Good news first: the UAE has no separate tax depreciation table. The depreciation in your accounts is usually what you deduct for UAE Corporate Tax.
There are a few catches, though. Cars used privately, assets moved between group companies and property held at fair value all need care. Property owners also have a newer option: a yearly 4% deduction under Ministerial Decision No. 173 of 2025.
How depreciation works for Corporate Tax
Your tax starts from the profit in your financial statements. Those follow IFRS, or IFRS for SMEs if your revenue is AED 50 million or less. Our guide to taxable income adjustments covers what changes after that.
When you buy a van or a machine, you don’t expense it all at once. You spread the cost over its useful life as depreciation. That yearly charge lowers your profit, so it lowers your tax too.
The charge is deductible if the asset is used for your business and doesn’t earn exempt income. Land is never depreciated.
If you owned assets before Corporate Tax started, keep depreciating them from their book value in your opening balance sheet.
UAE depreciation rates
The law doesn’t set rates. You pick a useful life that matches how long you really use the asset, and your auditor checks it’s reasonable. Most companies use straight-line: cost minus expected resale value, divided by the useful life.
These are typical choices in the UAE, not legal rates:
| Asset | Typical useful life | Yearly rate |
|---|---|---|
| Buildings | 20 to 40 years | 2.5% to 5% |
| Machinery | 5 to 15 years | about 7% to 20% |
| Furniture and fixtures | 5 to 7 years | about 14% to 20% |
| Vehicles | 4 to 5 years | 20% to 25% |
| Computers | 3 years | about 33% |
| Software | 3 to 5 years | 20% to 33% |
| Land | Not depreciated | 0% |
If you change a useful life later, it only affects future years.
Example: a company vehicle
A Dubai trading company buys a vehicle for AED 120,000, excluding VAT. It plans to keep it 5 years and sell it for AED 20,000. That’s AED 20,000 of depreciation a year.
| Per year (AED) | Delivery van, business only | SUV, 30% private use |
|---|---|---|
| Depreciation in the accounts | 20,000 | 20,000 |
| Deductible for tax | 20,000 | 14,000 |
| Tax saved at 9% | 1,800 | 1,260 |
For the SUV, keep mileage logs. Without them, the business share is hard to defend.
The 9% saving only applies once taxable income passes AED 375,000. In a year you claim Small Business Relief, there’s no saving.
If the van sells after 3 years for AED 70,000, its book value is AED 60,000. The AED 10,000 gain is taxable.
When tax and your accounts don't match
Most of the time they match. Watch for these cases:
- If you use an asset privately, only the business share is deductible.
- If interest was added to an asset’s cost (common in property development), that part falls under the interest limit rules. These only bite once net interest passes AED 12 million.
- If you buy an asset from a related party, the price must be at market value. If the FTA changes the price, your depreciation changes too. Our transfer pricing team can check this.
- If you move an asset to another group company, group relief lets it move at book value. If it leaves the group within 2 years, that relief is reversed.
- If you shorten useful lives just to cut tax, expect questions from your auditor and possibly the FTA.
The 4% option for investment property
If you own rental or investment property and carry it at fair value, your accounts show no depreciation at all. Ministerial Decision No. 173 of 2025 fixes that. From 2025, you can deduct up to 4% of the building’s original cost each year.
Who qualifies
- You hold investment property at fair value under IAS 40. Land doesn’t count.
- Your accounts are on the accrual basis.
- You elect the realisation basis for gains and losses under Article 20(3). You can do this in the same return.
How much you can deduct
Each year you deduct 4% of original cost, or the remaining tax value if that’s lower. Part years are pro-rated. If you owned the property before 2025, each full year you held it cuts the starting value by 4%. You can’t claim those earlier years.
Don’t miss the election
You get one chance, and you can’t undo it. The election goes in your Corporate Tax return for the first year it applies: the year you first hold the property, the year Small Business Relief stops applying, or FY2025 if you already owned it. It covers all your fair-value properties.
For calendar-year companies, the FY2025 return was due on 30 September 2026. If you filed it without the election, speak to a tax adviser soon.
Example
A company bought a rental building (excluding land) for AED 2,000,000 on 1 January 2023. It held it for 2 full years before 2025, so its starting tax value is AED 1,840,000.
| Year | Deduction (AED) | Tax value at year end (AED) |
|---|---|---|
| 2025 | 80,000 | 1,760,000 |
| 2026 | 80,000 | 1,680,000 |
| 2027 (sold 30 June) | 40,000 | 1,640,000 |
That’s AED 7,200 less tax in each full year. But when the building is sold, all AED 200,000 claimed is added back to taxable income. You pay the tax later, not never. The longer you hold the property, the more that delay is worth.
The same add-back happens if you switch to the cost model, claim Small Business Relief or close the business. Transfers under the group relief rules don’t trigger it.
Records to keep
You don’t file a depreciation schedule with your return, but the FTA can ask for one. Keep these for 7 years after the tax period:
- A fixed asset register with cost, purchase date, useful life and yearly depreciation
- Purchase invoices and sale documents
- Mileage logs for cars that are also used privately
- For the 4% option, your cost and tax value workings and the return with the election
Is your register out of date? Our accounting team can rebuild it from your invoices and bank statements.
Need help with depreciation?
For most businesses, tax depreciation is just good bookkeeping. The trouble starts when the asset register stops being updated, or a 4% election gets missed.
We can review your fixed asset register and depreciation policy, and tell you whether the 4% option is worth it for you. We also prepare and file returns through our Corporate Tax filing service. Call +971 50 483 6190 or contact us for a free consultation.
Want a dedicated tax adviser? Our group’s specialist tax firm, A&A Tax Consultancy, handles Corporate Tax, transfer pricing and VAT for businesses across the UAE.
General guidance as of October 2026. It is not tax advice for your specific situation.
