Introduction
The UAE Ministry of Finance has issued Cabinet Decision No. 153 of 2025, introducing a significant change to the VAT treatment of metal scrap transactions within the UAE. The Decision mandates the application of the Reverse Charge Mechanism (RCM) on certain local supplies of metal scrap between VAT-registered businesses. This regulatory update is aimed at improving VAT compliance while reducing administrative burdens for businesses operating in the metal scrap supply chain.
Publication and Effective Date
Cabinet Decision No. 153 of 2025 was issued on 14 November 2025 and published in the Official Gazette on 26 November 2025. In accordance with the Decision, it will come into force 60 days from the date of publication, making it effective from 14 January 2026.
Overview of the Reverse Charge Mechanism
Under the Reverse Charge Mechanism introduced by this Decision, the responsibility for accounting and reporting VAT shifts from the supplier to the recipient of metal scrap, provided specific conditions are met. Instead of charging VAT on the invoice, the supplier issues the supply without VAT, and the recipient accounts for VAT directly in their VAT return.
This approach is intended to streamline VAT administration, particularly in sectors where VAT leakage and compliance challenges have historically been observed.
Scope of Application
The Decision applies to the local supply of metal scrap between VAT-registered persons in the UAE. Metal scrap is defined as waste of ferrous or non-ferrous metals that retains commercial value and can be reused after processing.
The Reverse Charge Mechanism applies only where the recipient intends to:
- Resell the metal scrap, or
- Use it for processing, such as recycling, repair, or conversion into usable materials for manufacturing.
Transactions Excluded from the Decision
The Decision explicitly excludes metal scrap supplies that qualify as zero-rated exports under UAE VAT legislation. Such transactions will continue to follow the existing VAT rules applicable to exports and are not subject to the reverse charge treatment.
Obligations of the Recipient
To apply the Reverse Charge Mechanism, the recipient must fulfill specific compliance requirements before the date of supply, including providing a written declaration to the supplier confirming:
- Their VAT registration status with the Federal Tax Authority (FTA), and
- That the metal scrap is being acquired for resale or further processing, as defined under the Decision.
If the recipient fails to provide this declaration, the Reverse Charge Mechanism does not apply, and the supplier becomes liable to charge and account for VAT in the normal manner.
Obligations of the Supplier
Suppliers also have defined responsibilities under the Decision. These include:
- Verifying the recipient’s VAT registration status with the FTA using approved verification methods, and
- Ensuring that the tax invoice clearly states that the transaction is subject to the Reverse Charge Mechanism.
- Receive & retain the declaration as provided by the recipient of metal scrap.
Accurate invoicing and proper documentation are critical to demonstrate compliance and mitigate potential VAT exposure.
Documentation and Record-Keeping
Both suppliers and recipients must maintain robust documentation, including written declarations, VAT registration verification, invoices, and transaction records. These documents must be retained in accordance with UAE VAT law to support VAT reporting and withstand potential audits by the FTA.
Key Business Implications
Businesses involved in the metal scrap supply chain should proactively review their:
- Supply contracts and commercial arrangements
- Invoicing and accounting systems
- Internal VAT controls and compliance procedures
- Staff training and awareness around VAT reporting
Early preparation is essential to ensure a smooth transition and to avoid penalties once the Decision becomes effective in January 2026.
How MBB Auditing Can Support Your Business
MBB Auditing, a Dubai-based audit and tax advisory firm, supports businesses in navigating regulatory changes such as Cabinet Decision No. 153 of 2025 with confidence and clarity. Our services include:
- VAT impact assessments to determine how the Reverse Charge Mechanism affects your metal scrap transactions
- Review and redesign of VAT processes, invoicing formats, and internal controls
- Recipient and supplier compliance support, including documentation and declaration frameworks
- VAT return preparation and review to ensure accurate reverse charge reporting
- Ongoing advisory and FTA liaison, reducing the risk of penalties and disputes
MBB Auditing is well-positioned to assist UAE businesses in achieving full compliance while maintaining operational efficiency under the new VAT framework. Click here to fill the form, and our team will get in touch with you.Â
