The United Arab Emirates will implement new tax rules for metal scrap trading beginning January 14, 2026, according to Cabinet Decision No. 153 of 2025 announced by the Ministry of Finance.
Under the new reverse charge mechanism, the responsibility for collecting and paying Value Added Tax (VAT) will shift from sellers to buyers when registered businesses trade metal scrap with each other.
Currently, suppliers charge VAT on sales and collect it from buyers. Under the new system, buyers will instead calculate and pay the VAT directly to tax authorities. Suppliers will no longer add VAT to invoices for these transactions.
The new rules apply only to transactions between businesses registered with the Federal Tax Authority. This includes companies that buy metal scrap for resale or for processing into materials used in manufacturing new products.
Before completing transactions under the new system, both parties must follow specific procedures:
Buyers must:
Provide written confirmation to the supplier stating whether the metal scrap is for resale or processing
Confirm their registration with the Federal Tax Authority
Sellers must:
Obtain and keep the buyer's written declarations
Verify the buyer's registration status with tax authorities
State clearly on invoices that the reverse charge mechanism applies
The Ministry of Finance said the decision supports government efforts to strengthen the tax system and combat fraudulent practices in the metal scrap sector. Officials expect the new mechanism to reduce tax fraud significantly and make tax refund processing more efficient.
The ministry emphasized that the changes promote fair taxation and voluntary compliance while maintaining the country's competitive business environment.
The UAE has already applied the same reverse charge mechanism to other sectors, including electronic devices, gold, and precious metals. The government reported success with these implementations.
According to the Ministry of Finance, the decision fits within the UAE's larger plan to create an integrated financial framework that increases transparency, sustainability, and trust in the tax system.
The new rules take effect in just over one year, giving businesses time to prepare their systems and procedures for compliance.