UAE VAT Update: Reverse Charge on Scrap Metal, A Compliance Shift Businesses Can’t Ignore!

January 2026 is closer than you think, are you ready?

A new UAE Cabinet Decision introduces the reverse charge mechanism for scrap metal transactions, redefining VAT compliance for registered businesses across the supply chain.

As part of the UAE’s ongoing efforts to enhance tax efficiency and reduce administrative friction, the UAE Ministry of Finance has issued Cabinet Decision No. 153 of 2025, introducing the reverse charge mechanism (RCM) on the local supply of scrap metal between VAT-registered persons.

Published in the Official Gazette on 26 November 2025, the Decision will take effect on 25 January 2026, leaving businesses with a narrow but critical window to prepare.

From a tax strategy and digital compliance perspective, this is more than a legislative update. It is a structural change that directly impacts invoicing logic, VAT reporting, contractual terms, and internal controls.

What’s Changing Under the New Rules of VAT Accounting?

Scope of Application

The reverse charge applies where:

Scrap metal is supplied locally in the UAE

Both parties are VAT-registered

The buyer intends to resell or process the scrap metal

VAT Accounting Shift

Instead of charging VAT:

Suppliers issue VAT-free invoices

Recipients self-account for VAT in their VAT return under RCM

What’s not included?

Scrap metal supplies qualifying as zero-rated exports remain outside the scope.

New Compliance Expectations

Recipient Obligations

Recipients must provide written declarations confirming:

Their VAT registration with the Federal Tax Authority

The intended use of the scrap metal for resale or processing

Supplier Obligations

VAT Suppliers must:

Verify the recipient’s VAT registration

Clearly reference the reverse charge mechanism on invoices

If declarations are missing, VAT liability reverts to the supplier.

Why this matters for businesses?

From a digital tax and compliance standpoint, this Decision requires businesses to:

Reconfigure invoicing and ERP systems

Update VAT controls and documentation flows

Train finance and commercial teams

Reassess supply chain risk exposure

Businesses that delay preparation risk misreporting VAT, operational disruption, and penalties once the Decision goes live.

How Kozman & Co. | SBC Global adds value?

At Kozman & Co. | SBC Global we bridge tax expertise with digital execution; we support clients by:

Translating legislation into practical, system-ready actions

Reviewing contracts and supply chain structures

Aligning invoicing, VAT returns, and documentation with RCM rules

Designing compliance frameworks that scale with your operations

25 January 2026 is the compliance deadline, not the planning start date.

Speak with Kozman & Co today to assess your readiness for the UAE VAT reverse charge on scrap metal and turn regulatory change into a controlled, compliant transition.