Introduction of Ministerial Decision No. 173/2025

The United Arab Emirates’ Finance Ministry has announced a significant update in its tax regulations with the introduction of Ministerial Decision No. 173/2025. This decision, effective from January 1, 2025, allows real estate firms to deduct depreciation on investment properties that are measured at fair value. This move is part of a broader strategy to enhance the tax landscape for real estate companies operating within the UAE.

Depreciation Deduction Details

Under the new regulation, firms can apply up to a 4% depreciation rate on their investment properties. This provision aims to create a level playing field between properties valued at fair market rates and those assessed using historical cost methods. By allowing depreciation deductions, the UAE government seeks to foster tax neutrality, ensuring that companies are not disadvantaged based on their chosen valuation method.

Implications for Strategic Tax Planning

The introduction of this tax update is expected to significantly impact strategic tax planning for real estate firms in the UAE. By enabling depreciation deductions on fair-valued assets, companies can optimize their tax liabilities, leading to potential cost savings. This change encourages firms to reassess their asset valuation strategies and align them with the new tax benefits.

Boosting Investor Confidence

The decision is also anticipated to bolster investor confidence in the UAE’s real estate sector. By providing a more equitable tax environment, the government aims to attract both domestic and international investors. The ability to deduct depreciation on fair-valued assets makes the UAE an even more attractive destination for real estate investments, potentially driving growth and development in the sector.

Conclusion

Overall, Ministerial Decision No. 173/2025 represents a forward-thinking approach by the UAE’s Finance Ministry to support its real estate industry. By aligning tax policies with global best practices, the UAE continues to position itself as a leading hub for real estate investment and development.