VATP047

Reverse charge mechanism on Metal Scrap trading among UAE VAT registrants

Deepak Variyam

10/12/2026

Reverse charge mechanism on Metal Scrap trading among UAE VAT registrants

FTA clarifies reverse charge mechanism for Metal Scrap trading among UAE VAT registrants

VATP047 provides practical clarification on the scope and application of Cabinet Decision No. 153 of 2025, which introduces a reverse charge mechanism for supplies of Metal Scrap between UAE VAT registrants and sets additional compliance requirements for both the supplier and the recipient.

1. Scope of “Metal Scrap”

VATP047 confirms that the reverse charge mechanism applies only to Metal Scrap: ferrous or non-ferrous metal waste with commercial value that is usable following processing. Other scrap materials, such as paper, plastic, glass, textiles, organic waste and rubber, remain outside Cabinet Decision No. 153 of 2025 and are subject to the normal VAT rules.

2. Transactions covered: resale or processing

A supply is within scope only where the recipient intends to resell the Metal Scrap or use it in processing. Resale means selling Metal Scrap as part of the recipient’s business, whether at wholesale or retail level. Processing means converting Metal Scrap into materials that can be used in manufacturing new products, whether by repairing, recycling or another method. Metal Scrap acquired for internal maintenance, such as repairing storage racks, fences or structural supports, is not treated as acquired with an intention to resell.

3. VAT treatment under the reverse charge

Where the conditions are met, the supplier must not account for VAT on the Metal Scrap supply and must not report the supply or related VAT in its tax return. The recipient must account for the VAT and is responsible for the tax obligations arising from the supply.

VAT return reporting The recipient should declare the supplies in Box 3 and may recover recoverable tax in Box 10 of its VAT return; Box 9 should not be used for the input tax recovery.

This treatment applies only where the supplier and recipient are VAT registrants and the required pre-supply declarations and supplier checks are completed.

4. Compliance requirements before supply

Before the date of supply, the recipient must provide written declarations confirming that it is registered for VAT, including TRN details, and that the Metal Scrap is acquired for resale or processing. The two declarations may be combined into one document.

Before the date of supply, the supplier must receive and retain the declarations, verify the recipient’s VAT registration using the FTA’s TRN verification tool, and ensure the tax invoice clearly states that the supply is subject to the reverse charge mechanism.

5. Exports, failed conditions and effective date

Cabinet Decision No. 153 of 2025 does not apply to direct or indirect exports of Metal Scrap. Where the conditions for zero-rating are met, exports should be reported as zero-rated supplies. If the reverse charge conditions are not met, the default rule applies: the supplier accounts for VAT at the standard rate and reports the supply in Box 1. Metal Scrap supplied on or after 14 January 2026 is subject to the new rules.

Practical implications for businesses

Area	Recommended action
Scope mapping	Identify Metal Scrap product lines and exclude non-metal scrap materials that remain subject to normal VAT rules.
Customer qualification	Collect written declarations before the supply date confirming VAT registration and the intention to resell or process the Metal Scrap.
TRN verification	Use the FTA TRN verification tool and retain evidence of the check with transaction records.
Invoicing and ERP	Configure tax codes and invoice templates so qualifying supplies clearly state that the reverse charge mechanism applies.
VAT return reporting	For recipients, report qualifying supplies in Box 3 and recover eligible input tax in Box 10, not Box 9.
Exports	Keep direct and indirect export analysis separate; qualifying exports should be treated as zero-rated supplies, not reverse charge supplies.
Failed conditions	Where declarations or verification are missing, charge VAT under the default rules and assess the input tax recovery impact.
Effective date readiness	Implement updated onboarding, invoicing and VAT return controls before supplies made on or after 14 January 2026.

VATP047 is particularly relevant for businesses trading in Metal Scrap, recycling businesses, manufacturers acquiring scrap for processing and suppliers whose customer base includes VAT-registered scrap traders. The clarification provides a practical control framework: the customer declaration, TRN verification evidence, invoice wording and VAT return treatment should align before the supply is made.

UAE VAT Registrants should perform a targeted readiness review of Metal Scrap transactions expected from 14 January 2026, focusing on product scope, customer declarations, TRN verification evidence, invoice wording, ERP tax codes and Box 3/Box 10 VAT return mapping.