Reverse Charge Applicability on Metal Scrap Transactions in the UAE

Reverse Charge Applicability on Metal Scrap Transactions in the UAE

Cabinet Decision No. 153 of 2025
Issued: 21st December 2025
Effective from: 14th January 2026

Metal scrap plays a vital role in today’s industrial and manufacturing landscape. As urbanization accelerates and demand for metal-based products rises, recycling and trading metal scrap help conserve natural resources, reduce energy consumption, and support sustainable industrial growth. At the same time, metal scrap trading is closely regulated to ensure transparency, compliance, and responsible business practices.

Ministerial Decision No. 153 of 2025 provides clarity on how the Reverse Charge Mechanism (RCM) applies to metal scrap transactions in the UAE. In this blog, we explore the decision and what it means for manufacturers, suppliers, and buyers.

What is the Reverse Charge Mechanism (RCM)?

The Reverse Charge Mechanism shifts VAT accounting and reporting responsibility from the supplier to the recipient. Under RCM, the recipient of goods or services is responsible for accounting for VAT and reporting it to the Federal Tax Authority (FTA).

In essence, RCM ensures that VAT is correctly reported without the supplier charging VAT on the invoice, which is particularly relevant for metal scrap trading between VAT-registered persons in the UAE.

Application of RCM on Metal Scrap

RCM applies specifically to domestic transactions where both the supplier and the buyer are VAT-registered. Key points include:

• The supplier must not charge VAT on the supply of metal scrap
• Recipient must account for VAT under RCM
• Applies only if the recipient intends to resell the scrap or use it in further processing

What are the Responsibilities of the Buyer (Recipient)?

Buyers have specific obligations under RCM:

1.  Intention to Resell or Process – The recipient must intend to resell the goods or use them in further processing.
2.  Provide Declarations – The recipient must provide a written declaration to the supplier:

• Confirming their VAT registration in the UAE
• Confirming their intended use of the metal scrap

What are the Responsibilities of the Supplier?

Suppliers also have clear responsibilities:

1. Verify Registrations – Ensure that the recipient is a VAT-registered entity.
2. Obtain and Retain Declarations – Keep the recipient’s declarations on record for compliance purposes.
3. Invoice Requirements – Include a statement on the invoice that the supply is subject to RCM.
4. If Declarations Are Missing – If the recipient does not provide the required declarations, the supply is treated as taxable at 5% VAT, and the

supplier must issue a standard tax invoice with VAT.

Reverse Charge Criteria for Metal Scrap Transactions

Ministerial Decision No. 153 of 2025 also highlights which metal scrap transactions typically fall under RCM:

1. Manufacturing and Production Necessities

Metal scrap is a critical raw material in manufacturing. It is recycled and reused to produce new metal products, helping industries reduce costs, conserve resources, and support sustainable production.

2. Operational Necessities

Metal scrap supports day-to-day industrial operations, recycling processes, equipment use, and production workflows. This ensures businesses can maintain continuous operations efficiently.

3. Replacement Parts

Metal scrap is often repurposed to manufacture or repair replacement parts, minimizing waste, reducing costs, and maintaining equipment efficiently.

When the RCM Rules Don’t Apply?

Exceptions include:

• The supplier issues a tax invoice with VAT charged
• The customer fails to provide the required declarations
•  Either the supplier or the customer is not VAT-registered

These exceptions ensure RCM is applied only where appropriate, avoiding unnecessary complications.

Why Understanding RCM Matters?

In a dynamic industrial and regulatory environment, understanding how reverse charge applies to metal scrap transactions is critical. By adhering to Ministerial Decision No. 153 of 2025, businesses can ensure compliance, transparency, and correct VAT treatment, avoiding penalties and operational confusion.

How CLA Emirates Can Help?

At CLA Emirates, we specialize in guiding businesses through VAT and RCM compliance. Our experts can help you:

• Understand reverse charge applicability for metal scrap
• Ensure proper issuance of invoices and collection of declarations
• Navigate input VAT claims and compliance obligations

Stay informed and confident in your metal scrap dealings with CLA Emirates. Reach out to our team for personalized guidance and smooth implementation of the RCM rules.

Call for Consultation
CA Ajil Varghese | Associate Director - Indirect Tax
+971 54 2119 621
Ajil.Varghese@CLAemirates.com