Summary
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The UAE Federal Tax Authority has clarified the domestic reverse charge mechanism for qualifying metal scrap supplied between VAT-registered businesses. Where the statutory conditions are satisfied, the supplier does not charge VAT and the recipient accounts for the tax under the reverse charge mechanism.
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The treatment is limited to qualifying ferrous or non-ferrous metal waste with commercial value that will be resold or processed. Other waste materials, exports and metal scrap acquired for the recipient’s own operational use remain outside this specific domestic reverse charge mechanism.
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Written declarations and VAT-registration verification must be completed before each qualifying supply. If the required documentation is absent, the supplier must apply the normal VAT rules, while the recipient may be denied related input tax recovery under the conditions described in the clarification.
Article
The UAE Federal Tax Authority issued Public Clarification VATP047 on 2 October 2026, explaining the application of the reverse charge mechanism to domestic supplies of metal scrap between UAE VAT registrants. The clarification concerns the regime introduced under Cabinet Decision No. 153 of 2025. [Federal Ta…ifications], [uecn.org]
The mechanism applies where a VAT-registered supplier provides qualifying metal scrap to another VAT registrant that intends either to resell the scrap in its trading business or process it into materials used to manufacture new products. Where all conditions are met, the supplier does not account for VAT. Instead, the recipient accounts for output VAT under the reverse charge mechanism and may recover the corresponding input VAT, subject to the normal recovery rules.
The goods must consist of ferrous or non-ferrous metal waste that retains commercial value and can be used after processing. Items primarily composed of qualifying metal, such as certain end-of-life lead-acid batteries, may be covered. Paper, plastic, glass and rubber scrap remain subject to the ordinary VAT rules.
The mechanism does not apply where the buyer acquires the scrap for its own use, such as internal maintenance. Direct and indirect exports are also outside this domestic reverse charge mechanism and remain governed by the UAE’s ordinary export zero-rating rules.
Documentation is a critical condition. Before each supply, the recipient must provide written declarations confirming its VAT registration and intended qualifying use of the scrap. The supplier must retain those declarations, verify the recipient’s VAT registration through the FTA facility and state on the tax invoice that the reverse charge applies.
The recipient reports the transaction in Box 3 of its VAT return and may claim recoverable input VAT in Box 10. The supplier does not report output VAT on the qualifying supply.
Where the required declarations are not provided, the supplier must account for VAT under the normal rules. The clarification indicates that the recipient will not be entitled to recover the related input VAT in those circumstances. Businesses should therefore embed pre-transaction documentation and verification into sales, procurement and vendor-onboarding controls rather than complete the paperwork retrospectively.
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