The UAE Ministry of Finance has just released a new Ministerial Decision that could significantly impact businesses holding investment properties. Specifically, it addresses how depreciation should be treated for properties held at fair value under the new Corporate Tax Law (Federal Decree-Law No. 47 of 2022). While this may sound like a technical accounting tweak, it actually carries important implications for investors, developers, and corporate taxpayers alike.

At the heart of the decision is an effort to align the UAE’s tax regime with global best practices—especially when it comes to ensuring tax neutrality and fairness. Under the UAE’s corporate tax framework, businesses are generally required to determine taxable income using either the accrual basis or the realisation basis. This new rule is specifically relevant to those who opt for the realisation basis, which recognizes income and deductions only when they are actually realised, not when they accrue.

Now, under this decision, taxpayers using the realisation basis can deduct depreciation on investment properties that are measured at fair value in their books. This is a noteworthy clarification because fair value adjustments—often used in accounting—do not always translate smoothly into tax treatments. The concern is that without such a rule, businesses might be penalised or confused by discrepancies between financial statements and taxable income.

But here’s where it gets nuanced. The depreciation deduction allowed isn’t unlimited. In fact, it’s capped to ensure consistency and fairness. The taxpayer may deduct the lower of either 4% of the original cost of the property (on an annual basis), or a prorated amount if the property was not held for the full 12-month tax period. That could mean less deduction if, for instance, the asset was acquired mid-year or sold before year-end.

Why does this matter? Because many businesses in the UAE—particularly those in real estate, family office structures, or asset management—hold property portfolios that are significant in value and essential to their operational model. Being able to deduct depreciation, even partially, offers some tax relief and makes real estate investing more predictable from a compliance standpoint.

At Bizzmosis, we see this as a welcome step forward. It gives clarity to our clients who are structuring or managing property-holding entities, especially those using SPVs in ADGM, DIFC, or other free zones. It’s also a reminder that choosing between accrual and realisation methods is not just a technicality—it can change the way your tax obligations are calculated.

We recommend reviewing your current tax basis and investment property strategy, particularly if you’ve recently transitioned to fair value accounting or are considering acquisitions. This is an ideal moment to assess whether your current structure maximises the benefits available under the Corporate Tax Law.

✅ Let’s assess your structure and maximise available benefits. Contact us today.

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