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Corporate Tax in Dubai for Real Estate: The New Depreciation Rule for 2025

Dubai’s dynamic real estate market and favorable tax environment have long attracted investors from around the world. With the introduction of Corporate Tax, the United Arab Emirates continues to refine its legal framework to offer greater clarity, consistency, and benefits to businesses. One of the most significant updates for 2025 is the introduction of a new rule on tax depreciation for investment properties, a change that every business owner with interests in the sector must fully understand. This guide analyzes the new corporate tax in Dubai for real estate and how this strategic measure can positively impact your business.

What Changes with the New Tax Rule for Real Estate in the UAE?

The UAE Ministry of Finance has issued Ministerial Decision No. 173 of 2025, a key regulation that comes into effect on January 1, 2025. This decision introduces a highly anticipated measure: the possibility of applying tax depreciation to investment properties (Investment Properties) that are accounted for under the fair value model (fair value).

Until now, companies using this accounting model could not deduct depreciation on their real estate assets for tax purposes, creating a discrepancy between accounting and tax principles. The new rule resolves this inconsistency, allowing taxable entities to claim an annual depreciation of 4% on the original cost of the property. This change is designed to strengthen investor confidence and improve flexibility in tax planning for the real estate and capital-intensive sectors.

Keys to the New Regulation: What Every Investor Should Know

This update is not a mere administrative adjustment; it is a strategic opportunity that requires an informed decision. Below, we break down the fundamental points of the new regulation:

  • The Choice of “Realization Basis”: To benefit from this depreciation, companies must actively opt for taxation under the “realization basis” (realisation basis). This choice is a unique and irrevocable decision that must be made within a specific timeframe.
  • Annual Depreciation of 4%: Once the choice is made, the company can deduct 4% of the property’s acquisition cost annually, calculated on a pro-rata basis according to the holding period during the fiscal year.
  • Deadlines and Consequences: Companies that do not make this choice within the established time and manner will permanently lose the right to claim this depreciation on their investment properties valued at fair value. In this case, inaction has long-term tax consequences.
  • Consistency and Confidence: The measure aligns accounting treatment with tax treatment, providing greater coherence and predictability to the system. This is fundamental for any entrepreneur considering how to set up a company in Dubai with a real estate portfolio.

Who Does This Measure Directly Affect?

This new tax provision is especially relevant for a specific profile of companies and investors operating in the UAE:

  • Companies with Investment Properties: Companies that own real estate not for operational use, but as an investment to generate income or capital gains, and that account for them at fair value.
  • Capital-Intensive Sectors: Industries such as real estate, hospitality, or logistics, where fixed assets represent a substantial part of the balance sheet, will be particularly benefited.
  • Business Groups: The regulation also clarifies the tax treatment in case of property transfers within the same group under special regimes such as the Qualifying Group Relief (QGR) or the Business Restructuring Relief (BRR), ensuring the continuity of benefits.

This decision is a welcome step towards aligning accounting and tax principles in the UAE. It provides optionality for businesses and creates consistency in the tax treatment of investment properties.

Strategic Implications: Beyond Simple Compliance

It is crucial to understand that opting for the realization basis is not just a box to tick. It is a strategic decision with profound financial implications. Since tax depreciation under this new method is not reflected in the financial statements (which follow the fair value model), “temporary differences” may arise.

These differences can lead to deferred tax liabilities (deferred tax liabilities) according to international accounting standards. Furthermore, choosing this taxation method can affect the treatment of other assets valued at fair value and unrealized gains or losses. Therefore, thoroughly understanding the complete framework of taxes in Dubai is crucial to making this decision in an informed manner and aligned with the long-term objectives of the business.

How to Prepare Your Business for This Tax Change?

With the effective date approaching, businesses must act promptly. The first step is to conduct a comprehensive assessment of your investment property portfolio and analyze the financial implications of opting for the realization basis. This involves modeling tax scenarios to understand the impact on cash flow and future tax burden.

This measure demonstrates, once again, the UAE’s commitment to creating a robust, transparent, and attractive business ecosystem. An environment that not only offers an exceptional quality of life in Dubai but also an increasingly sophisticated and favorable tax framework for international investors.

Conclusion: A Strategic Opportunity for Real Estate Investors

The new rule on corporate tax in Dubai for real estate is a positive development that offers significant tax relief and aligns the UAE with international best practices. However, access to this benefit depends on an active, informed, and irrevocable choice. Ignoring this update is not an option for businesses looking to optimize their tax position and maximize the return on their real estate investments in the region.

If your company owns or plans to invest in properties in Dubai, it is crucial to act now. Our team of experts at MyDubaiWay is ready to analyze your situation and guide you in making the most beneficial decision under the new tax regime. Contact us to ensure your investment strategy is perfectly aligned with the latest regulations and maximizes your competitive advantages in this thriving market.

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