Date: 26 September 2025
Source: Federal Tax Authority (FTA) – Corporate Tax Public Clarification No. 009 (CTP009)
Prepared by: SGA World Auditing Accounting L.L.C-S.P.C, Abu Dhabi & Dubai
Category: UAE Corporate Tax | Real Estate | Transitional Rules
The Federal Tax Authority (FTA) has issued Corporate Tax Public Clarification No. 009 (CTP009) to explain how the valuation method applies under the Transitional Rules contained in Ministerial Decision No. 120 of 2023 (MD 120).
This clarification specifically focuses on real estate developers disposing of Qualifying Immovable Property (QIP) during or after the introduction of the UAE Corporate Tax (CT) regime. The guidance provides insight into the Valuation Method for Qualifying Immovable Property Disposal.
The guidance emphasizes the importance of the Valuation Method for Qualifying Immovable Property Disposal for ensuring compliance with tax regulations.
Understanding the Valuation Method for Qualifying Immovable Property Disposal is essential for maximizing tax benefits.
For developers, this update provides crucial guidance on identifying what portion of a project’s profit can be excluded from taxable income — particularly the gains that relate to the pre-corporate tax ownership period.
The Valuation Method for Qualifying Immovable Property Disposal aids in the clear delineation of taxable gains versus exempt gains.
Understanding the Transitional Relief for Real Estate Developers
The Valuation Method for Qualifying Immovable Property Disposal should be applied consistently across all projects for accurate reporting.
The Valuation Method for Qualifying Immovable Property Disposal is foundational for sound fiscal practices.
Under the UAE’s Corporate Tax framework, businesses can exclude gains that accrued before the start of the corporate tax regime — provided they meet certain conditions.
For property developers, this exemption is available through the valuation method or the time apportionment method. The FTA’s latest clarification (CTP009) focuses only on the valuation method.
Objective of the Valuation Method
Utilizing the Valuation Method for Qualifying Immovable Property Disposal can significantly impact the financial statements of developers.
The Valuation Method for Qualifying Immovable Property Disposal will ensure that developers understand the key criteria for excluding gains from taxable income.
Mastering the Valuation Method for Qualifying Immovable Property Disposal is key for prudent investment decisions.
The valuation method allows developers to calculate the pre-tax-period gain by determining the difference between:
Developers should utilize the Valuation Method for Qualifying Immovable Property Disposal to enhance their strategic initiatives.
- The market value of the property on the first day of the initial tax period, and
- The higher of its original cost or net book value.
This difference represents the excluded gain — the amount that can be deducted from taxable income once the property is disposed of or deemed disposed of.
Developers must familiarize themselves with the Valuation Method for Qualifying Immovable Property Disposal to avoid compliance issues.
Conditions to Apply the Valuation Method
Effective use of the Valuation Method for Qualifying Immovable Property Disposal supports financial transparency.
To claim relief under MD 120, the following key conditions must be met:
- Ownership Before Corporate Tax
The property must have been owned before the start of the first tax period. - Historical Cost Measurement
The property should be measured on a historical cost basis in the company’s financial statements. - Disposal During or After the First Tax Period
The property must be sold (or deemed sold) during or after the first tax period to trigger the relief.
Clarifications from FTA on the Application of MD 120
1. Definition of Qualifying Immovable Property (QIP)
The FTA confirms that immovable property includes land, buildings, and ongoing construction projects — regardless of how they are classified in accounting books (fixed asset or inventory).
Thus, both completed and under-construction projects can qualify as QIP if ownership existed before the tax period began.
2. Scenarios for Developers
| Scenario | Qualification as QIP |
|---|---|
| Land purchased before CT period; construction starts after | Only land qualifies as QIP |
| Construction started before CT period and continues after | Entire project (land + construction) qualifies as QIP |
| Fully completed project before CT period, sold after | Entire project qualifies as QIP |
If any portion of a project did not exist before the first tax period (and was not recognized in the opening balance sheet), it cannot be treated as QIP.
By adhering to the Valuation Method for Qualifying Immovable Property Disposal, developers can ensure better tax planning.
3. Meaning of “Disposal” or “Deemed Disposal”
Under IFRS 15, revenue from long-term property contracts may be recognized either over time or at a point in time.
The FTA aligns with these accounting principles, clarifying that a “disposal” occurs when the developer recognizes revenue and costs (including land and construction) in the income statement.
Hence, for Corporate Tax purposes, the disposal (or deemed disposal) occurs during the tax period in which the related revenue is recognized.
4. Determining Original Cost or Net Book Value
For developers, the original cost or net book value includes:
- Land acquisition cost
- Construction and related development costs
- Other direct project expenses recorded as work-in-progress
However, any costs already recognized in the profit and loss statement before the corporate tax regime came into effect cannot be included in the QIP valuation.
They are treated as already realized and therefore ineligible for transitional adjustment.
5. Fair Valuation of the QIP
The market value of each QIP must be determined as of the first day of the initial tax period.
The FTA specifies that:
- Valuations must be conducted by authorized government bodies (e.g., Dubai Land Department (DLD), Department of Municipalities and Transport – Abu Dhabi (DMA)), or
- Accredited third-party valuers approved by these authorities.
Valuations performed by unauthorized parties will not be accepted for corporate tax relief purposes.
Furthermore, valuations must represent only the portion of the property that qualifies as QIP.
Implementing the Valuation Method for Qualifying Immovable Property Disposal can streamline the audit process.
6. Making the Election under MD 120
Incorporating the Valuation Method for Qualifying Immovable Property Disposal into planning can yield significant benefits.
The election to apply the transitional valuation method must be made for each QIP individually.
A QIP may represent:
- An entire development project, or
- Specific units within a project.
Each property’s adjustment must align with the timing of revenue recognition under IFRS 15 and be applied consistently throughout the reporting periods.
Understanding the nuances of the Valuation Method for Qualifying Immovable Property Disposal is critical for compliance.
Utilization of the Valuation Method for Qualifying Immovable Property Disposal is crucial for tax strategy formulation.
7. Methodology to Calculate the Excluded Gain
According to the FTA, developers must follow a four-step approach when applying the valuation method:
Step 1: Calculate the total excluded gain =
(Market value at the start of the first tax period – higher of original cost or net book value).
Step 2: Apportion the gain across tax periods based on revenue recognition (percentage of completion or similar approach).
Step 3: Determine the portion of accounting profit attributable to QIP.
If the attributable profit in a tax period results in a loss, no relief can be applied in that year.
Step 4: Apply the excluded gain to offset accounting profits in each tax period.
Any unused portion cannot be carried forward — it expires once the relevant tax period closes.
Key Takeaways for Real Estate Developers
Strategically applying the Valuation Method for Qualifying Immovable Property Disposal fortifies business growth.
Ultimately, the Valuation Method for Qualifying Immovable Property Disposal empowers developers to achieve their financial goals.
- Developers may apply transitional relief on a project-wide basis, not necessarily unit-by-unit — simplifying recordkeeping.
- Relief can extend to future tax periods, proportional to project completion stages.
- Market valuations must be performed by DLD, DMA, or approved valuers only.
- Market value should exclude parts of the property not intended for sale or outside the QIP definition.
- Developers must review past and upcoming Corporate Tax Returns to ensure that the adjustments made align with the new CTP009 guidance.
Knowledge of the Valuation Method for Qualifying Immovable Property Disposal enables informed decision-making.
How SGA World Can Support You
Every developer should leverage the Valuation Method for Qualifying Immovable Property Disposal to capitalize on potential tax savings.
At SGA World Auditing Accounting L.L.C-S.P.C, we help real estate developers and investment companies across the UAE navigate complex Corporate Tax rules and ensure compliance with FTA guidance.
Our services include:
- Assessing eligibility for transitional relief under MD 120.
- Valuation review and alignment with FTA-approved standards.
- Preparing and reconciling FY 2024 Corporate Tax Returns in accordance with CTP009.
- Providing audit, accounting, and tax advisory support for property developers, contractors, and holding entities.
The Valuation Method for Qualifying Immovable Property Disposal is an essential component of effective corporate strategy.