UAE firms are now able to deduct depreciation from taxable income on investment properties held at fair value, according to a ministerial decision issued by the Finance Ministry. The rule permits deductions on investment assets in tax periods starting from 1 January, 2025 onwards, and will come into effect immediately.

To qualify: Deductions can be made only if taxpayers opt for the realization basis method of accounting for such assets for the tax period starting from 1 January, 2025. Firms will have to follow accrual-based accounting to qualify for the deduction benefits and hold investment property at fair value. This option is available to taxpayers regardless of whether they owned the investment properties before or after the corporate tax law took effect.

How much exactly? The deduction is calculated from either 4% of the original cost of the assets for each tax period, or the tax written down value at the start of the financial year — depending on whichever of the two is lower. If a taxpayer’s tax period is shorter or longer than one year, or holds the property for only part of the period, the depreciation is adjusted on a pro rata basis.

The ministry is also offering a one-off window for firms using the historical method of accounting — which values assets at their acquisition cost — to select the realization basis instead to qualify for depreciation deductions.

What if the asset is transferred to a related party? Depreciation deduction might be disallowed only if the transaction does not have a clear or valid commercial basis or non-fiscal basis.

Industry reax: Real estate firms seem to be welcoming the decision. Aldar CFO Faisal Falaknaz said it will “reinforce investor confidence, attract institutional capital, and enhance the UAE’s standing as a transparent, competitive, and globally integrated investment destination” in a statement (pdf) following the announcement.

IN OTHER TAX-RELATED NEWS-

The Finance Ministry and the Federal Tax Authority introduced a tiered excise tax model for sugar-sweetened beverages, replacing the flat rate system, state news agency Wam reports. Set to take effect in 2026, the revised mechanism will link tax per liter to the sugar content per 100 ml.

The rationale: The change is aimed at curbing high sugar consumption and promoting healthier products, in line with national public health goals. The authorities said businesses will have “sufficient time to prepare” ahead of the policy shift, with awareness campaigns and further details to be rolled out before implementation.

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