The UAE has once again updated its corporate tax laws, this time focusing on property. For investors, family offices, and companies with property assets, these changes are important. Understanding the rules will help you avoid costly mistakes and plan better for the future.
What Changed in the New Ruling
Ministerial Decision No. 173 of 2025 introduces limits on how property-related deductions can be applied. Until now, some businesses used depreciation and impairment accounting rules to lower taxable income significantly.
The new law sets a cap: annual deductions for investment properties cannot exceed 4% of the original cost. This closes a gap that many companies were using to reduce their tax bills.
The law applies from January 1, 2025. That means companies that already filed returns under the old system may need to revisit their filings. In some cases, amended returns will be necessary.
Why This Matters for Property Owners
Property is a major investment class in the UAE. Many companies hold buildings in prime locations or large portfolios across free zones and mainland. These assets affect not just balance sheets but also tax liability.
Before the new ruling, companies could sometimes record large deductions by writing down old properties or overstating impairment losses. This reduced corporate tax exposure, often by millions of dirhams. The updated decision prevents this practice.
Now, property investors must plan carefully. Annual deductions are limited. Impairment values, even if higher than book value, cannot be used to offset tax beyond the 4% cap.
Accounting Treatment vs. Tax Treatment
The new rules highlight the difference between financial reporting and tax compliance. Under international financial reporting standards (IFRS), businesses must account for depreciation and impairment separately.
Depreciation applies to fixtures, fittings, and equipment. Impairment applies to the building’s core structure and its current market value. Both can change reported profits.
But for tax purposes in the UAE, the law now sets stricter limits. Even if IFRS shows a major drop or rise in value, only 4% of the original cost can be deducted each year against taxable income.
Key Considerations for Companies
- Timing of Tax Returns
If your fiscal year crosses 2024 and 2025, review your filings. Some companies may need to amend returns if deductions claimed exceed the new limits. - Scope of the Ruling
The decision applies to investment properties, not to undeveloped land or company headquarters. For example, an iconic office building used by the business itself is not covered. - Group Structures
Related parties and group holdings should carefully assess transactions. Some intra-group transfers may fall under the new restrictions. - Oversight and Compliance
Large family-owned businesses and private entities, which often have limited external oversight, should review their balance sheets. Years of underreported depreciation or impairment could now impact tax exposure.
What Investors Should Do Now
- Review property portfolios with accounting and tax advisors.
- Recalculate tax positions under the 4% cap.
- Identify if any tax returns need amendment.
- Contact the Federal Tax Authority when in doubt. Good faith and timely reporting can protect against penalties.
Broader Impact on Property Investment
The UAE government introduced the corporate tax in June 2023 with a standard 9% rate on profits above Dh375,000. Free zone companies and certain activities remain exempt.
This property ruling reflects a tightening of rules to prevent aggressive tax planning. While it reduces flexibility for property-heavy businesses, it aligns UAE tax law with global standards.
For investors, it means property is still attractive but requires smarter planning. Building a strategy around tax planning UAE will be critical to avoid surprises. The ruling does not eliminate property as a viable asset class but changes how returns should be managed.
Final Thoughts
Corporate tax in the UAE is still new, and frequent updates should be expected. The latest decision on property deductions is a reminder that compliance must go hand in hand with accounting and financial planning.
Companies and individuals with property investments should act now. Review your tax position, adjust your accounting processes, and build a forward-looking approach to tax planning UAE.
With the right advice and preparation, you can continue to benefit from property investment while staying compliant with the law.
Don’t let new tax rules catch you off guard. AR Associates offers trusted support in tax planning UAE to keep your business compliant and profitable. Reach out now for a consultation.
