Issuance of a Cabinet decision regarding the application of the reverse charge mechanism to scrap trade for value-added tax purposes

The Ministry of Finance announced the issuance of Cabinet Resolution No. “153” of 2025 regarding the application of the reverse charge mechanism to scrap metal trade between those registered in the country for the purposes of value-added tax, to enter into force as of January 14, 2026, 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. By law.
The adoption of this decision comes within the framework of the UAE government’s efforts to enhance the efficiency of the tax system, combat fraudulent practices associated with the scrap metal trade sector, ensure tax justice and raise levels of voluntary compliance, in a way that supports tax transparency and maintains the competitiveness of the business environment in the country.
The decision stipulates applying the reverse charging mechanism to supplies made between those registered in the scrap metal sector, by transferring the responsibility for calculating value-added tax to the recipient (the buyer) instead of the supplier (the seller) in the cases specified by the decision.
Under this mechanism, the recipient who intends to resell scrap metal or use it in the process of converting scrap metal into materials that can be used in the manufacture of new products becomes responsible for calculating the tax due and fulfilling all tax obligations resulting from the supply, while the supplier does not calculate the tax related to that transaction.
The decision also stipulates that both the supplier and the recipient must adhere to specific procedures prior to the date of supply.
The procedures include submitting written declarations from the recipient to the supplier stating that the purpose of receiving the scrap metal is for the purposes of resale or use in processing, in addition to confirming that it is registered with the Federal Tax Authority. The supplier must receive and retain permits from the recipient, verify that the recipient is registered with the Federal Tax Authority, and include an explicit statement in the invoice explaining the application of the reverse charge mechanism to the supply subject to the transaction.
The Ministry of Finance explained that implementing the new mechanism contributes to reducing cases of tax fraud and improving the management of recovery operations in the scrap metal trade sector, after the successful implementation of a similar mechanism in the electronic devices, gold and precious metals trade sectors.
The Ministry confirmed that this decision comes within the state’s vision aimed at developing an integrated financial system that supports transparency and sustainability and enhances confidence in the country’s tax system.