Reverse Charge on Metal Scrap in the UAE: 2025 Rules, Documentation, and VAT Risk for Traders

The UAE introduced a specific reverse-charge regime for certain metal-scrap transactions through Cabinet Decision No. 153 of 2025. The most important practical point is the effective date: although the decision was issued in 2025, it applies to qualifying supplies made on or after 14 January 2026. It is not a rule that automatically applies to every scrap transaction during 2025.

Where the conditions are satisfied, the supplier does not charge or account for VAT on the qualifying domestic supply. Instead, the VAT liability moves to the VAT-registered recipient, which accounts for the due tax under the reverse-charge mechanism and, subject to the normal input-tax rules, may recover the eligible amount. Where the conditions are not satisfied, the default VAT rule applies and the supplier must account for VAT.

The commercial label “scrap” is not enough. The reverse charge depends on the material, the recipient's intention, the parties' VAT-registration status, declarations made before supply, and the supplier's verification and invoice controls.

This article explains the 2025 decision as clarified by the Federal Tax Authority (FTA), including scope, effective date, declarations, TRN verification, tax-return boxes, exports, examples and audit risks. It is general information for UAE businesses and should not replace advice on a specific product classification, transaction chain or VAT return.

1. What changed and when?

Cabinet Decision No. 153 of 2025 was issued on 4 November 2025. The FTA's Public Clarification VATP047 confirms that the reverse-charge treatment applies to Metal Scrap supplied on or after 14 January 2026, provided the conditions and compliance requirements are met.

This creates an important timeline distinction:

Period	Practical treatment
Before 14 January 2026	The special Cabinet Decision No. 153 regime does not apply. The supplier should apply the VAT rules that were in force for the supply date.
14 January 2026 onwards	A qualifying domestic supply between VAT registrants can fall under reverse charge, but only if the material, transaction and documentation conditions are met.
Any date where conditions fail	The default rule applies: the supplier accounts for VAT on the supply and reports it in Box 1 of its VAT Return.

A 2025 invoice date does not by itself establish eligibility or ineligibility. The tax point, supply date, customer status, intended use and documents should be tested against the rules applicable on that date. Businesses that continued using a pre-2026 scrap-invoicing process should review transactions from 14 January 2026 onwards.

2. The legal and guidance framework

The legal foundation is Article 48(8) of the VAT Decree-Law, which permits the Cabinet to specify cases where the recipient accounts for VAT. Cabinet Decision No. 153 of 2025 uses that authority for qualifying trade in Metal Scrap between Registrants in the UAE.

VATP047 is the FTA's Public Clarification on the application of the mechanism. It clarifies the definition of Metal Scrap, the recipient's intention to resell or process, the written declarations, TRN verification, invoice wording and VAT-return reporting. The clarification explains the FTA's position; it does not replace or amend the legislation.

Businesses should read the decision together with:

Federal Decree-Law No. 8 of 2017 on Value Added Tax, as amended;
Cabinet Decision No. 52 of 2017 on the Executive Regulation, as amended;
the current FTA VAT Return and tax-invoice instructions; and
any later FTA clarification or amendment that applies to the return period.

Official references: Cabinet Decision No. 153 of 2025, FTA Public Clarification VATP047, and the FTA VAT legislation page.

3. What counts as “Metal Scrap”?

The decision defines Metal Scrap as ferrous or non-ferrous metal waste that has commercial value and can be used after Processing. Processing means transforming the scrap into materials usable in the manufacture of new products, whether by repair, recycling or another method.

The definition is narrower than the everyday word “scrap”. The following are not automatically within the special regime:

paper, plastic, glass, textile, organic or rubber waste;
mixed waste where the metal component does not satisfy the definition or cannot be identified;
ordinary new metal products sold as inventory rather than metal waste; and
items acquired for an unrelated internal business purpose instead of resale or Processing.

Metal Scrap can include a product that is mainly composed of qualifying metal even if it contains a limited amount of other material. VATP047 gives used lead-acid batteries as an example: where lead is the majority component and the principal material to be extracted through Processing, the battery can be treated as Metal Scrap despite smaller quantities of plastic or electrolytes.

Classification should be supported by commercial and technical facts, not only by a product code or invoice description. A trader should retain photographs, specifications, weighbridge records, inspection reports, supplier descriptions, recycling or processing plans, and any evidence that the metal has commercial value and can be used after Processing.

4. The transaction must be for resale or Processing

The special reverse charge applies only where the recipient intends to resell the Metal Scrap or use it in Processing. The intention is tested at the time of purchase and should be evidenced in the transaction file.

Resale

Resale means the recipient will sell the Metal Scrap as part of its business of trading in Metal Scrap. VATP047 states that resale can occur at wholesale or retail level. A scrap dealer buying metal waste for onward sale can therefore fall within the rule if the other conditions are met.

Processing

Processing means converting the Metal Scrap into material that can be used in manufacturing new products. This may involve repair, recycling or another conversion method. A business acquiring metal scrap to convert it into construction material, building material or new vehicle parts can be acquiring it for Processing.

Internal use is different

A recipient that acquires Metal Scrap for use in its own business, but not for Processing, is not treated as acquiring it with an intention to resell. VATP047 uses internal maintenance as an example: scrap used to repair storage racks, fences or structural supports at the recipient's premises does not qualify merely because the item is made of metal.

Recipient's purpose	Likely treatment	Evidence to request
Buy metal waste and sell it to another dealer	Potentially within reverse charge	Trading licence/activity, purchase order, resale records and written declaration
Buy metal waste and recycle it into new products	Potentially within reverse charge	Processing description, facility records, production plan and written declaration
Buy metal pieces to repair a warehouse fence	Outside the special intention test	Maintenance request, internal work order and evidence of consumption
Buy mixed plastic and metal waste without separation details	Classification risk; not automatically within the regime	Composition analysis, contract description and weight breakdown

5. The parties must both be VAT Registrants

The special treatment is a domestic business-to-business mechanism between Registrants. Both the supplier and the recipient must be registered for UAE VAT. A supplier should not rely on the customer's statement alone; VATP047 requires the supplier to verify the recipient's registration using the FTA's TRN verification functionality.

Verification should be performed before the date of supply and retained with the invoice file. The record should identify the recipient, its TRN, the verification date, the result and the person who completed the check. A screenshot or system-generated confirmation may be useful, provided it is stored in accordance with the business's data and record-retention controls.

A supplier should also consider whether the recipient's apparent registration is valid for the relevant date and whether the legal entity named in the contract, tax invoice and TRN record is the same entity. A group company, trade name, branch or warehouse may not be interchangeable with the registered person.

6. Two written declarations are required before supply

Before the date of each Metal Scrap supply, the recipient must provide the supplier with written declarations that:

the recipient is a VAT Registrant, including its VAT registration details, such as its TRN; and
the recipient intends to purchase the Metal Scrap for resale or use in Processing.

The two declarations may be combined in one document. The critical timing point is “before the date of supply”. A declaration signed after delivery, after invoicing or after an FTA query may not cure the original failure. The supplier should not backdate a declaration or treat an informal WhatsApp message as a substitute for a controlled written document unless it clearly contains the required confirmations and can be preserved.

Suggested declaration fields

The law and clarification should be followed over any template, but a practical declaration can include:

recipient's full legal name and TRN;
supplier's full legal name and TRN;
purchase order, contract or supply reference;
description of the Metal Scrap and, where relevant, material category or grade;
a statement that the recipient intends to resell the Metal Scrap or use it in Processing;
the date on which the declaration is signed;
name, position and authority of the signatory; and
signature or approved electronic acceptance capable of being retained.

For recurring supplies, a framework declaration may be commercially convenient, but the business should confirm that it covers the supplies and periods in question and remains accurate. Where the recipient changes its purpose, legal entity or VAT status, a fresh declaration and review should be triggered.

7. Supplier obligations

The supplier carries the main gatekeeping burden. Before applying the reverse charge, the supplier should complete the following controls:

Classify the goods. Confirm that the goods are ferrous or non-ferrous metal waste with commercial value and usable after Processing.
Confirm the transaction purpose. Obtain the recipient's written statement that it intends to resell or process the Metal Scrap.
Confirm recipient registration. Verify the recipient's TRN through the FTA tool before supply.
Check the supply route. Confirm that the transaction is not a direct or indirect export that should instead be tested under zero-rating rules.
Issue a compliant tax invoice. The invoice must clearly indicate that the supply of Metal Scrap is subject to the reverse-charge mechanism and must not mislead the parties about who accounts for VAT.
Report consistently. Do not include the qualifying supply or related VAT in the supplier's Box 1 output-tax reporting where the reverse-charge conditions are met.
Retain the file. Store the declaration, TRN check, invoice, delivery records, classification evidence and return reconciliation.

The supplier should build these controls into the sales-order process. If the ERP system automatically charges 5% VAT to every scrap customer, the business should not simply override the tax code without documenting the eligibility decision. If the system automatically applies reverse charge to every product described as “scrap”, that creates an equally serious risk.

8. Recipient obligations

The recipient becomes responsible for accounting for VAT on the qualifying transaction. The recipient must include the transaction in the appropriate reverse-charge reporting and remains responsible for the related tax obligations.

VATP047 states that, where the eligibility requirements are met, the recipient declares the supply in Box 3 of its VAT Return and may recover the Recoverable Tax in Box 10. Box 9 should not be used to recover the input tax for this transaction.

The recipient should reconcile:

the supplier's invoice and Metal Scrap description;
the value used to calculate due tax;
the reverse-charge amount reported in Box 3;
the recoverable amount reported in Box 10;
the recipient's intended resale or Processing activity; and
any partial exemption, blocked input tax or other restriction on recovery.

Reverse charge does not create an automatic right to recover every amount calculated. The normal input-tax recovery rules still matter. If the Metal Scrap is used for exempt activities, non-business purposes or activities that do not support recovery, the recipient should restrict the recoverable amount as required.

9. What happens if the conditions are not met?

If the recipient did not provide the required declarations before the date of supply, or if another eligibility condition is missing, the special regime does not apply. The default rule then requires the supplier to account for VAT on the supply at the applicable rate. VATP047 states that the supplier reports such a supply in Box 1 of its VAT Return.

The customer should not ask the supplier to issue a reverse-charge invoice merely because both parties are VAT registered. Registration is only one condition. The material must qualify, the recipient's purpose must qualify, declarations must be timely, and the supplier must complete the required verification and invoice controls.

VATP047 also explains that, where the conditions are not met, the recipient will not be entitled to recover input tax under the specified provisions of Article 54(1) of the VAT Law. This makes a failed eligibility check commercially significant: the supplier may have to charge VAT, while the recipient may still face recovery limitations if the transaction was not handled in accordance with the requirements.

10. Exports are treated separately

Cabinet Decision No. 153 does not apply where the supplier makes a direct or indirect export of Metal Scrap. If the export satisfies the conditions for zero-rating, the normal zero-rated export rules apply and the supplier reports the supply as a zero-rated supply in its VAT Return.

Reverse charge and zero-rating are not interchangeable:

Scenario	VAT question
UAE supplier sells qualifying Metal Scrap to a UAE VAT-registered dealer for resale	Test the Cabinet Decision conditions and reverse-charge documentation.
UAE supplier exports the Metal Scrap directly	Test the normal zero-rating and export-evidence rules, not the domestic Metal Scrap reverse charge.
UAE supplier sells to an intermediary that arranges an export	Analyse whether the transaction is an indirect export and whether zero-rating conditions are met; do not assume reverse charge.

Export evidence should be maintained separately, including customs records, transport documents, commercial invoices and proof of the required movement and timing. A customer declaration intended for domestic resale does not prove an export.

11. Documentation package for traders

A trader should be able to show an auditor how it moved from product classification to VAT-return reporting. A complete file may include:

contract, purchase order and supplier/customer master data;
description, photographs, specifications, weight tickets and material-composition evidence;
recipient's written declarations signed before the date of supply;
FTA TRN-verification result and verification date;
delivery notes, weighbridge tickets and warehouse receipts;
tax invoice with clear reverse-charge wording;
recipient's resale agreement, sales invoice or Processing records where relevant;
VAT-return workpaper showing Box 3 and Box 10 treatment;
evidence that the transaction was not a direct or indirect export, or export evidence if zero-rating was applied; and
exception approvals and correspondence where the standard process was not followed.

For high-volume traders, the evidence can be managed through a transaction-level checklist linked to the purchase order and invoice. The checklist should prevent invoice release until the declaration and TRN verification fields are complete.

12. Common VAT risks

Risk 1: Treating all scrap as metal scrap

A business may use “scrap” as a broad commercial category that includes plastic, glass, paper and mixed waste. The Cabinet Decision is limited to qualifying ferrous or non-ferrous metal waste. Product classification should be documented before the tax code is selected.

Risk 2: Applying the rule to a 2025 supply

The decision was issued in 2025, but the FTA says the special regime applies from 14 January 2026. A trader should not retroactively use the new tax code for supplies made before that date without a separate legal analysis.

Risk 3: Collecting declarations after delivery

The declarations must be provided before the date of supply. A post-delivery form may demonstrate later intent but may not satisfy the statutory condition for the original transaction.

Risk 4: Failing to verify the recipient's TRN

Both parties being familiar trading partners does not remove the supplier's verification obligation. A supplier should use the FTA verification functionality and retain the result.

Risk 5: Charging VAT and reporting reverse charge inconsistently

The invoice, sales ledger, tax return and customer accounting should tell the same story. A supplier that charges VAT on the invoice but omits the transaction from Box 1, or a recipient that reports Box 3 without a qualifying invoice, should expect questions.

Risk 6: Recovering input tax in Box 9

VATP047 identifies Box 3 for the reverse-charge supply and Box 10 for recoverable tax. Using Box 9 for the input-tax recovery can create a return-classification error.

Risk 7: Internal consumption disguised as resale

A recipient may state that it is a trader but use a particular batch for repairs or construction at its own premises. The purchase purpose should be reviewed at transaction level, especially where the business has both trading and internal-use activities.

Risk 8: Confusing export zero-rating with domestic reverse charge

Exports require their own zero-rating conditions and evidence. A chain involving a freight forwarder or an overseas buyer should not be labelled reverse charge without analysing the movement and contractual supply.

13. Worked examples

Example A: compliant domestic resale

Trader A, a UAE VAT Registrant, sells qualifying aluminium waste to Trader B, another UAE VAT Registrant. Before delivery, Trader B provides one written document confirming its TRN and its intention to resell the aluminium waste. Trader A verifies the TRN through the FTA tool and issues an invoice clearly stating that the supply is subject to reverse charge.

Assuming the material qualifies and no export or other exception applies, Trader A does not account for VAT on the supply in Box 1. Trader B accounts for the due tax in Box 3 and considers the corresponding amount in Box 10, subject to normal recoverability rules.

Example B: internal maintenance

A manufacturing company buys steel pieces described as scrap to repair its warehouse racks. It is VAT registered and provides a declaration stating that it will use the steel in its business. The purpose is internal maintenance, not resale or Processing. The special reverse-charge condition is not met. The supplier should apply the default VAT treatment rather than relying on registration alone.

Example C: missing pre-supply declaration

A dealer receives copper scrap on 20 February 2026. The dealer sends a resale declaration on 25 February, after delivery. Even if the dealer intended resale from the beginning, the supplier's file does not contain the required declaration before the date of supply. The supplier should not assume that the late document cures the failure; the default rule should be reviewed and corrective action taken promptly.

Example D: used lead-acid batteries

A recycler acquires used lead-acid batteries whose principal recoverable component is lead. The batteries also contain plastic and electrolyte. On the facts described by VATP047, the batteries may fall within Metal Scrap where lead is the majority component and the main component to be extracted in Processing. The recycler should retain technical and processing evidence rather than relying on the word “battery” alone.

Example E: export route

A UAE trader contracts to sell qualifying metal waste to a foreign buyer and ships it outside the UAE. The transaction should be tested under the direct or indirect export rules and the zero-rating evidence requirements. The domestic Metal Scrap reverse charge is not the correct mechanism merely because the goods are metal waste.

14. Internal controls for high-volume traders

Metal traders often process many deliveries, variable weights and changing customers. A written policy should assign responsibility across sales, operations, finance and tax:

Team	Control
Sales	Obtain the recipient declaration before accepting an eligible order and avoid promising reverse-charge treatment before verification.
Operations	Record material type, weight, delivery date and destination; flag export or mixed-load movements.
Tax	Classify goods, verify the TRN, approve the VAT code and review Box 1/Box 3/Box 10 reporting.
Finance	Reconcile invoices, credit notes, settlements and VAT-return values; block invoices with missing documents.
Compliance	Test a sample of transactions monthly and retain an exception log with remediation owners.

ERP design should distinguish at least three states: eligible reverse-charge domestic supply, ordinary VAT supply because conditions fail, and export/zero-rated supply pending export evidence. A single “scrap” tax code is unlikely to be sufficiently controlled.

15. Audit and penalty exposure

Incorrect reverse-charge treatment can create underreported output tax for the supplier, underreported due tax for the recipient, denied input-tax recovery, tax assessment, late-payment exposure and administrative penalties. The commercial parties may also disagree over who should bear an unexpected VAT amount after the invoice has been issued.

Contracts should address tax treatment and cooperation without pretending that a contractual clause overrides the VAT Law. A clause can require the customer to provide accurate declarations, maintain VAT registration, notify changes and reimburse documented tax costs arising from its misrepresentation. It cannot make an ineligible transaction eligible.

If a business discovers that it applied reverse charge without satisfying the conditions, it should quantify the affected supplies, preserve the original records, assess whether a correction or disclosure is needed, and obtain UAE VAT advice promptly. Waiting until an FTA audit may make the correction more difficult and increase the risk that customer records no longer match.

16. Practical compliance checklist

Before applying reverse charge to a domestic Metal Scrap supply, confirm each item:

Is the item ferrous or non-ferrous metal waste?
Does it have commercial value and can it be used after Processing?
Is the supply date on or after 14 January 2026?
Are both supplier and recipient UAE VAT Registrants?
Has the supplier verified the recipient's TRN through the FTA tool?
Did the recipient provide written declarations before the date of supply?
Does the recipient intend to resell the Metal Scrap or use it in Processing?
Is the transaction not a direct or indirect export?
Does the tax invoice clearly state that reverse charge applies?
Will the supplier exclude the qualifying supply from Box 1 and will the recipient report it in Box 3 and, where eligible, recover in Box 10?
Are classification, delivery, declarations, TRN verification and return workpapers retained together?

If any answer is uncertain, pause the tax-code decision and escalate the transaction to the tax team. A short delay before invoicing is usually easier to manage than an incorrect reverse-charge correction after the return has been filed.

17. Frequently asked questions

Does the 2025 decision apply to all scrap sold in the UAE?

No. It applies to qualifying Metal Scrap, meaning ferrous or non-ferrous metal waste with commercial value that can be used after Processing, and only where the transaction and documentation conditions are satisfied.

Why does the article say 2025 rules if the mechanism starts in 2026?

Cabinet Decision No. 153 was issued in 2025, but the FTA states that Metal Scrap supplied on or after 14 January 2026 is subject to the decision and its compliance requirements.

Can the supplier apply reverse charge if the recipient is VAT registered but buys the scrap for its own repairs?

Not on that fact pattern. Internal business use, such as repairing racks or fences, is not the same as an intention to resell or use the Metal Scrap in Processing.

Can one declaration cover several deliveries?

It may be possible to use a controlled framework declaration where it accurately covers the relevant supplies, but the supplier should confirm that it was provided before each applicable supply and remains correct. A material change should trigger a fresh declaration.

Can the recipient send the declaration after receiving the goods?

The FTA clarification requires the declarations before the date of supply. A late declaration should not be assumed to cure the original failure.

Does the supplier have to verify the TRN if the customer sends a certificate?

VATP047 requires the supplier to verify that the recipient is a Registrant using the FTA functionality. A customer-supplied document can support the file, but it should not replace the required verification.

What wording must appear on the invoice?

The tax invoice must clearly indicate that the Metal Scrap supply is subject to the reverse-charge mechanism. The invoice should also satisfy the general tax-invoice requirements applicable to the transaction.

Which VAT-return boxes are relevant?

For an eligible recipient, VATP047 states that the supply is declared in Box 3 and recoverable tax may be reported in Box 10. Box 9 should not be used for that input-tax recovery. If the conditions fail, the supplier reports the supply in Box 1.

Does reverse charge apply to exported Metal Scrap?

No. Direct and indirect exports are excluded from Cabinet Decision No. 153. The supplier should test the normal zero-rating and export-evidence rules instead.

Can used batteries be Metal Scrap?

Potentially. VATP047 explains that used lead-acid batteries may qualify where lead is the majority component and the main component to be extracted through Processing. The conclusion depends on the facts and evidence.

What if the supplier mistakenly issued a reverse-charge invoice?

The parties should not simply leave the error in place. Review the material, declarations, TRN verification, supply date and export status, then determine the appropriate correction and VAT-return treatment with professional advice.

18. HZ Legal practical view

The safest approach is to treat Metal Scrap reverse charge as a pre-supply eligibility process, not as an accounting choice made at month-end. The sales team should obtain the declarations, operations should document the material and movement, tax should verify the TRN and tax code, and finance should reconcile the invoice to the VAT return.

The phrase “2025 rules” should also be handled carefully in contracts and internal manuals. The decision is a 2025 legal instrument, but its operational starting point is 14 January 2026. Every policy should state the effective date clearly and require a fresh review when the FTA updates its guidance or the VAT legislation changes.

For traders with mixed loads, export chains, batteries, dismantling operations, related-party purchases or recurring declarations, a transaction-level review can prevent the most expensive mistakes. HZ Legal Consultancy can assist with contract language, VAT process design, invoice controls, evidence reviews and responses to FTA queries.

Official sources

Editorial note: UAE VAT legislation, executive regulations and FTA guidance may change. Confirm the consolidated law and current filing instructions that apply to the date of each supply and VAT return.