Latest news with #AnuragChaturvedi
Arabian Post
4 days ago
- Business
- Arabian Post
UAE Clarifies Tax Depreciation Rules on Fair‑Valued Properties
The UAE Ministry of Finance has introduced Ministerial Decision No. 173 of 2025, establishing clear rules for applying depreciation adjustments to investment properties held at fair value under the corporate tax regime. The decision allows businesses that choose the realisation basis to deduct tax depreciation, addressing a long-standing ambiguity in the treatment of such assets. Under the new rules, eligible taxpayers may deduct whichever is lower: the tax written-down value of the property, or 4 per cent of the property's original cost for each 12-month tax period. In cases where the tax period differs from a full year, the deduction is prorated accordingly. This provision applies to properties held both before and after the introduction of corporate tax, beginning with tax periods from 1 January 2025. The decision requires taxpayers to make an irrevocable election for the realisation basis in their first tax period starting on or after 1 January 2025 in which they hold an investment property; once selected, the choice applies to all future such properties. To accommodate those yet to make the election, the Ministry has granted an exceptional opt-in window enabling taxpayers to secure these depreciation benefits. ADVERTISEMENT Tax practitioners describe the move as enhancing fairness and aligning the UAE with international best practices. It establishes parity between owners of properties under historical cost accounting—already entitled to depreciation—and those adopting fair value accounting. According to the official announcement, the decision offers comprehensive guidance on various scenarios, including transfers between related and unrelated parties, development projects, and claw-back situations. This ensures clarity in calculating tax obligations and supports accurate return forecasts from investment assets. Industry reactions underline the practical benefits and strategic implications of the decision. Aldar Properties, Abu Dhabi's leading listed developer, welcomed the changes. Faisal Falaknaz, Group Chief Financial and Sustainability Officer, described the measure as a 'progressive and well-calibrated step' that affirms equity and supports long-term capital planning under the corporate tax law. He added that the decision will reinforce investor confidence and enhance the UAE's competitiveness as a global real estate destination. Aldar's investment arm holds a property portfolio valued at Dh25.8 billion as of 31 December 2024, and this clarification could affect similar entities across the sector. Financial and tax advisory firms emphasised the immediate cash flow advantages from the depreciation allowance. Anurag Chaturvedi, CEO of Andersen UAE, noted that the absence of depreciation claims on fair-valued properties previously led to higher taxable profits and increased tax liabilities. Now, with the new decision, firms opting for the realisation basis may reduce their taxable income by as much as 4 per cent of the original purchase cost per year. Thomas Vanhee, founding partner of Aurifer, described the decision as harmonising tax treatment with common economic lifespans of properties. He explained that businesses using fair value accounting now gain access to depreciation benefits comparable to those using historical cost without requiring an asset sale. Industry analysts have drawn attention to important caveats. Businesses should note that once they elect the realisation basis, they cannot reverse the decision. Moreover, property disposals or transfers—especially within corporate groups—could trigger claw-back provisions, meaning previously claimed deductions might be recouped by tax authorities. Gaurav Keswani, managing director of JSB in Dubai, urged companies to exercise caution, emphasising the importance of long-term strategic planning. He warned that misjudging the choice between realisation and fair value methods could lead to unintended tax liabilities. The backdrop to the decision lies in the UAE's broader roll-out of federal corporate taxation. Introduced on 1 June 2023, the regime charges a 9 per cent rate on profits exceeding Dh375,000, with a threshold of Dh1 million in annual turnover for applicability. The depreciation clarification forms part of the government's continued efforts to refine and operationalise the tax framework for transparent business operations. Financial experts are awaiting further interpretative guidance from the Ministry of Finance and the Federal Tax Authority. This guidance is expected to cover nuances in depreciation calculations, accounting treatment, claw-back events, and interactions with wider tax provisions.
The National
5 days ago
- Business
- The National
How UAE's decision on property depreciation charge lowers tax burden
The UAE Ministry of Finance's decision to help businesses make depreciation tax adjustments for investment properties will provide a 'short-term tax and cash benefit', experts have said. The ministry issued Decision No 173 of 2025 on Thursday, allowing certain businesses to deduct depreciation from their taxable income on investment properties accounted for at fair value – but only if they elect the realisation basis for capital gains and losses. It is applicable for tax periods starting January 1, 2025. The deduction will be limited to the lower of the tax written down value of the investment property, or 4 per cent of its original cost for each 12-month tax period, or a pro-rated amount if the tax period is shorter or longer than 12 months, or if the property was held only for part of the tax year, the ministry said. Fair value is the estimated price an asset would sell for on the open market, while realisable value is the estimated amount that can be obtained from an asset after deducting any costs necessary to make the sale or completion. Written down value is the net value after deduction of depreciation, said Anurag Chaturvedi, chief executive of financial advisory Andersen UAE. He said this was 'a welcome clarification' for taxpayers holding investment property at fair value under the International Financial Reporting Standards. Businesses opting for the realisation basis must 'carefully compute' depreciation deductions in line with the new rules, he added. 'In simple terms, many companies own investment properties that increase or decrease in value over time. These values are updated in their books [fair value accounting] but, until now, they could not deduct any depreciation for tax purposes – meaning higher taxable profits and more tax to pay,' said Thomas Vanhee, founding partner of boutique tax advisory services firm Aurifer. 'With this new decision, companies that choose the realisation basis [ie, they only pay tax when a property is sold, not every year based on value changes] can now deduct a portion of the property's cost [up to 4 per cent annually] from their taxable income.' It provides a short-term tax and cash benefit for businesses through the depreciation granted, something which did not exist under the regime applicable up to the end of 2024. It also better aligns with the property's economic life, Mr Vanhee said. The decision impacts businesses, not people, and further strengthens the UAE's tax framework, he said. This is 'a significant change from prior practice', where depreciation was not permitted on such properties if fair value accounting was used, he added. For example, if a UAE company owns an investment property that originally cost Dh10 million ($2.7 million), recorded at fair value under the IFRS, and it chooses the realisation basis for tax purposes, the allowable depreciation would be 4 per cent of the original cost, or Dh400,000, Mr Chaturvedi said. The UAE introduced the federal corporate tax with a standard statutory rate of 9 per cent starting from the financial year beginning on or after June 1, 2023. It took the income of companies exceeding Dh375,000 within the taxable bracket. Business owners in the country would be subject to corporate tax only if their turnover in a calendar year exceeds Dh1 million, the ministry said at the time. Abu Dhabi's biggest listed developer, Aldar Properties, welcomed the 'progressive and well-calibrated' decision and said it ensured 'tax neutrality and equity', with deductions available to businesses that hold investment properties on a historical cost basis. The decision also provides clarity on how tax depreciation applies in cases of property transfers (between related or third parties), developments and claw-back scenarios – ensuring businesses have a clear view of their compliance obligations and financial planning, the developer said in a statement on Friday. Aldar operates two business divisions: Aldar Development and Aldar Investment. The latter's portfolio of income-generating properties had a gross asset value of Dh25.8 billion as of December 31, 2024. Faisal Falaknaz, group chief financial and sustainability officer of Aldar, said the decision 'creates parity' between different accounting treatments and helps companies plan long-term capital deployment 'more effectively'. Gaurav Keswani, founder and managing director of Dubai-based financial consulting firm JSB, said it's not a decision to be taken lightly. "Once a business opts in, it's irreversible and if the property is later transferred, there's the potential for a claw-back of the tax benefit. So, careful planning is essential," he warned.
Khaleej Times
28-05-2025
- Business
- Khaleej Times
UAE attracting thousands of companies despite corporate tax, says expert
The UAE has been attracting thousands of companies from Europe, CIS and other countries because of its favourable, low tax environment and availability of talent among others, said Anurag Chaturvedi, CEO of Andersen UAE. While speaking during the New Age Finance and Accounting Summit organized by Khaleej Times on Wednesday, Chaturvedi said, "When UAE introduced 9 per cent corporate tax, a lot of people were thinking that UAE was going to lose its advantage of tax-haven and the economy will have a downtrend shift. On the contrary, over 200,000 businesses registered in the UAE between 2022 and 2024, despite the introduction of corporate tax – which was one of the lowest in the world." Highlighting the advantages of establishing a business in the UAE, he added that the country offers different ownership structures, dozens of free zones that offer various incentives, a strategic location that allows people to travel to any of the global jurisdictions within a fraction of time, a robust banking system and smart infrastructure. "Each time you travel across the UAE, you see a lot of traffic. Obviously, it is because a lot of people are travelling to the UAE to tap into opportunities in this country, because it is one of the fastest growing countries which really adopts global trends quickly," he said during the presentation titled The Global Tax Landscape – Why UAE Remains a Competitive Advantage. What is attracting entrepreneurs to the UAE? The one-day summit was attended by hundreds of top finance and tax industry executives. Top officials from the financial industry discussed topical issues that the industry is experiencing, especially related to AI, corporate taxes, e-invoicing and others. Chaturvedi elaborated that the push to attract companies and talent is coming from government entities, free zones and chambers of commerce. "Be it the economic department, free zone, chambers of commerce, they work hand-in-hand, bringing a lot of entrepreneurs to the UAE by involving the entire ecosystem," he added. Chaturvedi also noted that companies in the Western world are facing the challenge of a lack of talent availability or the talent is too expensive. "When you look into the UAE, we are home to 190-plus nationalities. They're available at different levels. And new talent keeps coming," he added.
The National
25-05-2025
- Business
- The National
What is the new UAE tax option for unincorporated partnerships?
The UAE's Ministry of Finance on Saturday issued a Cabinet decision to introduce an option for tax treatment for unincorporated partnerships. The federal Decree-Law No (47) of 2022 on the taxation of corporations and businesses gives unincorporated partnerships – businesses partnerships that are not registered as separate companies – the option to be treated as a taxable person with prior approval by the Federal Tax Authority (FTA), state news agency Wam said, quoting a ministry statement. The move is part of efforts to 'enhance tax transparency' and improve the UAE's business environment, the report said. 'This Cabinet decision provides businesses with much-needed certainty. The flexibility to choose how to be taxed aligns with international practices and supports smoother implementation of the corporate tax law,' Anurag Chaturvedi, chief executive of financial advisory Andersen UAE, told The National. The UAE introduced the federal corporate tax with a standard statutory rate of 9 per cent starting from the financial year beginning on or after June 1, 2023. It took the income of companies exceeding Dh375,000 ($102,100) within the taxable bracket. Business owners in the country would be subject to corporate tax only if their turnover in a calendar year exceeds Dh1 million, the ministry said at the time. The decision announced on Saturday is intended to clarify the tax options available to unincorporated partnerships. These are business partnerships that are not registered as separate legal entities, such as limited liability companies or corporations. Examples include joint ventures or professional service firms, like law or audit partners, that are operating under a partnership agreement without incorporation. The law applies to people or entities who are part of unincorporated partnerships in the UAE. Examples include two consultants operating under a profit-sharing agreement, a group of real estate agents or doctors working as a partnership and foreign partnerships with a UAE-sourced income, Dhruv Tanna, associate vice president at DIFC-based investment and wealth management firm PhillipCapital, said. Under the new law, unincorporated partnerships now have the option to be taxed as a company, rather than individual partners separately paying corporate tax on their business incomes. 'Upon approval of the application by the partners, the unincorporated partnership will be regarded as a legal person and a resident person for tax purposes,' according to the Wam report. 'It will receive the same tax treatment as other legal persons.' The move aims to 'promote tax neutrality' by allowing unincorporated partnerships to benefit from the exemptions and reliefs available to legal persons under the corporate tax law, it said. The new decision aims to clarify how unincorporated partnerships are taxed and provide them with flexibility on how they choose to be taxed, analysts say. The ministry's decision also makes doing business in the UAE easier. 'It gives businesses a clear framework and flexibility in how and when they want to be taxed at the partnership level and not as per their individual share of income,' Mr Chaturvedi said. 'This flexibility gives businesses the ability to choose what's most efficient for them, based on their structure and long-term plans.' Mr Tanna said this flexibility 'can make things easier for some businesses, especially those with many partners or complex structures, by simplifying reporting and allowing access to certain tax benefits'. 'It doesn't necessarily raise costs but gives partnerships the choice to manage their tax obligations in a way that suits them best,' he added. The partners may choose this option if it simplifies tax filing for multiple partners and if the partnership wants access to corporate tax exemptions or reliefs, Mr Tanna said. They may also take this option if they want clearer liability separation for legal or financial reasons. 'For example, a partnership with many foreign or corporate partners may benefit from streamlined reporting by being taxed as one entity,' he said. Opting in to treat the partnership as a taxable person also makes sense if the partnership wants centralised compliance, a cleaner capital structure – such as for external investors – or if it is simpler to have the firm handle tax instead of each partner individually, Mr Chaturvedi said. If the partners are taxed individually, each pays the UAE corporate tax of 9 per cent on their share of the business profits. This does not include unrelated personal income like salary from another job or investment income, unless it's linked to the partnership, Mr Tanna said. If the partnership opts to be treated as a single taxable entity, the partnership itself pays 9 per cent corporate tax on its taxable income – just like a company.
