Western Valuers and Surveyors publishes study on industrial asset valuation under UAE corporate tax

Western Valuers and Surveyors, a Dubai-based RICS-regulated consultancy, has released a study analyzing industrial asset valuation in the UAE's corporate tax environment. The report delves into the standards governing industrial asset valuation, the record-keeping obligations for businesses, and common challenges to valuations during audits or regulatory reviews.

Designed for finance directors, auditors, and large industrial asset holders, the study underscores that the UAE Corporate Tax Law does not set specific depreciation rates for tangible fixed assets. Instead, it follows businesses' financial accounting treatments under International Financial Reporting Standards, necessitating depreciation over estimated useful lives using systematic methods like straight-line, reducing balance, or units of production.

Consequently, the burden of providing evidence for depreciation rests with the taxpayer. The Federal Tax Authority mandates that companies maintain detailed records of each asset, including description, acquisition date, original cost, estimated useful life, depreciation method, accumulated depreciation, and net book value. These records must be retained for seven years.

However, Western Valuers and Surveyors found recurring deficiencies in these registers. These include incomplete asset identification, lack of reconciled physical verification, and depreciation calculated from the invoice date instead of the asset's readiness for use. According to Ibrahim Emad, MRICS Director at Western Valuers and Surveyors, valuations have become critical evidence for tax authorities, auditors, and lenders, making it essential for reports to clearly state their valuation basis and undergo inspection.

The study also highlights that the UAE's revised International Valuation Standards now require valuers to explicitly state the basis of value used and justify its selection. A report stating a fair value conclusion while employing assumptions akin to forced-sale scenarios represents a compliance gap. Similarly, the same asset can hold significantly different values depending on the valuation basis applied.

For instance, an operating production line evaluated as part of a going concern differs substantially from the same equipment valued for removal and resale. The report identifies technological obsolescence as the primary driver of industrial asset value loss, often occurring ahead of the accounting useful life due to rapid technology cycles.

Functional obsolescence, where equipment remains operational but loses competitive advantage in terms of throughput, energy consumption, or automation, is challenging to detect and typically goes unnoticed in fixed asset registers. Other factors influencing asset valuation include physical condition, maintenance history, operating environment, commissioning status, regulatory requirements, and installation/removal costs.

Common reasons for questioning industrial asset valuations include insufficient physical inspections, unverified bases of value, undisclosed assumptions, outdated valuation dates, and reports signed by unqualified experts. Western Valuers and Surveyors, accredited by the Dubai Land Department and registered with RERA, specializes in industrial consultancy, offering services like plant and machinery valuation, fixed asset register construction, asset tagging, physical verification, and technical due diligence. The firm operates across the UAE and the broader region.