New rule: UAE firms can now deduct tax depreciation on fair-valued investment property

Move aims to create tax fairness between firms using fair value, historical cost methods

Last updated: July 17, 2025 | 16:35

Justin Varghese, Your Money Editor

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As of July 16, the number of registered entities for Corporate Tax has reached 576,000, up from 538,000 in April.

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Abu Dhabi: UAE Ministry of Finance has issued a new rule allowing companies to deduct depreciation on investment properties held at fair value — a move that brings these firms in line with those using a historical cost method for accounting.

The Ministerial Decision applies under the UAE’s Corporate Tax Law (Federal Decree-Law No. 47 of 2022) and provides clarity for how tax deductions can be claimed on such properties starting from tax periods beginning on or after January 1, 2025.

Under the new rule:

Taxpayers can deduct depreciation from their taxable income, but only if they choose the “realization basis” method and make an irrevocable election in their first eligible tax period.
The deduction allowed will be the lower of 4% of the original cost or the written-down value of the property, calculated over each 12-month period or prorated for shorter timeframes.
This option is available to taxpayers owning investment properties either before or after the corporate tax law took effect.

The Ministry noted that the decision helps ensure parity between taxpayers who use fair value and those who follow historical cost accounting, as the latter already benefit from accounting depreciation.

There’s also an exceptional one-time window for businesses that haven’t yet opted for the realization basis to do so — allowing them to take advantage of this tax deduction opportunity.

The Ministry added that clear guidance has been issued on “claw-back” scenarios — when previously claimed depreciation might need to be reversed, such as in cases other than property disposals.

This step is part of the UAE’s wider goal to create a neutral, transparent, and globally aligned tax framework for businesses operating in the country.

Justin VargheseYour Money Editor

Justin is a personal finance author and seasoned business journalist with over a decade of experience. He makes it his mission to break down complex financial topics and make them clear, relatable, and relevant—helping everyday readers navigate today’s economy with confidence. Before returning to his Middle Eastern roots, where he was born and raised, Justin worked as a Business Correspondent at Reuters, reporting on equities and economic trends across both the Middle East and Asia-Pacific regions.