Application of Domestic Reverse Charge on Metal Scrap Supplies in the UAE

What has changed?

Under the new decision, the VAT treatment for metal scrap transactions between UAE-registered businesses has been modified. When metal scrap is supplied to a VAT-registered buyer who intends to resell it or use it for processing, the reverse charge mechanism must be applied.

Key changes:

• The supplier will no longer charge VAT on the sale of metal scrap.
• The buyer (recipient) will be responsible for self-accounting for VAT under the reverse charge mechanism.

What does this mean for businesses?

For the Recipient (Buyer):

• The buyer must report both output VAT and input VAT on the purchase in their VAT return.
• This ensures VAT is accounted for even when the supplier is not required to collect it.
• The buyer must maintain proper documentary evidence to support the use of RCM.

For the Supplier:

• The supplier is not required to charge VAT but must ensure the proper conditions for RCM application are met.
• This shift reduces VAT-related risk for suppliers, transferring responsibility to the buyer.

Conditions for Applying Reverse Charge on Metal Scrap:

Before applying RCM, both parties must ensure the following requirements are met:

A. Recipient (Buyer) Obligations:

The buyer must provide the supplier with a written declaration confirming:

1. They are registered with the FTA for VAT purposes, and
2. They intend to resell the metal scrap or use it for processing.

B. Supplier Obligations:

The supplier must:

1. Receive and safely retain the buyer’s written declaration.
2. Verify that the recipient is VAT-registered with the FTA;
3. Issue an invoice that clearly states that the transaction is subject to the Reverse Charge Mechanism.

Important Exception

These RCM rules do not apply if the supply of metal scrap is zero-rated under any provision of the UAE VAT Law.

What Businesses Should Do Now

Businesses involved in the trading, resale, or processing of metal scrap should:

• Review their current VAT processes and invoicing practices to ensure compliance from 14 January 2026.
• Prepare standard declaration templates to obtain confirmations from buyers.
• Update internal controls, especially around customer onboarding and VAT verification.
• Train teams on RCM rules to avoid incorrect VAT treatment.

The responsibility now largely shifts to the buyer, making accurate declarations and proper documentation critical.