UAE Allows Tax Depreciation on Investment Properties at Fair Value

UAE, 08 September, 2025:  The UAE Ministry of Finance has issued Ministerial Decision No. 173 of 2025, permitting tax depreciation on investment properties held at fair value starting January 1, 2025.

Under the new rule, businesses may claim 4% annual depreciation on the original cost of such properties, calculated on a pro-rata basis. However, companies must elect the realisation basis of taxation within the prescribed timeframe. The choice is irrevocable, and missing it means permanently losing the right to depreciation.

The decision is expected to significantly benefit the UAE real estate sector and align tax and accounting practices. It also ensures continuity of treatment for properties transferred under Qualifying Group Relief, Business Restructuring Relief, or within tax groups.

Since depreciation does not appear in financial statements under the fair value model, businesses may need to address deferred tax implications. Experts advise companies to act early, as the election could also impact the treatment of other fair-valued assets and unrealised gains.