Scrap Metal VAT Reverse Charge in the UAE

• 11 September, 2026
• By Safwan, Managing Partner
• Tax Compliance

Last reviewed 11 September 2026 by the Exiloz tax team against the UAE legislation in force on that date. Tax law moves — confirm any figure against tax.gov.ae before you act on it.

The buyer now accounts for the VAT, not the seller

If you buy or sell scrap metal in the UAE, the invoice just changed. Under Cabinet Decision No. 153 of 2025: signed on 4 November 2025, published in the official gazette on 26 November 2025 and effective 60 days later, on 14 January 2026, local supplies of metal scrap between VAT-registered businesses now fall under a domestic reverse charge. The supplier stops charging 5%. The recipient accounts for the VAT instead, declaring the output tax and reclaiming the input tax in the same return. It is the same mechanism the UAE already uses for gold and for imported services, extended to a trade long exposed to missing-trader fraud. If you would rather not handle this in house, this is what our reverse charge guidance covers.

Scrap is a cash business with thin margins and fast turnover. That is exactly why the VAT around it kept getting abused. The new domestic reverse charge is the fix, and it lands on three things: how you invoice, how you file, and one piece of paper you now need before every sale.

What Cabinet Decision 153 actually changes

Until 14 January 2026, a scrap sale worked like any other standard-rated supply. The seller added 5% VAT, collected it from the buyer, and handed it to the Federal Tax Authority. Cabinet Decision No. 153 of 2025 flips that for local sales of metal scrap between two VAT-registered businesses. The seller no longer charges the tax. The buyer accounts for it. The Ministry of Finance framed the change as a way to cut fraud and ease cash flow in a sector where output VAT collected by a supplier could vanish before it ever reached the FTA. Big-4 and local firms, PwC and Habib Al Mulla among them, read it the same way: a targeted anti-fraud measure, not a rate change.

Who accounts for the VAT now

The recipient does. In practice, the VAT-registered buyer treats the purchase as if it had made the supply to itself: it declares the output VAT in its return and, in the same return, reclaims the input VAT under the normal recovery rules. Where the scrap feeds a taxable activity and the input is fully recoverable, the two entries net to zero and no cash moves for the tax. The supplier's job shrinks. It issues an invoice with no VAT and a note that the reverse charge applies. It does not collect 5%, and it does not report output tax on that sale.

What counts as metal scrap

The decision defines Metal Scrap as ferrous and non-ferrous metal waste and scrap that still holds commercial value and can be used again after processing. Iron and steel offcuts, copper, aluminium, brass. If it is metal, it has resale value, and a processor can do something with it, you are almost certainly inside the scope. Finished metal goods are not scrap. Neither is material with no commercial value. When a load sits on the weighbridge, that is the moment to check the definition against what is actually on it.

The declaration you must have before the sale

This is the part people miss. The reverse charge is not applied on trust. Before the date of supply, the recipient has to give the supplier a written declaration: it confirms the recipient is registered for VAT, and it states that the scrap is bought for resale or for processing. The supplier then has to verify that declaration and keep it on file. No valid declaration, no reverse charge. If a seller applies the mechanism without one and the buyer turns out not to be registered, the seller is the one left exposed. Check the buyer's TRN on the FTA portal, keep the declaration, and date it before the invoice.

Before and after, side by side

Worked example: a Dubai scrap trader and a smelter

An Al Quoz scrap dealer, VAT-registered, sells AED 500,000 of mixed copper and aluminium scrap to a Jebel Ali smelter that is also registered. Before 14 January 2026 the dealer would have added 5% (AED 25,000), collected AED 525,000, and paid the AED 25,000 to the FTA. Now the flow is different. Before the sale the smelter hands the dealer a signed declaration with its TRN, confirming the scrap is bought for processing and resale. The dealer checks that TRN on the FTA portal, files the declaration, and issues an invoice for AED 500,000 with no VAT, marked “Reverse charge applies under Cabinet Decision No. 153 of 2025: recipient to account for VAT.” The smelter records AED 25,000 output VAT in its return and, because the scrap feeds taxable production, reclaims the same AED 25,000 as input in that return. Net VAT cash on the deal: nil. The dealer never touches the 5%. That is the whole point: it removes the cash a missing trader used to disappear with.

Common mistakes we see

Official sources

Where this leaves you

For most scrap dealers and processors, this is a paperwork change with a cash-flow upside, not a tax increase. Get three things right and you are covered: stop charging VAT on qualifying local sales, collect a dated declaration before every supply, and record both sides of the reverse charge in your return. It runs on the same logic as the UAE's other reverse charge rules, and it sits alongside the wider 2026 VAT law amendments worth reading before your next filing. If your invoicing or VAT setup needs adjusting for it, our Dubai accounting team can set it up so the entries are right the first time.

Frequently Asked Questions