• Metal Scrap has been defined in the New Decision as metal waste and non-usable metal materials that have lost their value and can only be used after processing.

• The New Decision defines processing as the procedure by which metal scrap is converted into materials that can be used in manufacturing new products, whether through repair, recycling, or any other method.

• The New Mechanism is applicable for local supplies of Metal Scrap to VAT registered recipients who have the intention to reutilize, recycle, or otherwise process the Metal Scrap.
• The New Decision stipulates that the application of the New Mechanism will result in the following (subject to meeting specified conditions):
  - The supplier of Metal Scrap will not be responsible for accounting for VAT and should not include the value of the supply in its tax return.
  - The recipient of Metal Scrap will be responsible for accounting for VAT on the supply and for fulfilling all related UAE VAT obligations which arise.

• The New Mechanism does not apply to Metal Scrap supplies that are subject to zero-rated VAT under UAE VAT law.
• Suppliers of zero-rated Metal Scrap are not required to follow the New Mechanism rule.

• The application of the New Mechanism is subject to the supplier of Metal Scrap meeting the following conditions before the date of supply:
  - The supplier should receive a written declaration from the recipient confirming its intention to reutilize, recycle or otherwise process the Metal Scrap.
  - The supplier should verify the VAT registration status of the recipient.

KPMG comment:

If the recipient fails to provide the required declaration or is not registered for UAE VAT, the New Mechanism will not apply. In such cases, the supply will not be treated as acquired by the recipient under the New Mechanism, and the supplier must charge 5% VAT on these supplies.

• The application of the New Mechanism is subject to the recipient of Metal Scrap meeting the following requirement prior to the date of supply:
  - The recipient must submit a written declaration to the supplier confirming their intention to reuse, recycle, or otherwise process the Metal Scrap, and also confirming their VAT registration status with the Federal Tax Authority.

• The supplier of Metal Scrap is required to verify the recipient’s registration status using the methods provided by the Federal Tax Authority.
• If the recipient is VAT-registered and has provided a written declaration, the invoice issued by the supplier of Metal Scrap must clearly indicate that this New Mechanism applies.
• It is important to note that the New Decision suggests that the recipient of Metal Scrap could have restrictions on the recovery of the associated VAT, if the written declarations referred to above are not submitted/provided.