UAE Firms Can Now Claim Tax Depreciation on Fair Valued Investment Properties: What You Need to Know
In a major move towards aligning UAE’s corporate tax system with international standards, the Ministry of Finance announced on July 17, 2025, that firms in the UAE can now claim tax depreciation on investment properties held at fair value. This landmark decision provides clarity and relief for property-owning businesses across the country. Whether you are a real estate investor, a corporate group, or a small business with property investments, this update could significantly affect your tax planning strategy.
For many businesses, working with the Top Accounting Firms in Dubai, like TFAB, will be essential to ensure correct implementation, avoid compliance issues, and take full advantage of the new depreciation allowances.
What Is Tax Depreciation on Fair Valued Investment Property?
Traditionally, investment properties were only depreciated for tax purposes if they were accounted for at cost. However, the new UAE regulation allows depreciation even when the property is held at fair market value, a practice used in line with International Financial Reporting Standards (IFRS).
This means businesses can now reduce their taxable income by claiming depreciation deductions on fair-valued properties, which was not previously allowed under UAE corporate tax rules.
The decision falls under the Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses, particularly within the section addressing Depreciation Adjustments for Investment Properties Held at Fair Value.
Who Does This Apply To?
This new tax benefit is available to taxpayers who elect for the realization basis of accounting. These are typically:
- Real estate investment companies
- Large corporate groups with significant property holdings
- SMEs with investment properties in their portfolios
- Companies engaged in real estate development and leasing
- provided you hold the property at fair value in your books.
Whether your property was purchased before or after the implementation of corporate tax, you may now claim depreciation on it, provided you hold the property at fair value in your books.
How Is Depreciation Calculated Under the New Rule?
The Ministry of Finance has provided a clear method for calculating depreciation on fair valued investment properties:
Businesses can deduct the lower of:
- The tax written-down value of the property
- Or 4% of the original cost of the property, for each 12-month tax period
If the property is held for only part of a year, depreciation will be prorated accordingly.
This approach provides a balanced framework that avoids overstatement of depreciation while giving businesses legitimate tax relief.
Clarifications on Transfers and Development
Another key part of this decision is the clarification on how depreciation should be treated in special cases, such as:
- Transfers between related parties
- Transfers to unrelated third parties
- New construction or development by the taxpayer
This ensures that property owners cannot manipulate valuations or transfers to gain unfair tax advantages. The Top Accounting Firms in Dubai, including TFAB, can help businesses correctly assess these scenarios and maintain compliance.
Why Is This Change Important for UAE Businesses?
The UAE is rapidly becoming a hub for global business and investment. With the introduction of corporate tax, businesses must now take a more strategic approach to tax planning.
Allowing depreciation on fair-valued properties:
- Reduces the tax burden for property-heavy businesses
- Aligns with international accounting practices (like IFRS)
- Provides clarity for companies involved in real estate development and investment
- Encourages proper property valuation and record-keeping
This move is part of the UAE’s broader efforts to modernize its tax framework while maintaining competitiveness in the global market.
Potential Benefits of the New Depreciation Rule
Lower Taxable Income:
By deducting depreciation, businesses can reduce the amount of taxable income, potentially leading to lower corporate tax payments.
Encourages Transparency:
Clear guidelines on fair value depreciation promote accurate financial reporting and discourage tax evasion.
Supports Real Estate Sector Growth:
The change provides tax relief for property investors, encouraging continued growth in the UAE’s real estate and construction sectors.
Simplified Record Keeping:
Businesses now have consistent guidelines for recording depreciation on investment properties, streamlining audits and tax filings.
Why You Need Expert Guidance
While this update is beneficial, it also adds layers of complexity to your corporate tax planning. Mistakes in depreciation calculation or reporting could lead to penalties or tax audits.
This is why it’s crucial to partner with experts like TFAB, recognized as one of the Top Accounting Firms in Dubai. Our team can help you:
- Assess Your Property Holdings:
Review your investment property portfolio to determine eligibility for depreciation under the new rule. - Update Financial Records:
Ensure your accounting and bookkeeping systems reflect fair value adjustments accurately. - Handle Complex Transfers:
Navigate property transfers between related or unrelated parties without triggering compliance risks. - Optimize Tax Planning:
Leverage the depreciation allowance to reduce tax liabilities while maintaining compliance with UAE corporate tax laws.
Provide Ongoing Support:
Our internal audit services in UAE can regularly check your financial systems to ensure you remain compliant with the latest regulations.
TFAB’s Comprehensive Tax and Accounting Services
At TFAB, we offer more than just tax advisory. As one of the Top Accounting Firms in Dubai, our full-service solutions include:
Accounting and Bookkeeping Services
We handle your day-to-day financial records, ensuring your property valuations and tax filings are up-to-date and compliant.
VAT Services in Dubai
Real estate transactions often involve VAT complexities. We help you manage VAT filings alongside your corporate tax responsibilities.
Internal Audit Services in UAE
Our audit team ensures your property records, depreciation calculations, and tax filings are accurate and risk-free.
Corporate Tax Advisory
We provide end-to-end support for corporate tax planning, including real estate tax strategy and compliance with Federal Decree-Law No. (47).
Maximize Tax Benefits on Property with Expert Guidance from Top Accounting Firms in Dubai
The introduction of tax depreciation on fair valued properties is a welcome change for many businesses in the UAE. However, proper implementation is critical. Don’t wait until tax season to address these changes. Partner with TFAB today, one of the most trusted Top Accounting Firms in Dubai, to ensure your business stays compliant while maximizing tax efficiency.
Contact TFAB Today
Get in touch with TFAB for a consultation on how this new property depreciation rule affects your business. Let us help you optimize your tax strategy and ensure compliance in every aspect of your financial operations.