MoF announces reverse charge mech. for VAT on scrap-metal trading

Legal framework

The new measures are issued under Federal Decree Law No. 8 of 2017 on Value Added Tax and its amendments, as well as Cabinet Resolution No. 52 of 2017 concerning the Executive Regulations of the law.

Purpose of the decision

The mechanism aims to enhance the efficiency of the tax system, combat fraud in the metal-scrap sector, promote tax fairness, encourage voluntary compliance, and maintain a competitive business environment in the UAE.

How the reverse charge works

Under the reverse charge mechanism, the buyer, whether purchasing scrap-metal for resale or converting it into materials for new products, becomes responsible for accounting for the VAT due. Suppliers will no longer charge VAT on these eligible supplies.

Procedural requirements

Both suppliers and buyers must comply with specific procedures. Buyers are required to provide written declarations confirming the purpose of receiving the metal scrap and their registration with the Federal Tax Authority (FTA). Suppliers must retain these declarations, verify the buyer’s FTA registration, and clearly indicate on invoices that the reverse charge mechanism applies.

Expected impact

The MoF expects the new mechanism to significantly reduce tax fraud and improve the efficiency of tax refund administration in the scrap-metal sector. This follows the successful implementation of similar mechanisms in the electronics, gold, and precious metals sectors.

Alignment with UAE vision

The decision aligns with the UAE’s broader goal of building an integrated, transparent, and sustainable financial framework that strengthens trust in the tax system.