The UAE corporate tax rules 2025 represent one of the most important updates in the country’s fiscal and business environment in recent years. With the implementation of new measures such as the 4% annual depreciation allowance on investment properties held at fair value, companies across Dubai and the wider Emirates must adapt their strategies. These reforms are designed to strengthen transparency, align local accounting practices with international tax systems, and ensure that the UAE remains a globally competitive market.

This detailed guide explores how the changes will affect businesses, particularly in the Dubai real estate sector, what compliance steps are necessary, and why this shift is being welcomed as a milestone in the evolution of the UAE economy.

A New Era for Corporate Taxation in the UAE

For decades, the UAE was known as a “tax-free” jurisdiction, attracting multinational corporations, startups, and investors. However, as global frameworks evolved and organizations such as the OECD pressed for consistency under Pillar Two rules, the UAE gradually began to implement a formal corporate tax regime.

The introduction of the UAE corporate tax law Decree-Law No. 47 of 2022 laid the foundation, setting a general corporate tax rate of 9% on taxable income exceeding AED 375,000. This threshold ensures that small businesses and startups can continue to thrive, while larger corporations contribute their fair share to the national economy.

The latest amendment adds another important dimension: businesses that own or hold properties at fair value can now claim a 4% annual depreciation allowance based on the original cost of the property. This change, effective January 1, 2025, is especially relevant for capital-intensive sectors such as real estate, construction, and hospitality, where property assets form the backbone of operations.

Why the UAE Introduced These Corporate Tax Changes

The government’s objectives behind the new UAE corporate tax rules 2025 are clear:

• Alignment with global standards: The UAE is integrating more closely with international practices on taxation, including transfer pricing rules UAE corporate tax requirements and global minimum tax expectations.

• Investor confidence: By clarifying how assets are treated for tax purposes, businesses and investors gain predictability in financial planning.

• Diversification of revenue: As the UAE continues to diversify beyond oil, creating a stable tax base is essential to fund infrastructure, healthcare, education, and innovation projects.

• Support for the property sector: Dubai has emerged as a real estate hub, and these rules provide a structured framework for companies to optimize their tax positions.

Key Provisions of the New Depreciation Rule

Under the updated Dubai companies corporate tax compliance framework, businesses that hold investment properties at fair value now have several important choices and obligations:

1. Election for Realisation Basis

   • Companies can make a one-time irrevocable choice to elect the realisation basis of taxation.

   • This election determines how depreciation and gains are recognized.

2. Annual Depreciation of 4%

   • Businesses can claim 4% per annum on the original cost of investment properties, applied on a pro-rata basis depending on how long the property is held during the tax year.

3. Group Relief Provisions

   • Continuity is provided under Qualifying Group Relief (QGR), Business Restructuring Relief (BRR), and Tax Groups (TG) when properties are transferred between related entities.

4. Failure to Elect

   • If a company does not elect the realisation basis, it permanently forfeits the right to claim depreciation on those properties. This makes timely decision-making and tax planning critical.

Broader Implications for Businesses

The new rules are not just about compliance—they are about strategy. Businesses need to consider:

• Deferred Tax Liabilities: Since depreciation may not align perfectly with accounting standards, temporary differences can create deferred tax liabilities.

• Impact on Free Zones: While new UAE corporate tax free zones rules still allow exemptions in certain cases, the rules are tightening. Companies must understand what qualifies as “qualifying income free zone UAE corporate tax” to maintain benefits.

• Transfer Pricing: The emphasis on transfer pricing rules UAE corporate tax means multinationals must document related-party transactions carefully.

• Domestic Minimum Top-Up Tax UAE: Large multinational groups may also face the 15% global minimum tax under the OECD’s Pillar Two framework, as the UAE has confirmed its implementation.

Impact on Real Estate Investors

For investors, the changes offer both challenges and opportunities:

• Profitability Boost: By reducing taxable income through depreciation, companies can improve net profitability.

• Transparency: Consistent tax treatment across entities increases market transparency, enhancing Dubai’s reputation as a safe investment destination.

• Strategic Planning: Choosing the realisation basis may impact not only current tax liability but also future gains when properties are sold.

• Investor Confidence: Global investors—particularly from markets like India, the UK, and Singapore—are more likely to commit capital when they see tax clarity.

Corporate Tax Filing Deadlines and Compliance in 2025

The corporate tax filing deadline UAE 2025 will be critical for companies to observe. Businesses must prepare by:

• Registering for corporate tax with the Federal Tax Authority (FTA).

• Filing accurate returns that incorporate depreciation elections.

• Ensuring alignment with UAE corporate tax law Decree-Law No. 47 of 2022 and subsequent amendments.

• Documenting compliance with transfer pricing rules for related-party transactions.

Failure to comply could result in administrative penalties, reputational risks, and ineligibility for group relief benefits.

Who Pays Corporate Tax in Dubai Free Zones?

This is one of the most common questions. Under the who pays corporate tax in Dubai free zones framework:

• Companies generating qualifying income can still benefit from 0% tax rates.

• Non-qualifying income is taxed at the standard 9% rate.

• The FTA has clarified categories of qualifying and non-qualifying income, but businesses must track transactions carefully to avoid unexpected liabilities.

Why This Matters for Dubai’s Global Position

Dubai competes with cities like Singapore, Hong Kong, and London for foreign direct investment. The clarity provided by the UAE corporate tax rules 2025 helps solidify its position.

• For real estate: Developers and investors gain predictable returns.

• For multinationals: Transfer pricing and group relief provisions create consistency.

• For startups: The AED 375,000 threshold allows breathing room while scaling.

• For free zones: Rules ensure fair competition and compliance with global tax standards.

Practical Steps Businesses Should Take

1. Conduct a Tax Position Review
   Evaluate whether electing the realisation basis is beneficial, considering current and future property portfolios.

2. Update Accounting Systems
   Ensure accounting software can track depreciation on original cost and reconcile with fair value.

3. Consult Advisors
   Seek guidance on how these rules interact with international structures, especially for multinationals.

4. Monitor Deadlines
   Missing the corporate tax filing deadline UAE 2025 may result in loss of depreciation rights and fines.

Looking Ahead: Long-Term Impact

The new UAE corporate tax rules 2025 will likely encourage greater professionalism across industries. Businesses will:

• Prioritize accurate reporting and governance.

• Build long-term strategies for Dubai companies corporate tax compliance.

• Attract global investors seeking stable, transparent jurisdictions.

• Adjust real estate valuations based on consistent depreciation treatment.

By introducing these measures, the UAE is signaling its commitment to a sustainable and transparent tax regime without losing its appeal as a business hub.

FAQs

What is the new tax depreciation rule for investment properties in the UAE?
From January 1, 2025, businesses can claim a 4% annual depreciation on investment properties held at fair value, based on the property’s original cost.

Does the rule apply automatically?
No. Companies must make a one-time irrevocable election for the realisation basis; otherwise, they cannot claim depreciation.

What happens if a business does not elect the realisation basis?
They permanently lose the right to claim depreciation on properties held at fair value.

How does this impact financial reporting?
Temporary differences may arise between tax and accounting values, creating deferred tax assets or liabilities.

Why is this change important for Dubai’s property sector?
It improves profitability, transparency, and investor confidence—vital for a global real estate hub.

Who benefits the most from the new UAE property tax rules?
Companies in capital-intensive sectors such as real estate, hospitality, and logistics, as well as multinational groups that require consistent tax treatment.

Final Thoughts

The UAE corporate tax rules 2025 are more than a technical update—they are a strategic shift. By introducing depreciation allowances, strengthening compliance frameworks, and clarifying free zone provisions, the UAE ensures its tax regime remains competitive yet responsible.

For businesses, this is the time to review structures, file accurately, and leverage opportunities. For investors, the changes reinforce Dubai’s promise as a transparent, profitable, and globally aligned market.

As the world adapts to international tax reforms, the UAE has once again shown that it can balance local business growth with global expectations—securing its place as one of the most dynamic and resilient economies worldwide.

Get Expert Guidance on UAE Corporate Tax Rules

Understanding the UAE corporate tax rules 2025 and how they apply to your business or investment can be complex—but you don’t have to navigate it alone. At House & Hedges Real Estate, our experts are here to guide you through compliance, real estate tax planning, and profitable investment opportunities in Dubai’s fast-growing market.

📩 Email: info@houseandhedges.ae
📱 WhatsApp: +971 52 336 2441

Reach out today to get personalized advice tailored to your business or property portfolio and ensure you’re fully prepared for the upcoming changes.