UAE Corporate Tax: Property owners better off after new 4% depreciation rule
Real estate investors in the UAE are facing critical decisions about tax consequences as new corporate tax regulations will come into force on January 1, 2025. They need to decide whether properties ought to be assessed at the current market value or the initial purchase price, influencing tax computations. The submission deadlines for tax returns under these new regulations are September 2026.
One of the most significant advantages for investors is the newly introduced 4% annual depreciation clause on investment properties. This is only applicable if the properties are appreciated at market prices; choosing the original purchase price forfeits this advantage. For instance, if one owns a property that costs Dh1 million, but its worth has appreciated to Dh3 million after five years, the investor benefits with 4% depreciation on the higher worth for the five years, paying a 9% corporate tax upon sale.
The new corporate tax regulations starting January 1, 2025 will require UAE property investors to make essential tax-related decisions. Investors need to decide between recording their properties at market value or their original purchase price because this choice determines how tax calculations will be made. The new tax regulations require all taxpayers to file their returns by September 2026.
What is the new annual percentage of depreciation allowance for investors?
Investors can benefit from a new annual 4% depreciation allowance which applies specifically to investment properties. The depreciation benefit becomes available only when properties are assessed at market value but the original purchase price method eliminates this opportunity. An investor who bought a property for Dh1 million now sees it worth Dh3 million so they can apply 4% depreciation on the increased value over five years before paying 9% corporate tax when selling.
For further information or assistance with UAE Corporate Tax and VAT matters, please contact our Tax Department.
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