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⚡ Quick answer
Under Cabinet Decision No. 153 of 2025 (effective 14 January 2026), local supplies of metal scrap (ferrous or non-ferrous metal waste with commercial value) between VAT-registered UAE businesses fall under the reverse charge mechanism. The supplier does not charge VAT; the buyer self-accounts — reporting 5% output VAT in Box 3 and recovering it as input VAT in Box 10 of the VAT return (usually a nil net effect). It only applies if both parties are FTA-registered, the buyer gives a written declaration (resale/processing intent + VAT registration) before the supply, the supplier verifies the buyer's registration, and the invoice states that reverse charge applies. It does not apply to zero-rated exports — and holding a trading licence alone is not enough to skip VAT.
Until recently, a scrap-metal trade was simple VAT: the seller added 5%, the buyer paid it, and the seller remitted it to the FTA. From 14 January 2026 that flips for local sales between registered businesses. The seller now issues the invoice without VAT, and the buyer becomes responsible for accounting for the tax — the reverse charge mechanism, already familiar from imports, gold and electronics, now extended to scrap.
For a trader who buys scrap from dealers and sells to factories or companies, this matters twice — once as a buyer, once as a seller. Let's walk both.
The rule
What changed, and what counts as "metal scrap"
Metal scrap here means ferrous or non-ferrous metal waste that has commercial value and is usable after processing. "Processing" covers converting scrap into materials for manufacturing — by recycling, repairing or otherwise. When such scrap is sold locally between two VAT-registered businesses, the reverse charge applies: the supplier stops charging VAT, and the recipient accounts for it.
Reverse charge, in one line
Reverse charge shifts the responsibility for accounting for VAT from the supplier to the buyer. The seller invoices with no VAT; the buyer declares the VAT in its own return.
The conditions
When you can (and can't) skip the VAT
This is the part traders get wrong. You don't get to leave VAT off an invoice just because you sell scrap or hold a trading licence. All of these must be true:
- The goods are in-scope metal scrap (ferrous/non-ferrous waste with commercial value).
- Both parties are VAT-registered with the FTA.
- Before the supply, the buyer gives a written declaration confirming (a) they intend to resell or process the scrap, and (b) they are VAT-registered.
- The supplier obtains and keeps that declaration and verifies the buyer's FTA registration.
- The invoice clearly states that the reverse charge mechanism applies.
- The supply is not a zero-rated export (and is within scope of UAE VAT).
✗ No declaration = no reverse charge — and a nasty side-effect
If the buyer doesn't provide the required declaration, the reverse charge doesn't apply — and the buyer may also be unable to recover input VAT on that scrap. The declaration isn't paperwork for its own sake; it's the thing that makes the whole treatment valid for both sides.
A trading licence lets you trade scrap. It does not, by itself, let you drop VAT off the invoice. The reverse charge is triggered by registration, intent and declarations — not by your licence activity.
Your two roles
As a buyer, and as a seller
A scrap trader sits in the middle of the chain, so the rule hits you from both directions:
When you BUY from a scrap dealer
You are the recipient
- Give the dealer your written declaration (resale/processing + VAT registration) before the supply.
- The dealer invoices you with no VAT, stating reverse charge applies.
- You self-account: declare 5% output VAT and recover it as input VAT in your return.
- Keep the invoice and your declaration on file.
When you SELL to a company
You are the supplier
- Obtain the buyer's written declaration before supplying.
- Verify the buyer is VAT-registered with the FTA.
- Invoice with no VAT, and state clearly that the reverse charge applies.
- Retain the declaration and proof of the buyer's registration.
The numbers
How to show it in the VAT return
This is where traders worry most — and it's actually straightforward. The buyer reports both sides of the VAT in the same return, so it nets to nil if they're fully taxable. Take an illustrative scrap purchase of AED 100,000:
VAT 201 — the buyer's entries (illustrative)
| Box | What it captures | Amount | VAT |
|---|---|---|---|
| Box 3 | Supplies under reverse charge (your output VAT) | 100,000 | 5,000 |
| Box 10 | Reverse-charge purchases (your recoverable input VAT) | 100,000 | 5,000 |
| Net VAT effect | 0 | ||
The output VAT in Box 3 and the input VAT in Box 10 offset — so a fully taxable trader pays no extra cash, but the transaction is fully and correctly declared. The seller, meanwhile, simply reports the sale value with no VAT charged on it.
⚠️ The most common — and most audited — mistake
Claiming the input VAT in Box 10 but forgetting the output VAT in Box 3 (or vice versa). Even though the net is nil, the FTA cross-checks both entries. Missing one side is a classic trigger for scrutiny and penalties — so always record both.
✅ Good news on paperwork (from 1 January 2026)
Under Federal Decree-Law No. 16 of 2025, you no longer need to issue a self-invoice for reverse-charge transactions. Retain the supplier's invoice and the declarations instead — and keep records for 5 years for any FTA review.
Old way vs new way
Before and after 14 January 2026
| Before | From 14 Jan 2026 (RCM) | |
|---|---|---|
| Seller's invoice | Adds 5% VAT | No VAT; states "reverse charge applies" |
| Who accounts for VAT | Seller collects & remits | Buyer self-accounts |
| Buyer's return | Input VAT only | Output (Box 3) + input (Box 10) |
| Declarations | Not required | Buyer's written declaration required |
| Cash flow | Buyer funds VAT, reclaims later | Usually nil net — no VAT cash out |
Sources & authority: Reverse charge on local metal-scrap supplies between VAT-registered persons under Cabinet Decision No. 153 of 2025, effective 14 January 2026 (issued under Federal Decree-Law No. 8 of 2017 on VAT and Cabinet Decision No. 52 of 2017). "Metal scrap" = ferrous/non-ferrous metal waste with commercial value, usable after processing. Conditions: both parties FTA-registered; buyer's written declaration (resale/processing intent + registration) before supply; supplier obtains/retains declaration, verifies registration, and states reverse charge on the invoice. Excludes zero-rated exports (Article 45). VAT 201 reporting: output VAT in Box 3, recoverable input VAT in Box 10. Self-invoicing for RCM removed from 1 January 2026 under Federal Decree-Law No. 16 of 2025; 5-year record retention. This is general information, current at June 2026; rules and conditions can change and depend on your facts — confirm with the FTA or a registered tax agent.
Trading scrap? Get your VAT treatment and return right.
As an FTA-registered tax agent, Fastlane sets up your reverse-charge invoicing and declarations, and files your VAT return with Box 3 and Box 10 correctly matched — so you stay compliant and protect your input VAT. VAT filing from AED 199.
Related VAT services
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Accounting & Bookkeeping
RCM-coded ledgers and retained declarations, so every scrap trade is audit-ready. From AED 499/mo.
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FAQ
Frequently asked questions
Do I charge VAT when I sell scrap to a company?
From 14 January 2026, no — if both of you are VAT-registered, the scrap is in-scope, the buyer gives the written declaration, and you verify their registration, you invoice without VAT and state that the reverse charge applies. The buyer accounts for the VAT.
Who accounts for the VAT — me or the buyer?
The buyer (recipient). They self-assess 5% output VAT and recover it as input VAT in the same return, usually netting to nil. As the seller, you report the sale with no VAT charged.
How do I show reverse charge in the VAT return?
The buyer reports output VAT under reverse charge in Box 3 and recoverable input VAT in Box 10 of the VAT 201 — both entries, even though they offset to nil.
Can I skip VAT just because I have a scrap trading licence?
No. The reverse charge depends on in-scope goods, both parties being VAT-registered, the buyer's written declaration of resale/processing intent, verification of registration, and the correct invoice wording — not on your licence activity alone.
What if the buyer doesn't give the declaration?
Then reverse charge doesn't apply for that supply, and the buyer may be unable to recover input VAT on the scrap. The declaration must be in place before the supply.
Do I still need to issue a self-invoice?
No. From 1 January 2026, self-invoicing for reverse-charge transactions is no longer required. Keep the supplier invoice and declarations, and retain records for 5 years.
This article is for general information only and does not constitute tax or legal advice. The reverse charge mechanism has strict conditions and exclusions, and the correct treatment depends on your specific facts; misapplying it can affect your input VAT recovery and lead to penalties. Rules can change — confirm your position with the FTA or a registered tax agent before relying on this. For VAT and reverse-charge support, contact Fastlane Consultancy.