesn’t raise rates. It doesn’t make noise.
It just shifts the load to where the tax authorities believe it can be carried more cleanly.
Introduction
The Ministry of Finance has confirmed it. VAT on scrap-metal trading is getting the reverse-charge treatment.
On paper, it’s straightforward. The rule applies only where both sides of the deal are VAT-registered. No spillover. No grey expansion. Just a tighter grip on a part of the supply chain that has always carried a bit more risk than it looks like from the outside.
The decision was issued in 2025, but the clock really starts ticking in January 2026. That gap matters. It’s intentional. Time to adjust systems. Time to rethink invoices.
And if this feels familiar, it should. This is how UAE tax policy usually moves. Narrow changes. Very specific targets. Clear compliance logic. Not louder rules. Sharper ones.
Background: UAE VAT Framework
The UAE VAT system is built on Federal Decree-Law No. 8 of 2017, supported by the VAT Executive Regulations under Cabinet Resolution No. 52 of 2017. Since VAT was introduced, the framework has allowed for sector-specific measures where standard charging mechanisms create enforcement challenges.
The reverse charge mechanism is one such tool. It has been used selectively, not broadly. Its purpose is practical. Shift VAT accounting to the party best positioned to comply and audit. In high-volume trading environments, that party is often the buyer.
What Has Changed: Cabinet Decision No. 153 of 2025
At the centre of Cabinet Decision No. (153) of 2025 is one clean shift. VAT on scrap metal no longer sits with the seller. It moves to the buyer.
For qualifying transactions between VAT-registered businesses, the reverse charge mechanism now applies. That means suppliers stop charging VAT on eligible scrap-metal supplies. No output tax on the invoice. Instead, the buyer accounts for VAT directly in its return.
But this isn’t a free-for-all. The rule only kicks in where the scrap metal is bought for resale or for processing or manufacturing. That detail matters. It draws a clear line between commercial trading activity and everything else.
The tax itself hasn’t changed. The timing and responsibility have. And in VAT, those two things make all the difference.
Scope of Application: Eligible Supplies and Parties
The scope of the decision is intentionally tight. Almost surgical.
It applies only to supplies of scrap metal made between VAT-registered persons. If either party isn’t registered, the reverse charge simply doesn’t apply. Full stop.
Buyers must also meet specific eligibility conditions. They need to be registered, documented, and purchasing the scrap metal for a qualifying purpose. No assumptions. No informal understanding. The system now expects clarity upfront.
Non-registrants are excluded entirely, and the mechanism doesn’t spill into adjacent industries or finished metal products. This is not a broad VAT reform. It’s a sector-specific response, aimed squarely at scrap-metal trading.
In other words, the rule isn’t trying to catch everything. It’s trying to catch the right things.
Procedural and Documentation Requirements
So here’s how it works in practice because rules on paper are one thing, actually getting them done is another.
Buyers now have to step up. They need a written declaration that proves a few things:
First, that they’re properly VAT-registered with the Federal Tax Authority. Makes sense, right? You can’t pass responsibility to someone who isn’t in the system.
Second, they must confirm why they’re buying the scrap-metal: are they reselling it or using it for processing? This isn’t just bureaucracy for the sake of it. It gives the FTA clarity and helps prevent loopholes.
Suppliers, on the other hand, can’t just shrug and invoice as usual. They need to obtain and retain these buyer declarations, verify that the buyer is indeed registered for VAT, and make sure the invoices carry a clear reverse-charge statement. Forget any of this, and you’re in tricky territory. It’s about traceability. About being able to show, if asked, that every piece of scrap was accounted for in line with the new rules.
Think of it like prepping for a long workout: you don’t just show up and lift. You check your form, your gear, your environment. Same here, documentation is your form, your safety net, your proof that you played by the rules.
Objectives of the Decision
Why go through all this hassle? Well, the UAE isn’t trying to make life harder for traders. It’s trying to make the system smarter.
The first goal is obvious: combat VAT fraud in the metal-scrap sector. This is a segment that’s historically been prone to gaps, and the government wants to plug them without taxing everyone blindly.
Second, it’s about voluntary compliance and fairness. Traders who follow the rules should feel the system is fair because if everyone sees a gap being exploited, it undermines trust.
Third, the move should improve VAT refund administration. When paperwork is clear and responsibilities are defined, the FTA can process refunds faster, disputes are minimized, and everyone knows where they stand.
Finally and perhaps most importantly, it’s about transparency and trust in the UAE tax system. You could think of this as strengthening the core, making it resilient, but without adding weight that drags legitimate businesses down. It’s careful, deliberate. Not perfect, but a step toward a cleaner, more reliable tax environment.
Alignment with Existing Reverse Charge Applications
This is not new territory for the UAE.
Reverse charge mechanisms already apply to electronic devices, gold, and precious metals. In each case, the same logic was used: high transaction volumes, thin margins, and elevated fraud risk.
The extension to scrap metal fits squarely within that policy lineage.
Impact on Businesses and VAT Registrants
For scrap-metal traders, recyclers, and manufacturers, this won’t stay theoretical for long. It’s operational. Very.
Invoices will need new wording. Some ERP systems will need tweaks. In many cases, someone will have to sit down and ask an uncomfortable but necessary question: Do we actually verify our counterparties properly, or have we just been assuming things work out?
Buyer declarations become central. Not a box-ticking exercise. Something you obtain, review, store, and rely on. VAT registration checks move from “nice to have” to essential. Miss one, and the exposure lands squarely on the business.
January 2026 might sound distant. It isn’t. System changes take time. Training takes longer. And habits, especially informal ones, take the longest to fix. Waiting until the effective date would be like starting a training plan the morning of race day. Possible. Not smart.
Ministry of Finance Position
From the Ministry of Finance’s perspective, the logic is consistent.
The goal isn’t to make VAT heavier. It’s to make it cleaner. Shift the risk away from cash-flow loops and refund pressure. Place responsibility where oversight is easier and documentation tends to be stronger.
There’s also a broader message here. The UAE VAT framework isn’t frozen. It’s evolving. Adjusting. Responding to how markets actually behave, not how they look on paper.
For businesses, that adaptability cuts both ways. The system stays competitive. But it also expects attention. Awareness. Readiness. VAT in the UAE isn’t becoming more aggressive. It’s becoming more precise.
Conclusion
Cabinet Decision No. (153) of 2025 signals a sharper, more surgical phase of VAT administration in the UAE. The reverse charge mechanism for scrap-metal trading is not about increasing tax. It is about controlling risk. For affected businesses, the message is simple. Understand the change. Fix the processes. Be ready well before January 2026.
