FTA Clarification CTP009: Valuation Method for Qualifying Immovable Property Disposal by Real Estate Developers

On 26 September 2025 the Federal Tax Authority issued Corporate Tax Public Clarification CTP009, explaining how real estate developers apply the valuation method under the transitional rules in Ministerial Decision No. 120 of 2023. The relief lets a developer exclude from corporate tax the part of a project’s gain that built up before its first tax period.

This guide explains the relief, the conditions, what CTP009 clarified and how to calculate the excluded gain, with an example.

Understanding the Transitional Relief for Real Estate Developers

Corporate tax applies from each company’s first tax period, usually starting on or after 1 June 2023. A developer that owned land or projects before then would otherwise pay tax on gains that accrued before corporate tax existed. Ministerial Decision No. 120 of 2023 prevents this for Qualifying Immovable Property (QIP) by allowing the pre-tax gain to be excluded when the property is sold.

For immovable property, MD 120 offers two methods:

• the valuation method, based on market value at the start of the first tax period; and
• the time apportionment method, which spreads the gain over the ownership period.

CTP009 deals only with the valuation method for real estate developers.

What Are the Conditions for the Relief?

Condition	What it means
Owned before the first tax period	The developer held the property before its first corporate tax period began
Held on a historical cost basis	The property was measured at cost, not fair value, in the financial statements
Disposed of during or after the first tax period	The relief applies when the property is sold, or treated as sold, under corporate tax
Election in the first tax return	The method is chosen in the first corporate tax return and is irrevocable, except in exceptional cases approved by the FTA

Clarifications From the FTA on the Application of MD 120

What counts as Qualifying Immovable Property?

QIP is determined under MD 120, regardless of whether the property is classified as inventory or as a fixed asset under IFRS or IFRS for SMEs. CTP009 covers three common developer situations:

Situation at the start of the first tax period	What qualifies as QIP
Land owned, construction not yet started	The land only; construction after the first tax period does not qualify
Project under construction	The land and construction carried out before the first tax period
Project completed, units unsold	The completed project, for the unsold units

Anything that did not exist, or was not recognised, at the start of the first tax period is not QIP.

When is the property disposed of?

For developers, disposal follows revenue recognition under the accounting standards. If revenue is recognised over time under IFRS 15, the excluded gain is recognised in the same proportion as the project’s revenue in each tax period.

What are the original cost and net book value?

The excluded gain uses the higher of original cost or net book value, covering costs that relate to the QIP and were held on the balance sheet at the start of the first tax period, such as land and construction work in progress. Costs already expensed in the income statement before then cannot be included.

How must market value be determined?

• Market value is measured at the start of the first tax period.
• It must come from the relevant government authority, such as the Dubai Land Department or the Department of Municipalities and Transport in Abu Dhabi, or from an authorised valuer.
• The valuation must relate only to the QIP; if it includes other elements, it must be adjusted.
• Units already sold before the first tax period are excluded.

How Is the Excluded Gain Calculated?

Excluded gain = market value at the start of the first tax period − the higher of original cost and net book value

The excluded gain is then spread across tax periods in line with revenue recognition for the project.

Worked example

A developer with a calendar financial year starts its first tax period on 1 January 2024. It owns a plot of land:

Item	Amount
Market value on 1 January 2024 (from DLD)	AED 16,000,000
Original cost	AED 10,000,000
Net book value	AED 10,000,000
Excluded gain	AED 6,000,000

Construction starts in 2024 and revenue is recognised over time. If 40% of the project’s revenue is recognised in 2024, the developer excludes AED 2,400,000 of gain in its 2024 return, and the rest in later periods as revenue is recognised. Any unused excluded gain cannot be carried forward and is lost.

What Should Developers Do Now?

1. Identify each QIP held at the start of the first tax period, project by project or unit by unit.
2. Obtain valuations from DLD, DMT or an authorised valuer at the start of the first tax period.
3. Reconcile costs to the opening balance sheet, excluding costs already expensed.
4. Compare methods before filing the first return, since the election is irrevocable.
5. Track the excluded gain each period against revenue recognised.
6. Keep the evidence: valuation reports, cost records and calculations for at least seven years.

Expert tip: if your first corporate tax return has already been filed, check whether the elected method and calculations follow CTP009. Errors can be corrected through a voluntary disclosure.

Need Help With Transitional Rules for Real Estate?

SGA World helps developers identify Qualifying Immovable Property, reconcile costs to the opening balance sheet, calculate the excluded gain and prepare the corporate tax return. Contact us to review your position.