Depreciation Adjustments for Investment Properties held at Fair Value

The UAE Ministry of Finance has issued Ministerial Decision No. (173) of 2025, which includes Depreciation Adjustments for Investment Properties held at Fair Value on the Taxation of Corporations and Businesses. Any taxpayer can claim tax depreciation even if their investment properties were acquired before or after the corporate law. This Decision could benefit the person whose property is valued at fair value and electing the realization basis.

What is Investment property?

Investment property can be a building or part of a building held by the owner to earn rental income or for capital appreciation or both, including properties under construction/ development, vacant buildings to be leased, and buildings under operating leases. For taxable purposes, depreciation applies only to the building portion, not the land.

Not considered as Investment property:

• Property held for sale in the business (e.g., Inventory)

• Property under construction or development for sale (e.g., real estate projects)

• Properties occupied by the owner/employees

• Properties leased to others under finance leases

• Properties used in the manufacturing or supply of goods and services, or for administrative purposes

Election for applying depreciation

1. A Taxable Person preparing Financial Statements on an Accrual Basis and applying the realisation basis for gains/losses may elect to deduct the lower of

• 4% (four percent) of the Original Cost or

• “Tax Written Down Value (TWDV)” at the start of the relevant Tax Period

2. Election applies to all investment Properties calculated at fair value

3. Transferee can adjust the taxable income only once for that investment property

When can we file the tax?

Taxable persons can claim their tax depreciation by following the timelines

a) If a taxable person holds an investment property in the first tax period, they must elect in the tax return for that same year

b) If not, the election must be made on the tax return for the tax period where your first investment property is held

c) For those elected for Article (21) of the Corporate Tax Law, the Election must be made in the tax return for the first Tax Period in which the article doesn’t apply

d) If a taxable person fails to make an election within the deadline, they forfeit their right to make the election

Adjustments in Taxable income

If an Investment Property is transferred under Article (26) or (27) of the Corporate Tax Law, or between the Tax Group’s members, the taxable income shall be adjusted by

• Excluding any depreciation previously claimed from the future deductions of the transferee

• Adding the excluded amounts to the taxable income of the initial transferee

What is a Specific Anti-Abuse Rule?

Consider an Investment Property that is transferred between parties for commercial purposes. The FTA authorities can disallow the depreciation deduction claimed by the transferee if the transaction/arrangement is not for a valid commercial or other non-fiscal reason that reflects economic reality.