In this month’s edition, we bring you crucial updates on corporate and Indirect tax developments in the UAE. Our goal is to provide you with a comprehensive digest of the latest tax news, legislative changes, and enforcement actions in the United Arab Emirates (UAE). This edition highlights key developments from July 2025, along with important alerts.
Depreciation Adjustments for Investment Properties held at Fair Value – Key Insights & Compliance Strategies
In July 2025 the UAE Ministry of Finance released Ministerial Decision No. 173 of 2025 on “Depreciation Adjustments for Investment Properties held at Fair Value” for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. MD 173 introduces an irrevocable election that allows Taxable Persons who have opted to recognise gains and losses on a realisation basis to claim a deemed depreciation deduction on Investment Property carried at fair value under IFRS.
MD 173 applies to “Investment Property” as defined in IAS 40 that is measured at fair value in the financial statements. Land is excluded from the definition of Investment Property.
Have elected the realisation basis for gains/losses.
This Decision shall apply to Tax Periods starting on or after 01 January 2025.
Taxable Persons preparing financial statements on an accrual basis and applying the realisation basis for gains/losses may elect to deduct the lower of:
4% of original cost, or
Tax Written Down Value (TWDV) for each twelve-month Tax Period.
The election must cover all Investment Properties measured at fair value.
The election cannot be revoked once made.
The election must be made in the Tax Return for the first Tax Period to which MD 173 applies if Investment Property is already held, the Tax Period in which Investment Property is first held thereafter, or the first Tax Period in which Article 21 (Small Business Relief) ceases to apply.
Annual deduction = 4% of Original Cost or TWDV, whichever is lower.
Pro-rated for part-year ownership or short/long Tax Periods.
Deduction starts from the Tax Period stated in the election and continues until TWDV reaches nil, realisation occurs, or the property is removed from the fair value model.
“Original Cost” is aligned with IAS 40 and includes capitalised subsequent expenditure, subject to arm’s-length requirements.
“Opening Value” is determined by reducing Original Cost by a deemed 4% annual depreciation for each calendar year during which the property was held before the first relevant Tax Period.
TWDV equals Opening Value less depreciation actually deducted post-election.
Where an asset is transferred and amounts relating to that transfer were previously excluded from the Taxable Income of the initial transferee, any subsequent realisation event will trigger the reinstatement of those previously excluded amounts into the taxable income of that transferee in the Tax Period of realisation.
Furthermore, in the case of realisation events, any cumulative depreciation or amortization previously claimed as a deduction must be added back unless the transfer qualifies for intra–group relief or occurs between members of the same Tax Group.
The introduction of tax depreciation for investment properties offers immediate tax relief for UAE businesses using the Fair Value Method.
Claiming depreciation creates a temporary difference from accounting rules, potentially requiring deferred tax recognition in financial statements.
Businesses should review their fixed asset registers, valuation methods, depreciation policies, and tax reporting to align with the new rules.
The Ministry of Finance and the Federal Tax Authority (FTA) has announced a significant amendment to the excise tax framework applicable to Sugar-sweetened beverages (SSBs). The update introduces a Tiered volumetric model, where the excise tax on each litre of an SSB will be directly linked to its sugar content per 100ml. Under this new model, beverages with higher sugar concentrations will attract a proportionally higher Excise Tax, replacing the current flat rate of 50%.
This reform reflects the UAE’s ongoing commitment to public health promotion, encouraging reduced consumption of high-sugar products, and motivating manufacturers to reformulate beverages with lower sugar levels.
The new excise tax mechanism is expected to take effect in early 2026, subject to the issuance of the implementing legislation. Businesses should initiate early preparations, which may include:
Evaluating the current product portfolio to identify items that will fall under the new tiered tax model.
Measuring sugar content in each product to assess potential changes in applicable excise tax rates.
Conducting R&D or reformulation trials aimed at lowering sugar levels.
Assessing market viability of reformulated products.
Reviewing product formulations and packaging disclosures.
The Federal Tax Authority (FTA) has released an updated Private Clarifications Guide in July 2025, replacing the November 2024 version. The guide outlines the eligibility criteria, the types of matters that can be clarified, and the procedure for requesting the FTA’s official position on specific tax issues.
A Private Clarification is a binding written response from the FTA, issued for a specific taxpayer and a specific transaction, based solely on the facts and documents submitted.
Registered taxpayers or their appointed Tax Agents/Legal Representatives.
Tax groups, via the representative member and using the group TRN.
Unregistered persons in certain VAT and Excise scenarios.
Corporate Tax: only registered taxpayers or exempt entities in specific cases.
To qualify, the application must relate to a genuine, unresolved tax matter and must:
Identify the exact legal provision and the interpretative ambiguity.
Demonstrate that the matter has not already been addressed in FTA publications.
Include full factual background and documentary evidence.
The FTA will reject requests that are hypothetical, seek confirmation of status, relate to matters under active Tax Audit, duplicate existing FTA guidance, or concern administrative processes.
Identify the uncertainty and confirm it is not already clarified.
Prepare a detailed tax analysis, including alternative interpretations.
Compile supporting evidence.
Pay the applicable fee – AED 1,500 (for single tax) / AED 2,250 (for multiple taxes).
Await FTA response, generally within 60 business days.
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