UAE's 2025 tax update: How real estate firms can save on fair-valued assets
TL;DR:
Finance Ministry's
Ministerial Decision No. 173/2025
allows firms to deduct depreciation on investment properties measured at fair value, if they choose the realisation basis, effective from tax periods starting January 1, 2025.
Companies can claim depreciation up to 4% of original cost or the account's written-down value for each 12‑month period.
Tax expert insights, including Aldar, highlight greater planning flexibility and equitable treatment across fair-value and historical-cost assets.
The "realisation basis" election is irrevocable and introduces fresh tax planning tools, though firms must navigate 'claw‑back' provisions.
Businesses in the UAE are adjusting to new tax guidelines that affect how they report the value of their property assets. The Ministry of Finance has introduced specific provisions under the Corporate Tax framework that govern how companies can depreciate property assets that are recorded at fair value, a method that reflects the current market worth of assets, rather than historical purchase prices.
This change is particularly important for companies that follow International Financial Reporting Standards (IFRS), as many real estate developers, investment firms, and asset-heavy industries in the UAE do. Under the new rule, even when a property's value rises on the balance sheet due to market appreciation, the depreciation expense claimed for tax purposes will still be based on the asset's original cost, not the higher market value.
Experts believe this offers clarity and prevents businesses from inflating depreciation deductions to reduce tax liabilities. According to UAE tax professionals cited in a local news outlet Al Etihad, the move is a strategic clarification aimed at aligning tax practices with international standards while safeguarding the UAE's new corporate tax system from loopholes.
What the New Rule Says
Who it affects
: Businesses holding investment properties using
fair value accounting
under IFRS.
Eligibility condition
: Must opt for the realisation basis, meaning gains are taxed on disposal, not annual book adjustments.
Depreciation cap
: Up to 4% of original cost or the written-down value, prorated for partial-year holdings.
Election specifics
: A one-time, irrevocable choice must be made in the first 2025 tax period. Once selected, it applies uniformly across all relevant properties.
Claw-back rules
: The decision includes guidance on reversal triggers particularly transfers or revaluations, so companies must track annual changes meticulously.
Applicability
: Regardless of whether fair value assets were held before or after June 1, 2023, the corporate tax implementation date coverage begins from January 1, 2025.
Context: Why This Matters
Previously, firms using fair value accounting received no depreciation tax benefit, unlike those using historical cost, who could deduct depreciation expenses annually.
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Grammarly
Undo
As The National describes it, this was 'a significant change from prior practice,' bringing parity and compliance clarity.
Gulf News explains that the rule's goal is to 'create tax fairness between firms using fair value and historical cost methods', a move widely welcomed by developers and financial leaders.
Voices from the Market
In Al Etihad's interview, experts emphasised the significance of Ministerial Decision 173/2025:
Aldar Properties
, speaking to Al Etihad, applauded the decision for enhancing 'tax neutrality and equity' and called it a 'progressive and well-calibrated step.' Aldar's finance chief notes this brings confidence for capital deployment in its Dh25.8 billion assets under management.
Aurifer's
founding partner, as reported in The National, explained that the rule allows firms choosing the realisation basis to claim depreciation, smoothing taxable profits and aligning tax treatment with economic reality.
Practical Implications for Businesses
Strategic Tax Planning
Firms can now choose whether to hold properties at market or historical value, factoring in current outlay, potential long-term gains, and timing.
Cashflow Benefits
Depreciation deductions can improve near-term cash flow by reducing taxable income and corporate tax liabilities, especially during early years of holding.
Clarity & Compliance Confidence
With guidelines on claw-back events, firms can manage transitions, inter-company transfers, and development scenarios more precisely.
Investor Appeal
Developers like Aldar believe the reform supports investor confidence and better capital allocation in the real estate sector.
Key Considerations & Risks
Irrevocable election
: Once chosen, companies cannot revert, requiring comprehensive internal assessments before opting in.
Annual calculations
: Depreciation must be tracked and documented precisely, balancing reported gains and written-down values.
Claw-back vigilance
: Should revaluation events occur, firms need robust systems to comply with reversal rules.
Compliance timing
: Businesses must make the election in their first 2025 tax period, often aligning with the calendar year, so deadlines must be prioritized.
Broader Tax Landscape
This decision is part of a broader pattern of refining the UAE's Corporate Tax Law (Decree-Law 47/2022), which introduced a 9% base rate starting June 1, 2023, for profits exceeding AED 375,000.
As per WAM, in 2025, corporate tax registration passed 576,000 entities, indicating widespread uptake.
Additional 2025 reforms included tiered excise tax on sugary beverages and clarity on energy and digital taxation, further aligning the UAE with global fiscal standards.
The 2025 depreciation rule for fair-valued investment properties marks a milestone in the evolution of UAE corporate taxation. By restoring parity between reporting methods and enabling depreciation allowances, the Ministry has introduced real planning levers for firms, particularly in real estate. As various interviews in local news outlet confirms, the move is more than administrative: it reinforces the UAE's reputation for fiscal clarity, fairness, and investor-friendly regulations.
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