In a significant transfer aimed toward selling consistency and equity within the UAE’s evolving company tax panorama, the Ministry of Finance has issued Ministerial Choice No. 173 of 2025, permitting tax depreciation on funding properties (IP) held at honest worth. Efficient January 1, 2025, this important modification is predicted to profit a broad base of companies in the actual property and capital-intensive sectors, driving compliance, planning flexibility, and investor confidence.
Dhruva, a number one tax advisory agency within the Center East, applauds this improvement, which addresses a long-standing concern amongst taxpayers who comply with the honest worth mannequin and have been unable to say depreciation deductions for his or her funding properties.
“This determination is a welcome step in the direction of aligning accounting and tax rules within the UAE,” mentioned Sandeep Kumar, Company Tax Accomplice, Dhruva. “It supplies optionality for companies and creates consistency in how funding properties are handled for tax functions. Importantly, it provides firms a one-time alternative to elect the realisation foundation of taxation — a selection that’s irrevocable and requires cautious analysis.”
The brand new provisions enable a taxable individual to say depreciation at 4% every year on the unique value of the funding property—calculated on a pro-rata foundation relying on the holding interval. Nevertheless, to profit from this, the entity should elect for the realisation foundation of taxation, a selection that’s irrevocable and should be exercised inside a specified timeframe.
Additional, the election should be made on the degree of the taxable individual and is irrevocable as soon as exercised. Companies that fail to elect inside the prescribed timeline will completely forfeit the best to say depreciation on funding properties held at honest worth. The Ministry has additionally outlined particular provisions for properties transferred beneath Qualifying Group Reduction (QGR), Enterprise Restructuring Reduction (BRR), or inside Tax Teams (TG), making certain continuity and readability in such complicated preparations.
Furthermore, since depreciation beneath the honest worth mannequin doesn’t seem in monetary accounts, claiming it for tax functions might create a short lived distinction—giving rise to a deferred tax legal responsibility beneath worldwide accounting requirements.
Importantly, the choice additionally clarifies the tax implications upon realisation of such properties, together with changes for beforehand claimed depreciation. Particular provisions are additionally laid out for intra-group transfers, enterprise restructurings, and tax teams upon realisation of such properties.
“Taxpayers mustn’t view this as a routine compliance replace,” added Kumar. “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 beneath the brand new company tax regime.”
For companies holding actual property at honest worth, this replace underscores the significance of proactive planning and early elections in upcoming tax filings contemplating the election for the realisation foundation might have wider penalties past actual property — doubtlessly affecting the remedy of different fair-valued belongings and unrealised positive factors or losses. Dhruva advises UAE companies to fastidiously consider the long-term affect of electing the realisation foundation.