Transitional relief for developers in the UAE: CTP009 project-level valuation

CTP009 and the scope of Qualifying Immovable Property

CTP009 addresses developers. It confirms that if no construction had yet begun, only the land parcels qualify as Qualifying Immovable Property (QIP). Any building element constructed during or after the first Tax Period does not qualify and therefore cannot benefit from transitional exclusion.

By contrast, where construction began before the first Tax Period and continues after, the QIP is the real estate project in its entirety, excluding only what was disposed of before the first Tax Period.

• “… for real estate developers can consider the following categories of assets as examples of Qualifying Immovable Property: … Under construction properties, where construction commenced before the first Tax Period and continues after the start of the first Tax Period. In this case, the Qualifying Immovable Property is considered the whole real estate project, i.e. the land element and the properties under construction”.

This passage, standing alone, does not yet suggest that the notion of a “whole real estate project” extends to the completed project as it will exist upon full construction. At this stage, the expression can still be read as describing the aggregation of land and the works under construction as of the date of commencement of the first tax period (Tax Start Date).

However, the subsequent elaborations in CTP009 begin to push this understanding further, subtly encouraging the reader to think of “the project in its entirety” not merely as land plus WIP on the Tax Start Date, but as something approaching the completed development viewed in its economic unity.

• In particular, this passage reinforces this interpretive drift: “In cases where construction of the real estate project commenced before the start of the first Tax Period and extends beyond the start of first Tax Period, the adjustment under the transitional rules may be available in respect of the project as a whole, as such a project would meet the definition of a Qualifying Immovable Property”.

Here, the operative expression “meet the definition of a Qualifying Immovable Property” ties directly to Article 2(2)(a) of Ministerial Decision No. 120 of 2023, under which the taxpayer “shall make … adjustments in respect of each Qualifying Immovable Property [to] exclude the amount of gain that would have arisen, at the start of the first Tax Period, had the Qualifying Immovable Property been disposed of at Market Value and the cost of the Qualifying Immovable Property was the higher of the original cost and the net book value”.

Consequently, when the FTA refers to “the project as a whole” as meeting the definition of QIP, a reasonable developer might infer that the Market Value used in the adjustment formula should correspond not to the portion of the project completed as of the Tax Start Date, but rather to the entire project, viewed as an economic whole.

This interpretation gains further momentum from Example 2 of CTP009, in which the FTA reiterates:

• “As the construction started before the first Tax Period, the Qualifying Immovable Property is considered the real estate project in its entirety excluding the part disposed of before the first Tax Period”, and later
• “As the construction started before the first Tax Period, the Qualifying Immovable Property is considered the real estate project in its entirety (excluding the part disposed of before the first Tax Period). Accordingly, the accounting profit as recognised in the income statement in each of Tax Periods 2024 and 2025 is considered attributed to the Qualifying Immovable Property”.

On its face, this “whole project” and “project in its entirety” language could be read as referring to the completed project: the villas, apartments, or buildings as they will eventually stand. That literal reading would suggest that transitional relief always benchmarks against the “as-completed” value, with no discount for the fact that the project is only partially complete at the Tax Start Date.

This interpretation can be illustrated by the following stylized fact pattern:

• Start of first Tax Period: 1 January 2024
• Completion at tax day one: approximately 5% only
• “As-is” WIP Market Value (MV): AED 7 million only
• Entire project (“As-completed”) Market Value at day one (official valuation): AED 100 million
• Disposed pre-CT: 0% (so 100% remains)
• Higher of cost or NBV at Tax Day One: AED 5 million
• Final sale after completion: AED 110 million

Following the conservative “WIP-only” approach, transitional relief would exclude merely AED 2m:

• WIP MV (including land) – related Cost (NBV) = AED 7m − AED 5m = AED 2m,

effectively disregarding the vast bulk of pre-CT appreciation.

A slightly broader reading with the “project value × % completion” proxy would yield AED 100m × 5% = AED 5m, again excluding little.

CTP009 provisions cited above shift the analysis. The testing approach is no longer limited to the WIP balance at the start of the first Tax Period. Instead, the market valuation of the entire project on that date serves as the reference point. That valuation is then reduced by any portion of the project already disposed of before the commencement of Corporate Tax. The resulting adjusted market value is compared against the higher of original cost or net book value at the same date, and the difference represents the excluded pre-CT gain.`

CTP009 provisions cited above shift the analytical focus. The testing approach is no longer confined to the WIP balance at the start of the first Tax Period. Instead, the competent authority’s market valuation of the entire project on that date serves as the principal reference point. That valuation is then reduced by any portion of the project already disposed of before the commencement of Corporate Tax, yielding an adjusted market value of the Qualifying Immovable Property. This adjusted value is compared against the higher of original cost or net book value at the same date, and the difference represents the excluded pre-CT gain. Upon a subsequent disposal, only the residual movement, i.e. the increase in value after the Tax Start Date, further reduced by any post-CT capitalised costs incurred in completing the project, is brought into charge under the Corporate Tax Law.

Using the CTP009 method on the same figures:

• “As-completed” MV of entire project = 100m
• Higher of cost or NBV = 5m
• Excluded pre-CT gain = 100m − 5m = 95m
• Final sale after completion = 110m
• Taxable post-CT gain = (110m − 5m) − 95m − post-CT costs = 10m − post-CT costs

The contrast is striking. Under the “WIP-only” or “% completion” views, pre-CT exclusion would be negligible, effectively taxing value accrued before the law’s start. The entire project-level valuation unlocks the full transitional logic: pre-CT appreciation is ring-fenced, and only the genuine post-CT movement is within scope.

The tension: entire project vs. partial-state valuation

The same CTP009, however, immediately adds a caveat: “The Market Value in respect of a real estate project under construction at the start of the first Tax Period may not reflect its partially completed state, instead it reflects its completed state. The Market Value should, therefore, be adjusted, on a fair and reasonable basis, to reflect the partially completed state of the real estate project.”

If “entire project” truly meant “completed project,” then this clause would be redundant. Its very inclusion shows that the FTA recognizes that competent authority valuations are often issued as-completed, and that such figures overstate the pre-CT position.

Reconciling the two: a two-filter framework

The only way to reconcile these passages is to treat them as two filters applied in sequence.

• First, a scope filter. “Project in its entirety” means that the asset for relief is defined at project level, not piecemeal. Where construction began pre-CT, the QIP is the whole project (land together with WIP as it actually exists at commencement) less pre-CT disposals. Where no construction has begun, the QIP is limited to land parcels only. This ensures that the transitional adjustment is not artificially narrowed to tiny fragments such as individual villas or balance-sheet WIP.
• Second, a valuation-purity filter. Once the project has been identified as the QIP, the Market Value evidence must be tested for fidelity. If the competent authority report already reflects the partially completed state of that project at day one, it can be used directly. If instead the report states an as-completed value or sweeps in non-QIP elements, then the figure must be adjusted fairly and reasonably to represent the actual state of the project at the commencement of Corporate Tax.

The existence of the scope filter is not a matter of drafting convenience but of structural necessity. Without it, the transitional mechanism would lack a definable object of measurement, and Article 2(2)(a) of Decision No. 120 would be left without an operative anchor. Real-estate projects evolve through multiple, interdependent phases (land acquisition, permitting, infrastructure, and vertical construction) yet these phases collectively form a single economic organism. By defining the QIP at the project level, the scope filter aligns the legal unit of relief with the economic unit of value creation. In its absence, the adjustment would fracture into a mosaic of valuations for each villa or floorplate, producing arbitrary outcomes and taxing portions of pre-CT appreciation that the law was precisely designed to exclude.

An implication of the scope filter lies in its implicit rejection of segmented valuation. One could otherwise imagine a bifurcated approach under which the market value of the works in progress is appraised separately from the market value of the underlying land, and the two are then aggregated to form the total valuation base. While such a method might appear intuitively consistent with accounting practice, it departs from the economic and legal logic of CTP009. The clarification effectively admonishes against this approach: by treating the “project in its entirety” as the QIP, CTP009 instructs that the valuation must capture the unified economic reality of the development as it stands at the Tax Start Date, not a mechanical sum of its physical subcomponents. This prevents distortions arising from piecemeal appraisals that might undervalue integrated infrastructure, shared amenities, or development rights, and thereby ensures that the pre-CT appreciation is measured at the correct level of economic aggregation.

If the scope filter defines what is being measured, the valuation-purity filter determines how it is to be measured. Its presence in CTP009 is equally indispensable. Even once the project is defined as the QIP, there remains a risk that the market-value evidence obtained from a competent authority will not faithfully represent the project’s actual state at the Tax Start Date. Valuation reports in the real-estate sector are often prepared on an as-completed basis, designed for financing or collateral purposes rather than for temporal demarcation of tax-period gains. Left unadjusted, such values would overstate the pre-CT position and allow post-CT appreciation to escape taxation.

The “partial-state” clause in CTP009 therefore performs a cleansing function. It requires that the Market Value used for transitional relief must correspond to the project’s factual degree of completion and must exclude any elements that fall outside the QIP, such as construction still to be undertaken or ancillary non-QIP components. Where the valuation already reflects this state (for example, when the competent authority explicitly appraises the development “as-is” at the commencement date) no further adjustment is required. Where it does not, the taxpayer must undertake a fair and reasonable recalibration, typically by deducting the cost-to-complete plus a normal developer’s margin or by other accepted valuation techniques consistent with IFRS 13.

In this way, the valuation-purity filter operates as the second safeguard in the two-stage sequence. The scope filter ensures that the relief applies to the right asset (the project as an integrated economic unit) while the valuation-purity filter ensures that the value of that asset, as measured at the transition point, genuinely represents its pre-CT condition. Together they prevent the distortions that would arise at either extreme: taxation of pre-CT gains on one side, or over-exclusion of post-CT value on the other.

This reconciliation resolves the apparent contradiction referred above:

• “project in its entirety” is a scope rule, not an instruction to take completed values;
• the “partial-state” clause is the valuation discipline that prevents overstatement.

Read sequentially, the two provisions complement rather than conflict: one broadens the asset boundary, while the other confines the value to what legitimately existed at the Tax Start Date

Economic rationale if the MV were constructed differently

If we assume that the Market Value adjustment clause in CTP009 were constructed in a way that did not constrain the “project in its entirety” concept to a partial-state measurement, a different economic rationale could emerge. If the Minister had intended the “project in its entirety” to be valued in its as-completed state at the Tax Start Date, a different policy rationale could be inferred. Such a choice would arguably rest on stability and legitimate expectation considerations The Minister might have sought to protect transactional stability and legitimate expectations formed before the introduction of Corporate Tax.

When a project was conceived and financed before the Tax Start Date, every element of its economic calculus (the acquisition of land, the structuring of finance, pre-sales pricing, and investor returns) could had been made under a tax-neutral premise. Developers would not have priced units, structured off-plan agreements, or modelled internal rates of return with Corporate Tax factored in. In such cases, one could argue that the entire project, as a single economic undertaking, embodies a pre-CT equilibrium that the Minister might have intended to preserve.

Had the MV adjustment clause been formulated more permissively, allowing the valuation to reference the as-completed state of the project while recognizing that part of its value still had to be realised through construction, the law could have operated as a stability instrument. Transitional relief would then function not as a technical adjustment, but as a policy device to respect pre-CT investment commitments. The rationale would be to ensure that developers who embarked on long-term projects before the tax’s introduction would not face economic distortion merely because of timing differences in completion.

In that scenario, the phrase “project in its entirety” would not be a drafting artefact but a deliberate legislative signal that the pre-CT economic logic of the project, in its final form, should remain intact. The “entirety” approach would ensure that the expected tax-free profit embedded in the project’s inception model remains untouched, while only new or unforeseen value created under the post-CT fiscal regime would enter the tax base (for example, through post-CT design changes, or favorable market revaluations of the project in its “as-completed” state).

From this perspective, even if the project ultimately generated a better-than-expected outcome (say, total revenue of AED 110 million against a tax-day-one expectation of AED 100 million) the transitional framework would still treat the additional AED 10 million only as post-CT appreciation. This preserves the neutrality of pre-CT assumptions without granting windfall exclusion for improvements or market uplift arising after the Tax Start Date. In this sense, the rule would serve both stability and equity: it would respect the developer’s original, tax-neutral projections while ensuring that subsequent, unanticipated gains are taxed under the new regime.

Such a reading would be grounded not in accounting mechanics but in economic justice: respecting the pre-tax commitments and financial expectations of market participants who acted in reliance on the then-prevailing legal environment. The current formulation of CTP009, by introducing a partial-state qualification, tempers this stability rationale with a fairness correction, preserving the underlying intent to honour pre-CT expectations but preventing an overextension of relief to value still to be produced after the Tax Start Date.

Comparative perspective: stability, expectations, and transitional valuation design

Comparative experience suggests three broad design logics for ring-fencing pre-commencement appreciation, each with different implications for stability of expectations and base protection.

• First, fixed-date rebasing (step-up).

Some systems adopt an explicit “rebasing date”, deeming the taxpayer’s tax cost to equal market value on that historical pivot. Doctrinally, this is a strong stability instrument: it snapshots all pre-law gains and treats them as outside the charging provision, irrespective of the asset’s production function or degree of completion at that date. Its virtues are clarity and ease of administration; its weakness is potential over-exclusion if the rebase value bakes in post-date assumptions (e.g., “as-completed” prices without an adjustment discipline).

• Second, mechanical time apportionment.

A simpler path splits the eventual gain by reference to days before/after commencement. Stability is served in a formal sense (the pre-period slice is untaxed) but the method is economically coarse for development assets, where value accretion is lumpy and back-loaded. In real estate construction, time rarely maps to value creation; apportioning by days risks understating pre-law appreciation (or overstating it) purely as a function of build schedules.

• Third, valuation at the commencement date with evidential discipline.

A commencement-date market value is compared to historical cost/NBV, and the uplift is excluded; only the delta thereafter is taxed. Properly executed, this better captures economic reality for projects with non-linear value profiles. But it requires a purity filter for the market value input ensuring it reflects the state as at commencement and pertains only to the qualifying asset.

The UAE’s solution under MD 120/2023 as elaborated by CTP009 cleaves to the third logic while overlaying two developer-specific refinements. It treats the project (rather than piecemeal WIP) as the unit of relief where construction began before the Tax Start Date, thus addressing legitimate expectations bound up in pre-CT project finance and pricing. Simultaneously, it imposes a partial-state discipline on the valuation input, thereby containing the risk of over-exclusion that can arise if “as-completed” figures are used unadjusted. In effect, the FTA approach synthesis the stability advantages of rebasing (project-level recognition) with the accuracy of commencement-date valuation (partial-state purity), avoiding the crudeness of time apportionment for construction assets.

This comparative lens underscores the policy balance. A pure “entirety/as-completed” rule would maximise stability but risk eroding the post-commencement base. A pure “partial-state only” rule without project-level scope would protect the base but could defeat legitimate expectations for long-tail developments. The FTA’s two-filter structure is an institutional compromise: it honours pre-CT equilibrium at the scope level, while protecting fiscal integrity at the valuation level.

Conclusion

The transitional relief framework for immovable property now hangs together in a coherent way. MD 120/2023 creates the exclusion mechanism. The General Guide and Accounting Standards Guide articulate the accounting principles that justify such relief. CTP009 then provides the developer-specific clarification: it identifies the relevant asset (the project as an economic unit) and couples that definition with a valuation discipline that demands correspondence to the project’s partially completed state at the Tax Start Date. The result is a conceptually consistent mechanism that connects scope, value, and timing into a single operational logic.

Viewed through the two-filter lens, the earlier ambiguity between “entire project” and “partial-state MV” largely dissolves, though not without residue. The interpretive structure of CTP009 and MD 120/2023 could, in principle, sustain a more developer-favorable logic (one in which the “project in its entirety” is understood as encompassing the completed economic design of the development, preserving the full pre-CT equilibrium of its inception model). Yet, the clarificatory tone of CTP009 stops short of expressly endorsing this reading. By coupling the project-level scope with the partial-state valuation caveat, the FTA circumscribes the breadth of the relief, keeping it within the discipline of commencement-date reality. The outcome remains faithful to the principle of transitional justice in Article 61 (ring-fencing pre-law gains while bringing only post-CT movements into charge) but it does so with an interpretive restraint that tempers stability in favor of fiscal precision.

In policy terms, the FTA’s interpretive restraint reflects a cautious balancing act between stability and revenue protection. A broader, “as-completed” conception of “project in its entirety” would have maximized certainty for developers and honored pre-CT equilibrium in full, but at the cost of eroding the post-commencement tax base and inviting valuation gaming through inflated future assumptions. By embedding the partial-state requirement, the FTA preserved the structural fairness of transitional relief without compromising fiscal integrity. The approach situates the UAE within a pragmatic middle ground internationally: less generous than the “full rebasing” models seen in systems prioritizing investor stability, yet more economically faithful than mechanical time-apportionment regimes. Its hallmark is measured neutrality, recognising pre-law gains without transforming transitional relief into a subsidy for future value creation.

The disclaimer

Pursuant to the MoF’s press-release issued on 19 May 2023 “a number of posts circulating on social media and other platforms that are issued by private parties, contain inaccurate and unreliable interpretations and analyses of Corporate Tax”.

The Ministry issued a reminder that official sources of information on Federal Taxes in the UAE are the MoF and FTA only. Therefore, analyses that are not based on official publications by the MoF and FTA, or have not been commissioned by them, are unreliable and may contain misleading interpretations of the law. See the full press release here.

You should factor this in when dealing with this article as well. It is not commissioned by the MoF or FTA. The interpretation, conclusions, proposals, surmises, guesswork, etc., it comprises have the status of the author’s opinion only. Furthermore, it is not legal or tax advice. Like any human job, it may contain inaccuracies and mistakes that I have tried my best to avoid. If you find any inaccuracies or errors, please let me know so that I can make corrections.