UAE Investment Property Depreciation Rules Effective from January 2025

New UAE Corporate Tax Rules on Depreciation of Investment Properties — Effective January 1, 2025

Starting from January 1, 2025, the UAE’s Ministerial Decision No. 173 brings important changes regarding how businesses can claim depreciation on investment properties held at fair value, under IAS 40, for corporate tax purposes. Understanding these new rules can help you optimize your tax planning and compliance.

Key Points to Know:

1. Depreciation Election Option

Taxpayers using the accrual accounting method may choose to claim depreciation on fair-valued investment properties. The depreciation amount will be the lower of

  • 4% of the property’s original cost per year (prorated for part of the year), or

  • The Tax Written Down Value (TWDV) at the start of the tax period.

2. Irrevocable Election

The choice to claim depreciation must be made through the tax return for the relevant tax period. If you miss this deadline, you lose the right to claim depreciation for that period.

3. Consistency Across Properties

If you make the election, all your qualifying investment properties valued at fair value must use the same depreciation method.

4. Treatment on Disposal

When you sell, dispose of, or write off an investment property, any depreciation claimed previously will be reversed and included as taxable income.

5. Transfer of Properties

For transfers within the same group or restructuring events, any depreciation claimed by the transferor must be properly adjusted by the transferee.

6. Anti-Abuse Measures

Transfers between related parties that lack genuine commercial purpose may result in disallowing depreciation claims.

Recommendations from YUGA Accounting:

  • Maintain detailed records of your investment properties, including asset registers and holding periods.

  • Be aware of deferred tax liabilities that may arise from differences between accounting standards and tax treatments.

  • Seek expert advice before making the depreciation election, especially if your business has complex group structures or potential future tax exemptions.

At YUGA Accounting & Tax Consultancy, we help businesses navigate these new corporate tax regulations smoothly. Contact us for personalized guidance to ensure compliance and optimize your tax position.

FOR MORE INFORMATION, CONTACT US:

Phone: +971 52 1952 532 / +971 4 240 1110

Mail ID: info@yugaaccounting.com

Website: www.yugaaccounting.com

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