UAE VAT Change on Metal Scrap (Effective January 2026)

 A new VAT Rule on Trading Metal Scrap in the United Arab Emirates was introduced by the UAE Ministry of Finance as a result of Cabinet Decision No. 153 of 2025. This rule will come into effect from 14 January 2026 and includes the Reverse Charge Mechanism (RCM) for domestic transactions between VAT registered businesses engaged in trading Scrap Metal. Essentially, the liability to pay the VAT will shift from the seller to the buyer. Previously, sellers charged VAT on their invoices and remitted that amount to the tax authorities, while buyers were not required to include this amount in their returns until they sold the metal scrap. The new VAT rule will eliminate the seller’s ability to charge VAT on qualifying Scrap Metal sales. The buyer will be responsible for calculating their own VAT amount and including it in their returns. Hence, while the VAT will remain, it is no longer going through the sellers; it is being accounted for directly by the buyers. The retailers who sell scrap metal are also required to remain VAT registered in the UAE in order to take advantage of this ruling. If the retailer is supplying Scrap Metal to a VAT registered business, the retailer must issue the Invoice without charging VAT; however, it should clearly state that the Reverse Charge Mechanism applies to this supply.     Metal scrap is defined broadly as waste or excess metal in a form that is not usable and intended for recycling or re-manufacturing, or melting to be reused. The scrap category consists of ferrous scrap and non-ferrous scrap. Scrap is typically traded by various sectors such as recycling, manufacturing and industry. The effect of this change will mean that sellers will now not charge value-added tax on scrap transactions that meet the qualifications as well as ensure that the buyer has recorded their VAT registration correctly. Buyers will now have a responsibility to report VAT as output tax as well as to claim it back as input tax in the same tax period, if eligible. For most compliant industries, it will not impact cash-flow but require Non-Compliant businesses to account correctly. The change will help to reduce VAT leakage on high-volume scrap trading, provide for easier compliance for suppliers, and provide for better alignment between local and international VAT practices. Although the concept is simple, a business should conduct a comprehensive review of their contracts, invoicing formats and accounting systems prior to January 2026 in order to be in compliance.    

Future Prospects of the Metal Scrap Industry

 The amended VAT regulations pose both challenges and possibilities for the metal scrap sector. The UAE is strategically positioning itself as a centre for advanced sustainable economic activity, and the metal scrap industry is slated for expansion through strategies of innovation and adaptation. Going forward, businesses placing priority on sustainability, efficiency, and regulatory compliance can expect to do well in this evolving economy. As an example, these changes may provide a means to open up additional avenues of growth through capitalizing on new trends and increasing efficiencies in recycling and resource recovery.   

Conclusion

 To summarise: effective 14 January 2026, any company engaged in trading metal scrap with another registered VAT business in the UAE will not charge VAT, and will instead require the buyer to report the VAT. One rule, one shift in the burden of compliance, but an important compliance change that businesses must prepare for.  

Prepare your business now to navigate these changes effectively and leverage the competitive advantages they offer in the long term.