Depreciation of a Property in Dubai: What Is Possible

The question of depreciating a property in Dubai leads to an answer that is disappointing at first and then becomes interesting. For individuals there is no depreciation in the Emirates, because there is no income tax against which anything could be deducted. For companies, on the other hand, the situation changed fundamentally in 2025.

Why there is no depreciation for individuals

Depreciation is a tool for determining profit. It reduces a tax base. Where no tax is levied on the income of natural persons, that tax base does not exist.

If you hold and rent out an apartment in Dubai as an individual, you therefore have nothing to depreciate, but you do not need to either, because rental income is not taxed at this level anyway. Corporate Tax does not apply either, as long as the rental activity does not require a licence.

The change for companies: four per cent since 2025

If a company holds the property, things look different. With Ministerial Decision No. 173 of 2025, the Ministry of Finance closed a gap that had existed since Corporate Tax was introduced.

The background: if you account for investment property under the fair value model, no depreciation appears in the income statement; changes in value run through unrealised gains or losses. As a result, these companies lacked the deduction that companies using the cost model naturally had.

The deduction relates to twelve months and is reduced pro rata for shorter periods. On disposal, the cumulative depreciation claimed must be added back.

Where it can become expensive

Two conditions are worded uncomfortably strictly.

• The deadline: The election must be made in the first affected tax return. If you miss it, you lose the deduction permanently
• Irrevocability: The election applies to all investment properties held at fair value and cannot be withdrawn

This makes the decision not a minor accounting detail but a strategic commitment. It needs to be calculated before the first return, not afterwards.

In transfers within a group or restructurings, the acquirer takes over the values of the transferor, so getting around the rule by shifting assets does not work.

Why the rule was introduced at all

Until the end of 2024, the deduction depended solely on the accounting method. Two companies with an identical property portfolio could be taxed differently: one with depreciation, the other without, simply because it reported the portfolio at fair value.

The new rule puts both on an equal footing. It is therefore less a concession than a correction, and it reflects a pattern that has run through UAE tax law since 2023: the system is readjusted as soon as distortions appear in practice. If you invest here, you should expect that it will not stay at that.

What this means in practice

For the typical German-speaking buyer of one or two apartments, the rule is irrelevant. It is aimed at companies with a property portfolio that account under the fair value model.

It becomes relevant where several properties are held through a company, for example in a structure with several stakeholders or where succession is planned. In that situation, four per cent of the original cost noticeably reduces taxable profit.

German depreciation on an apartment in Dubai

This is the point that actually affects most readers, and it is regularly overlooked.

If you remain subject to unlimited tax liability in Germany and rent out an apartment in Dubai, you must declare this income in Germany. There has been no double taxation agreement between Germany and the Emirates since the end of 2021, so the income forms part of your worldwide income.

The good news: German rules apply when calculating this income, including depreciation for wear and tear (Absetzung für Abnutzung, AfA). You can therefore depreciate the apartment in Dubai under German law.

• The standard rate for buildings held as private assets is two per cent a year, or three per cent for buildings completed from 2023
• Only the building portion is depreciated, not the land
• Interest on debt, management costs and maintenance are also deductible as income-related expenses (Werbungskosten)
• The split of the purchase price between building and land must be documented in a verifiable way

For Austria, the credit method has applied since 2023 with a comparable effect; in Switzerland, by contrast, the exemption method generally applies, which is why the question arises differently there.

How we assess it

Depreciation is a good example of why the question “How is this taxed in Dubai?” is almost never the right question. What matters is where you are resident and in which legal form you hold the property.

From our client work: German owners resident in Germany regularly leave depreciation unused because they assume that a property in a tax-free country does not need to be declared in Germany at all. The opposite is true, and if you declare it, you can also deduct.

Our advice: if you hold through a company in the Emirates and account at fair value, have the election under Ministerial Decision 173 reviewed before the first tax return. The deadline runs quietly, and afterwards the deduction is lost.

What to clarify before deciding

• Do you hold privately or through a company?
• Does the company account under the fair value model or the cost model?
• Has the realisation basis been elected and declared in time?
• Are you still subject to unlimited tax liability in your home country?
• Is there a robust split of the purchase price between building and land?

As of: 28 August 2026. This article does not replace individual tax advice.

How to build structure and residence around this is explained on our page on tax planning.