Western Valuers and Surveyors publishes study on industrial asset valuation under UAE corporate tax

Western Valuers and Surveyors, a RICS-regulated valuation and advisory consultancy based in Dubai, has published a study examining how the valuation of plant, machinery and equipment is being used to support corporate tax filing and financial reporting in the UAE.

The study, released this month, sets out the standards framework applying to industrial asset valuation, the records businesses are required to maintain, and the reasons valuations are commonly challenged during audit or regulatory review. It is aimed at finance directors, auditors and companies holding significant industrial asset bases.

According to the study, UAE Corporate Tax Law does not prescribe depreciation rates for tangible fixed assets. Tax treatment instead follows a company's financial accounting treatment under International Financial Reporting Standards, requiring depreciation over estimated useful lives using a systematic method such as straight-line, reducing balance or units of production.

The firm said this places the evidential burden on the taxpayer rather than the legislation, because the business itself determines the depreciation profile and must be able to support it if questioned.

The study also examines fixed asset register requirements. The Federal Tax Authority requires companies to record, for each asset, its description, date of acquisition, original cost, estimated useful life, depreciation method, accumulated depreciation and net book value. Records must be retained for seven years under Federal Decree-Law No. 28 of 2022.

Western Valuers and Surveyors identified three deficiencies that recur in the registers it reviews.

The first is incomplete asset identification, where registers list aggregated entries such as a production line or workshop equipment rather than individually identifiable assets, making physical verification impossible.

The second is the absence of reconciled physical verification, which the firm said results in assets appearing in the register that no longer exist, alongside operating assets that were never recorded.

The third is depreciation calculated from the invoice date rather than the date an asset became ready for use. The study describes this as a common and material error in industrial settings, where installation and commissioning can extend over several months.

"Under corporate tax, a valuation is no longer only a number on the balance sheet," said Ibrahim Emad, MRICS Director at Western Valuers and Surveyors. "It is evidence that the tax authority, the auditor and the lender all need to be able to rely on. A report that does not state its basis of value, or that was prepared without anyone inspecting the assets, is difficult to defend when it is examined."

Emad is a Member of the Royal Institution of Chartered Surveyors and a registered valuation expert with the Dubai Courts.

On standards, the study notes that revised International Valuation Standards have tightened the requirement for valuers to state the basis of value applied and explain why it was selected. A report describing its conclusion as fair value while applying methodology consistent with forced-sale assumptions represents a compliance gap, the firm said.

The same asset can carry materially different values depending on the basis applied. An operating production line valued in place as part of a going concern will differ substantially from the same equipment valued for removal and resale.

The study identifies technological obsolescence as frequently the largest single driver of industrial asset value, with shortening technology cycles causing equipment to lose economic value ahead of its accounting useful life. Functional obsolescence, where equipment continues to operate but is no longer competitive on throughput, energy consumption or automation, is described as invisible in the fixed asset register and detectable only through inspection.

Physical condition, maintenance history, operating environment, commissioning status, regulatory requirements and installation and removal costs were identified as further determinants of value.

The study lists the most common reasons industrial asset valuations are questioned, including the absence of physical inspection, unstated bases of value, undisclosed assumptions, valuation dates carried forward without reassessment, and reports signed by parties without demonstrable competence in the relevant asset class.

Western Valuers and Surveyors is accredited by the Dubai Land Department, approved by the Abu Dhabi Real Estate Centre and registered with RERA. Its industrial consultancy practice covers plant and machinery valuation, fixed asset register construction, asset tagging, physical asset verification and technical due diligence.

The firm operates five service lines covering property valuation, industrial consultancy, building consultancy, strategic advisory and real estate investment advisory, and works across the UAE and the wider region.

www.westernvas.com