UAE VAT Rule Change: What Scrap Metal Buyers and Sellers Must Know from 2026

Dubai:
If your business buys or sells scrap metal in the UAE, a major VAT rule change is approaching. From January 14, 2026, the government will overhaul how Value Added Tax is applied to scrap metal transactions between VAT-registered companies, shifting responsibility from sellers to buyers.

The change was announced by the Ministry of Finance under Cabinet Decision No. 153 of 2025, introducing a reverse charge mechanism aimed at curbing tax fraud in the sector.

What the reverse charge means

Until now, scrap metal suppliers charged VAT on invoices and later remitted it to the Federal Tax Authority (FTA). From mid-January, that system flips.

Under the reverse charge model, buyers - not sellers - will account for VAT on scrap metal purchases. Sellers will issue invoices without charging VAT, while buyers will declare and pay the tax directly in their VAT returns.

The rule applies whether scrap metal is bought for resale or processed into new materials for manufacturing.

Who will be affected

The change applies only to transactions between VAT-registered businesses. Both buyer and seller must be registered with the FTA for the reverse charge to apply.

According to the Ministry of Finance, the scrap trade has historically been vulnerable to fraudulent VAT refund claims. Shifting tax liability to buyers is intended to close loopholes, speed up refunds and strengthen compliance.

For companies entering the recycling or metals trade - particularly those planning business setup in dubai - the update highlights how closely operational planning is now tied to tax structuring and VAT registration.

New paperwork requirements

The reverse charge comes with stricter documentation rules:

Buyers must:

• Provide a written declaration confirming the scrap is purchased for resale or processing

• Confirm active VAT registration with the FTA

Sellers must:

• Collect and retain buyer declarations

• Verify VAT registration status

• Clearly state on invoices that the reverse charge mechanism applies

These steps must be completed before the supply date to remain compliant.

Why the UAE is extending this model

The UAE has already applied reverse charge VAT rules to sectors such as electronics, gold and precious metals - industries also prone to tax abuse. Authorities say those measures worked, prompting the extension to scrap metal trading.

Penalties for non-compliance

While specific fines were not listed in the announcement, violations fall under Federal Decree-Law No. 8 of 2017 (VAT Law) and Cabinet Resolution No. 52 of 2017. Businesses that fail to adapt risk penalties, audits and disrupted trade operations.

With the deadline approaching, companies are advised to update accounting systems, train finance teams and review contracts well before January 14, 2026.