The UAE Ministry of Finance has approved a new ministerial decision allowing firms to claim tax depreciation on investment properties held at fair value, aligning these assets with traditional cost‑based holdings.
Under Federal Decree‑Law No. 47 of 2022, taxpayers electing the “realisation basis” can deduct the lower of the tax written‑down value or 4 per cent of the original cost per year, prorated for shorter periods. The allowance applies to properties held before and after the introduction of corporate tax, with an irrevocable election required in the first tax period starting on or after January 1, 2025.
The decision clarifies depreciation values across transfers, including those related to parties, third parties, or self-developed assets. It includes a window for first‑time realisation basis selection to ensure taxpayers can claim benefits even if they haven’t yet chosen this method.
Rules also cover “claw‑back” scenarios where previously claimed depreciation must be reversed outside of a disposal context.
“This treatment ensures tax neutrality and equity with deductions available to businesses that hold investment properties on a historical cost basis,” Aldar said in a statement. “The decision also provides clarity on how tax depreciation applies in cases of property transfers (between related or third parties), developments, and claw-back scenarios, ensuring businesses have a clear view of their compliance obligations and financial planning.”
Tax experts say this move levels the playing field between entities that use fair-value accounting and those that use cost accounting, thereby reducing distortion in taxable income calculations. The change signals the UAE’s effort to align corporate tax practices with international standards and support transparent investment decisions.
“By enabling depreciation deductions for investment properties held at fair value, this decision creates parity between different accounting treatments, helping companies plan long-term capital deployment more effectively,” said Faisal Falaknaz, Group Chief Financial and Sustainability Officer at Aldar. “It will also reinforce investor confidence, attract institutional capital, and enhance the UAE’s standing as a transparent, competitive, and globally integrated investment destination, particularly for the real estate sector.”
