Dubai: The UAE Ministry of Finance has issued a new Ministerial Decision under the Corporate Tax Law (Federal Decree-Law No. 47 of 2022), allowing firms to claim tax depreciation on investment properties measured at fair value. This decision aligns these businesses with those using the historical cost method, who already benefit from depreciation deductions.

Effective from tax periods beginning on or after January 1, 2025, the rule enables companies to deduct depreciation if they opt for the “realization basis” method and make an irrevocable election in their first eligible tax year.

The allowable deduction is capped at the lower of 4% of the original cost or the written-down value of the property, calculated annually or prorated over shorter periods. The rule applies regardless of whether the investment property was acquired before or after the corporate tax law came into effect.

To support a smooth transition, the Ministry has granted a one-time exception for firms that haven’t yet chosen the realization basis, giving them a final opportunity to do so and benefit from the new tax treatment.

Clear guidelines have also been issued regarding “claw-back” situations, where previously claimed depreciation may be reversed — except in the case of property disposals.

The Ministry stated that the update reinforces tax equity and provides clarity for property-owning businesses, ensuring that fair value users aren’t left at a disadvantage in the evolving tax environment.