UAE, 22 July, 2025 : Property investors in the UAE stand to benefit from the new corporate tax rule allowing a 4% annual depreciation on investment properties – but only if they declare these properties at fair market value for tax purposes starting January 1, 2025.
Taxpayers must choose between recording their property at original purchase cost or current market value. This choice, once made, applies to all properties owned and must be declared in the first tax return, due by September 2026.
Choosing the market value option enables depreciation, reducing taxable income. For instance, a property bought at AED 1 million and now worth AED 3 million would allow AED 120,000 in annual depreciation (4% of AED 3 million), reducing the tax burden on gains at the time of sale.
However, properties recorded at original cost are not eligible for depreciation, meaning investors may pay 9% corporate tax on the full capital gain.
Experts suggest investors weigh their options based on intent to sell and current market trends. In cases where the current market value is below the original cost, it may be wiser to stick with historical values.
The UAE Ministry of Finance confirmed that depreciation will apply to the lower of the written-down value or 4% of original cost, bringing tax treatment more in line with international norms.
The move is seen as a boost to long-term real estate investors, offering a structured way to manage gains and improve financial reporting.
Source: gulfnews.com
