A Change That Is Already Reshaping the Market
Since 14 January 2026, companies trading scrap metal in the UAE have been operating under a new VAT framework. Cabinet Decision No. 153 of 2025 introduced a reverse charge mechanism, shifting the responsibility for reporting VAT from the seller to the buyer in transactions between VAT-registered businesses.
At first glance, the reform appears to be a technical adjustment to tax reporting. In practice, it forms part of a broader effort to introduce greater structure and transparency into a market where materials often move through multiple intermediaries before being reintegrated into industrial production.
What This Means Day to Day
Under the previous system, suppliers charged VAT on the sale and remitted it to the authorities. Under the new framework, for qualifying transactions, suppliers no longer charge VAT. Instead, the purchasing business accounts for it directly in its own VAT return, provided both companies are VAT-registered and the material is intended for resale or processing.
The reverse charge model is not unique to the UAE. It is widely used in metals and other high-volume sectors, where transaction chains can be complex, because it simplifies reporting and reduces the risk of discrepancies or underreporting across multiple stages of trade.
The legislation also formalises a principle long recognised within the industry: scrap metal is not waste. It is defined as material that retains value and can be reprocessed and reused, explicitly recognising it as a recoverable resource. By requiring clearer documentation and reporting, the UAE is ensuring that these materials move through transparent, regulated supply chains.
Scrap Is No Longer the End of the Story
In modern steelmaking, scrap is not a residual material. It is often the primary input. Globally, recycled metal feeds production routes that rely less on newly extracted raw materials and make more effective use of materials already in circulation. The UAE’s updated VAT treatment supports this transition by providing the trade of recyclable metals with a clearer and more structured regulatory foundation.
Viewed in this context, the reform connects taxation with a broader industrial reality: how materials move through a circular production system.
The AGSI Perspective: A Circular Steel Model in Practice
This is the operating environment in which Arabian Gulf Steel Industries (AGSI) functions. AGSI produces steel using locally sourced recycled material rather than traditional inputs such as iron ore. At its Abu Dhabi facility, steel is manufactured using 100% recycled feedstock, demonstrating how recovered material can serve as the primary input in new production.
Because the production process relies entirely on recycled steel, it avoids the resource-intensive extraction and primary processing stages associated with conventional steelmaking while making more effective use of materials already in circulation. AGSI operates within a circular production model in which steel is collected, processed and returned to use rather than discarded, aligning with the broader circular economy direction promoted across the UAE’s industrial landscape.
The company also uses electric steelmaking technologies associated with lower-emission production pathways, reflecting the industry’s ongoing transition toward more sustainable manufacturing. In practice, this demonstrates how well-organised scrap supply chains can support both industrial output and environmental performance simultaneously.
A Step Toward a More Circular System
The VAT reform introduced in 2026 does more than change how tax is reported. It reinforces the treatment of recycled materials as economic assets that must be tracked, managed and reintegrated into the production cycle with the same discipline applied to primary resources. By strengthening oversight of scrap-metal transactions, the UAE is supporting a system in which transparency, resource efficiency and industrial resilience reinforce one another.
For companies such as AGSI, whose operations already depend on recovering and reusing locally sourced material, the new framework does not alter the underlying trajectory. Instead, it provides regulatory alignment to a model that already treats recycled steel not as waste, but as an integral component of modern industrial production.
References
Fastmarkets (2025) UAE demand for low-carbon steel rises as regulators tighten standards. Available at: https://www.fastmarkets.com (Accessed February 2026).
Gulf News (2024) AGSI helps transform the steel industry sustainably. Available at: https://gulfnews.com (Accessed February 2026).
KPMG (2025) UAE Cabinet Decision No. 153 of 2025 – Reverse Charge Mechanism for Metal Scrap. Available at: https://kpmg.com (Accessed February 2026).
Ministry of Finance UAE (2025) Cabinet resolution on implementing the reverse charge mechanism for VAT on scrap metal trading. Available at: https://mof.gov.ae (Accessed February 2026).
PwC Middle East (2025) UAE introduces VAT reverse charge on scrap metal transactions. Available at: https://www.pwc.com/m1 (Accessed February 2026).
Reina Consulting (2025) Domestic reverse charge for supplies of metal scrap in the UAE. Available at: https://www.reina-consulting.com (Accessed February 2026).
SteelOrbis (2024) UAE’s AGSI achieves net-zero at Abu Dhabi steel plant. Available at: https://www.steelorbis.com(Accessed February 2026).
Steel Times International (2024) AGSI achieves net-zero certification at Abu Dhabi steel plant. Available at: https://www.steeltimesint.com (Accessed February 2026).