Abu Dhabi: The UAE Ministry of Finance has introduced a new rule under the Corporate Tax Law (Federal Decree-Law No. 47 of 2022), allowing businesses to deduct tax depreciation on investment properties measured at fair value. This move aims to establish tax equality between companies using the fair value method and those applying the historical cost approach.
Effective for tax periods starting on or after January 1, 2025, the new decision outlines the conditions under which companies can claim depreciation:
- Eligible taxpayers may deduct depreciation from their taxable income if they adopt the “realization basis” method and make an irrevocable election during their first eligible tax period.
- The allowable depreciation deduction will be the lower of 4% of the original cost or the written-down value of the investment property, calculated annually or prorated for shorter periods.
- This provision applies to properties acquired before or after the implementation of the Corporate Tax Law.
The Ministry emphasized that this policy ensures a level playing field, as companies using historical cost already benefit from depreciation deductions in their financial accounting.
Additionally, a one-time opportunity is available for businesses that have not yet chosen the realization basis, enabling them to take advantage of this tax benefit.
The Ministry also issued detailed guidance on “claw-back” provisions, which clarify scenarios in which previously claimed depreciation might need to be reversed—except in the case of property disposals.
This measure supports the UAE’s broader strategy to build a transparent, fair, and globally competitive tax environment for businesses operating in the country.
