VATP046: the reverse charge on metal scrap, and the invoice it produces

What the clarification settles

Cabinet Decision No. 153 of 2025 moved qualifying supplies of metal scrap between UAE VAT registrants to the domestic reverse charge with effect from 14 January 2026. VATP046 sets out how the mechanism operates in practice: the materials within scope, the conditions for applying it, the responsibilities carried by supplier and recipient, the VAT return treatment, invoicing, and the position on exports.

The mechanism turns on a documentary condition held at a point in time. That makes it a data and process question as much as a tax one.

The consequence that reaches the e-invoice

The reverse charge changes who accounts for the VAT. Under the electronic invoicing system it also changes which document the supplier issues, because the document type follows the tax treatment.

On the export side the same branching appears: where the zero-rating conditions are met, a tax invoice showing the supply as zero-rated is required; where they are not, a tax invoice carrying applicable VAT.

A document-type decision taken from a declaration status is a determination the ERP has to make at the moment of invoicing, from data it holds. That is the point at which a VAT clarification becomes a systems requirement.

The three conditions

1. 01

   Both parties registered

   Supplier and recipient are both UAE VAT registrants.

2. 02

   Intended use

   The recipient intends to resell the metal scrap, or to use it in processing — repairing, recycling, or converting it into materials for new products.

3. 03

   Declarations retained

   The supplier retains the recipient’s written declarations confirming VAT registration and the intention to resell or process.

The reverse charge applies where all three conditions are satisfied. Where they are not, the normal VAT treatment applies, and the recipient accounts for the transaction on that basis.

How the VAT is accounted for

Where the conditions are unmet, the supplier charges VAT at the standard rate and reports the supply in Box 1, and the recipient’s input tax recovery follows the applicable VAT rules.

What the supplier carries

Each of these is a control with an owner, a timing and an evidence trail. Verification carried out after the date of supply answers a different question from verification carried out before it.

Exports sit outside the mechanism

Cabinet Decision No. 153 of 2025 applies to domestic supplies. Direct exports, where the supplier arranges the transport or appoints an agent to do so, and indirect exports, where the overseas customer arranges collection, both sit outside it.

Where the zero-rating conditions are met, the export is reported as a zero-rated supply under the normal VAT rules.

What this asks of an enterprise

A metal-scrap trader reading this as a VAT change will update a tax code. The change reaches further than that, because the condition sits in data the business holds about its customers and has to act on at the moment an invoice is raised.