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Tax advisory agency Dhruva has welcomed a significant UAE company tax replace that enables 4 per cent annual depreciation on funding properties held at truthful worth.
Efficient since January 1, 2025, the brand new rule helps actual property and capital-intensive sectors by boosting compliance, flexibility, and investor confidence.
The UAE Ministry of Finance issued Ministerial Choice No. 173 of 2025, introducing tax depreciation on funding properties (IP) held at truthful worth.
UAE actual property tax guidelines
Efficient January 1, 2025, the modification is designed to reinforce consistency within the company tax regime, benefiting companies in the true property and capital-intensive sectors by enhancing compliance, planning flexibility, and investor confidence.
Tax advisory agency Dhruva welcomed the choice, which resolved long-standing considerations amongst corporations utilizing the truthful worth mannequin however unable to assert depreciation deductions.
Sandeep Kumar, Company Tax Accomplice at Dhruva, stated: “This resolution is a welcome step in direction of aligning accounting and tax rules within the UAE. It supplies optionality for companies and creates consistency in how funding properties are handled for tax functions. Importantly, it offers corporations a one-time alternative to elect the realisation foundation of taxation — a alternative that’s irrevocable and requires cautious analysis.”
Beneath the brand new guidelines, taxable entities might declare depreciation at 4 per cent each year on the unique value of the property, calculated on a pro-rata foundation relying on the holding interval.
To learn, companies should go for the realisation foundation of taxation, an irrevocable election that should be made inside a prescribed timeframe within the UAE.
Firms that fail to elect will completely forfeit the fitting to assert depreciation on properties held at truthful worth.
The Ministry additionally clarified provisions masking Qualifying Group Reduction (QGR), Enterprise Restructuring Reduction (BRR), and Tax Teams (TG), making certain continuity the place properties are transferred underneath such preparations.
Since depreciation underneath the truthful worth mannequin isn’t mirrored in monetary accounts, corporations might face short-term variations, giving rise to deferred tax liabilities underneath worldwide accounting requirements.
The choice additional clarifies the tax therapy upon the realisation of such properties, together with changes for beforehand claimed depreciation, with detailed provisions for intra-group transfers, restructurings, and tax teams.
Kumar stated: “Taxpayers mustn’t view this as a routine compliance replace. It’s a strategic alternative to align their tax positions with enterprise realities. At Dhruva, we’re dedicated to serving to companies make knowledgeable selections underneath the brand new company tax regime.”
For companies holding actual property at truthful worth, the replace underscores the significance of early planning and well timed elections in tax filings.
Dhruva famous that electing the realisation foundation might also affect the therapy of different fair-valued belongings and unrealised good points or losses, highlighting the necessity for cautious long-term analysis.
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