VAT on Scrap Metal Trading in UAE: Reverse Charge Rules Explained

The UAE Federal Tax Authority has specific rules governing VAT on scrap metal transactions. Understanding the reverse charge mechanism is essential for compliance and avoiding penalties.

What is the Reverse Charge Mechanism?

For scrap metal transactions, the buyer (not the seller) is responsible for accounting for VAT. The seller issues an invoice without VAT, and the buyer self-accounts for the tax.

When Does Reverse Charge Apply?

• All domestic B2B scrap metal sales
• Both registered and unregistered sellers
• Applies to: iron, steel, copper, aluminium, brass, and all metal scrap

Invoicing Requirements

Sellers must issue a tax invoice stating "Reverse Charge Applies" and include the buyer's TRN number. Do not charge 5% VAT on the invoice amount.

Record Keeping

Both parties must maintain records for 5 years. Include weight tickets, metal grade certificates, and payment receipts.

Common Mistakes to Avoid

• Charging VAT on invoices (should be zero-rated for seller)
• Missing TRN numbers on invoices
• Not maintaining weight certificates
• Failing to report as reverse charge in VAT returns