UAE Corporate Tax – Why the 31 December 2023 Property Valuation Could Save You Millions

Corporate Tax in the UAE: The One-Time Property Valuation That Could Save You Millions

As the UAE’s Corporate Tax regime moves into full effect, businesses across the country are preparing to file their first tax returns for FY 2024. But if your company owns real estate, there’s one decision you can’t afford to ignore - whether or not to submit a 31 December 2023 fair value property valuation.

This is a one-off opportunity to significantly reduce your future Corporate Tax liability. If you don’t act before submitting your first return, the chance is gone - permanently.

Let’s break it down.

What Is the 31 December 2023 Valuation?

Under UAE Corporate Tax Law, capital gains from the sale of real estate are taxable for most companies, unless exempt. When a property is sold, the taxable gain is calculated as:

Sale Price - Cost Base = Capital Gain

The law allows you to choose the cost base from one of two options:

1. The original acquisition cost, or
2. The fair market value as of 31 December 2023, if professionally valued and elected in your first Corporate Tax return

This election is only available once and must be included in your company’s first Corporate Tax return (which for most is due by 30 September 2025). Miss that window, and the acquisition cost becomes the permanent base.

Why Does It Matter?

The cost base directly affects your future tax bill. If you acquired the property at a low price and it has appreciated significantly, failing to elect the 2023 valuation means you'll be taxed on a much larger gain.

Here’s a quick example:

Company A bought a property in 2015 for AED 10 million
Market value as of 31 December 2023: AED 18 million
Future sale price in 2027: AED 22 million

Scenario 1 - With 31 December 2023 valuation:
Capital gain = 22m - 18m = AED 4 million
Tax (9%) = AED 360,000

Scenario 2 - Without 2023 valuation:
Capital gain = 22m - 10m = AED 12 million
Tax (9%) = AED 1,080,000

Tax saving = AED 720,000

That’s the difference a valuation can make - and it gets more significant the longer you’ve held the property.

Who Should Be Paying Attention?

If your business owns or holds any of the following, a valuation should be a priority:

• Commercial buildings, offices, or logistics facilities
• Residential rental portfolios or staff accommodation
• Warehouses or land held for future development
• Hotels, clinics, or schools held as assets
• Properties held in family offices, holding companies, or SPVs
• Free zone entities that may be partially subject to Corporate Tax

Even if you don’t plan to sell in the near future, the cost base is locked once you file your return - so future disposals could carry unnecessary tax costs if you don’t elect now.

What About Depreciation?

In addition to the capital gains calculation, businesses holding investment properties can now elect to claim annual depreciation of 4% for buildings held at fair value (under Ministerial Decision No. 173 of 2025). This is only available if:

• The business uses fair value accounting
• The building and land are properly split in the valuation
• The election is made in the first return

It’s a valuable ongoing tax benefit - but separate from the capital gain impact of the 2023 valuation. Ideally, your valuation should address both.

What Happens If You Don’t Get a Valuation?

• You’ll pay more Corporate Tax in future when the asset is sold
• You lose the chance to reset the cost base permanently
• The FTA may default to acquisition cost, even if the current value is far higher
• You may fail to qualify for depreciation deductions
• Poor documentation could raise red flags in audits or transfer pricing reviews

How Archers Can Help

At Archers, we’re already helping dozens of clients file with confidence by delivering:

• Independent fair market valuations as of 31 December 2023
• Detailed land and building splits for depreciation purposes
• Reports that are DLD- and RICS-compliant, accepted by banks, auditors, and tax advisors
• Strategic support to help you time disposals, structure ownership, and avoid tax pitfalls

We work with property owners, CFOs, tax advisors, legal teams, and family offices across the UAE.

Final Thoughts

Corporate Tax is now part of doing business in the UAE - but the cost of compliance doesn’t have to be high.

This is your one chance to lock in a higher cost base, reduce your future taxable gain, and potentially save millions. Once your first Corporate Tax return is filed, the opportunity disappears.

If you own property and haven’t secured a 31 December 2023 valuation, now is the time to act.

Contact Archers today to schedule a Corporate Tax-compliant valuation and protect your business’s bottom line.

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