UAE Clarifies VAT Reverse Charge Requirements for Domestic Metal Scrap Transactions

Summary

The UAE Federal Tax Authority has clarified the application of the domestic VAT reverse charge to qualifying supplies of ferrous and non-ferrous metal scrap between VAT-registered businesses.
Before the supply, the recipient must provide declarations confirming its VAT registration and its intention to resell or process the scrap. The supplier must verify the registration and include reverse-charge wording on the invoice.
If the required declarations are not provided on time, the supplier must charge VAT at the standard rate, while the recipient may be prevented from recovering the VAT incorrectly incurred.

Extended article

On 2 October 2026, the UAE Federal Tax Authority issued VAT Public Clarification VATP047, explaining the scope and operation of the VAT reverse charge for domestic supplies of metal scrap.

The mechanism was introduced by Cabinet Decision No. 153 of 2025 and has applied since 14 January 2026.

Under the reverse charge, the supplier does not charge VAT. The VAT-registered recipient accounts for the output tax and, where the normal recovery conditions are satisfied, claims the corresponding input tax.

Which materials are covered?

The mechanism applies only to metal scrap, defined as ferrous or non-ferrous metal waste that:

has commercial value; and
can be used following processing.

The special rule does not apply to every type of waste or recyclable material. Paper, plastics, glass, textiles, rubber and other non-metal scrap remain subject to the normal VAT rules.

Businesses dealing in mixed waste should identify and document the different components. A single transaction containing metal and non-metal materials may require separate VAT treatment if the components constitute distinct supplies.

Recipient’s intended use

The reverse charge applies only where the recipient intends to:

resell the metal scrap; or
use it in processing.

Processing means converting the scrap into material that can be used to manufacture new products.

The mechanism does not apply where the recipient acquires the scrap for its own internal use. Metal acquired for maintenance, repairs or another internal business purpose is not regarded as having been acquired for resale or qualifying processing.

The intended use should therefore be determined and documented before the supply takes place.

Mandatory declarations

Before the date of supply, the recipient must provide the supplier with written declarations confirming:

Its VAT registration details.
That the metal scrap is being acquired for resale or processing.

The two confirmations may be included in a single document. The supplier must retain the declaration and verify the customer’s Tax Registration Number through the FTA’s verification facility.

The supplier must also state on the tax invoice that the supply is subject to the reverse charge mechanism.

These requirements should be treated as conditions that must be satisfied before the relevant transaction is processed. A contract, purchase order or general customer statement may not be sufficient unless it contains the prescribed information and is available before the date of supply.

VAT-return reporting

Where the conditions are met:

the supplier does not account for VAT on the transaction or report the supply in its VAT return;
the recipient accounts for the VAT in Box 3 of its UAE VAT return; and
recoverable input tax is reported in Box 10, subject to the ordinary input-tax recovery conditions.

The clarification states that Box 9 should not be used to report the recovery associated with the domestic metal-scrap reverse charge.

Businesses should verify that their ERP and VAT-return mapping treat the transaction differently from an imported service or another transaction normally reported through Box 9.

Exports remain outside the mechanism

The domestic reverse charge does not apply to direct or indirect exports of metal scrap. Where the statutory conditions for zero rating are fulfilled, the supplier should report the export as a zero-rated supply.

The supplier must retain the export evidence required under the UAE VAT legislation. The fact that the customer intends to export the goods does not automatically convert a domestic transaction into a qualifying export.

Consequences of missing documentation

If the recipient does not provide the required declarations before the supply, the supplier must account for VAT at the standard rate.

The clarification also states that the recipient is not entitled to recover the input tax incurred where the declarations were not provided. This creates a potentially material cost for the recipient and a collection risk for the supplier.

Suppliers should therefore introduce a system control preventing reverse-charge invoices from being issued unless: