UAE clarifies metal-scrap VAT reverse charge and recovery risk

The clarification interprets Cabinet Decision No. 153 of 2025, issued on 4 November 2025 under article 48(8) of Federal Decree-Law No. 8 of 2017 on Value Added Tax. It explains rules applying to supplies from 14 January 2026; it does not introduce a new October tax amendment.^[1][2][3]

Scope and accounting

For qualifying domestic supplies between VAT registrants, the buyer accounts for VAT instead of the seller. The buyer must intend to resell the scrap or process it into material for manufacturing new products. The decision excludes supplies qualifying for export zero-rating under article 45(1) of the VAT law.^[2][3]

VATP047 distinguishes commercially valuable ferrous or non-ferrous waste from paper, plastics and other scrap. Used lead-acid batteries can qualify where lead is the predominant recoverable component. Buying scrap merely for internal maintenance does not establish the required resale or processing purpose.^[1]

Declarations determine recovery

Before supply, buyers must declare their VAT registration and intended resale or processing. Sellers must retain those declarations, verify registration using the FTA’s TRN tool and mark the invoice for reverse charge. The FTA permits the two declarations to be combined in one document, but requires them for each supply.^[1][2]

If the declarations are missing before supply, the seller charges standard-rate VAT. Article 2(4) of the decision also prevents the buyer treating the purchase as qualifying use under article 54(1)(a)–(b) of the VAT law. The clarification confirms the resulting input-tax denial. A supplier invoice therefore does not cure the declaration failure.^[1][2][3]

Eligible buyers report the reverse charge in return Box 3 and recover qualifying input tax in Box 10, rather than Box 9. MNE recycling, trading and manufacturing teams should link purchase declarations, registration evidence and tax codes to each transaction; retrospective paperwork risks leaving VAT as a cost.^[1][2]