The UAE Corporate tax framework continues to evolve in 2025 with the introduction of Ministerial Decision No. 173 of 2025, has introduced rules for applying depreciation rules for investment properties held at fair value under the Corporate Tax Law. This move provides clarity on how businesses can adjust their taxable income when electing to recognise gains and losses on a realisation basis. This Decision applies to tax periods beginning on or after 1 January 2025. This blog outlines the key provisions, timelines, and implications of the decision for taxpayers.
Election to Apply Depreciation to Investment Properties Measured at Fair Value
A taxable person preparing accrual-based accounting and opting to account for gains and losses on realisation basis (under Article 20(3) of the Corporate Tax Law) may irrevocably elect to adjust taxable income by applying a depreciation deduction for investment properties held at fair value. This deduction is the lower of:
- 4% of the original cost annually (or proportionately for partial periods), or
- The tax written down value (WDV) at the start of the tax period.
This election is comprehensive and applies to all investment properties held at fair value by the taxpayer.
Specific Scenarios and Adjustments
The Opening Value and Original Cost shall be determined in respect of the following:
- The transferor, in transfers covered under Articles 26 or 27 of the Corporate Tax Law or within a Tax Group, unless the most recent transfer is excluded except where the most recent transfer is not covered by the aforementioned provisions or is not between group members.
- The Taxable Person, in all other cases.
- If the transfer falls under specific clauses of Articles 26, 27, or 42 of the Corporate Tax Law, the transferee must adjust its Taxable Income to account for the depreciation deduction previously elected by the transferor, provided that the transferee has not already made such an adjustment.
- As an exception to Ministerial Decision No. 134 of 2023, a Taxable Person may elect to recognise gains and losses on a realisation basis in the same Tax Return in which this depreciation election is made
Timeline for Making the Election
The decision provides strict timelines for making the depreciation election:
- Held in first tax period: Election must be made in that period’s Tax Return.
- Not held in first tax period: Election must be made in the Tax Return for the period in which the first Investment Property is acquired.
- First period where Article 21 ceases to apply: For those opted for Article 21 earlier.
Failure to make the election within the specified period results in forfeiture of the right to elect.
Adjustments to Taxable Income
- In cases involving transfers between group members or under Articles 26 and 27, the transferee using cost model, must exclude depreciation/amortisation up to the amount claimed by the transferor.
- Upon realisation (except in the above transfer cases), any previously excluded amounts are to be included in taxable income.
Additionally, if related party transactions lack a valid commercial rationale, the Authority may disallow the depreciation deduction, invoking the specific anti-abuse rule under Article 6.
Comply with Confidence
Understanding the investment property depreciation UAE rules under the Corporate tax update UAE is essential for managing tax exposure. Engaging a trusted corporate tax consultant in Dubai helps sure you’re compliant, penalty-free, and stress-free.
FAQs
What is the depreciation method for investment properties under UAE Corporate Tax?
UAE follows a straight-line depreciation method for investment properties.
Can land value be depreciated under UAE Corporate Tax rules?
No, land is not depreciable under UAE tax regulations; only buildings qualify.
What is the useful life of investment properties for tax purposes?
Typically, a useful life of 20–50 years is applied, depending on the property type.
Are revaluations of investment property allowed for tax depreciation?
No, revaluations are ignored for depreciation; only original cost is considered.