Not by a round percentage chosen at the start of a project. Development, project management and marketing fees charged between related developer group entities should reflect the functions performed, assets used and risks assumed by each party, tested against what independent developers, contractors or asset owners would agree — and any profit-sharing arrangement should follow the same logic.
UAE real estate groups rarely run a project through a single company. A typical structure separates the land-owning special purpose vehicle, a development or project management entity, a sales and marketing entity, and sometimes a separate construction supervision function, with financing layered across some or all of them. Corporate Tax turns the allocation of fees, costs and profit across these entities into a transfer pricing question, even where the entities have common ownership and are managed by the same team. The UAE analysis should start with the FTA Transfer Pricing Guide (CTGTP1).
Related Party property sales and leases raise a parallel Market Value question; that is covered in Related Party real estate transfer pricing.
Why do UAE property groups split one project across multiple related entities?
The reasons are usually commercial and legal rather than tax-driven: ring-fencing project liability, satisfying lender requirements, meeting Real Estate Regulatory Agency or equivalent escrow rules, or separating a recognised development brand from the underlying land ownership.
Whatever the commercial reason, once the structure exists, every intercompany fee, cost recharge and profit allocation inside it needs to be priced on an arm's length basis under Article 34. Common ownership does not remove Related Party status.
Which functions typically get split — and priced — across a development?
| Function | Typical return or fee basis |
|---|---|
| Land / asset ownership | Capital appreciation on the land, or rent, reflecting the risk retained in the asset. |
| Development management | A fee, often expressed as a percentage of gross development value or total project cost. |
| Construction / project management | A fee, often a percentage of construction cost, reflecting supervision and delivery risk. |
| Sales and marketing | A commission, typically a percentage of sales value achieved. |
| Financing | Interest on funds advanced, priced with reference to tenor, security and credit risk. |
| Design and consultancy | A fee for architectural, engineering or planning services rendered. |
Should a development management fee be priced on cost, on GDV, or on profit?
It depends on what the development manager actually controls and what risk it carries.
A fee based on cost incurred can be appropriate where the manager is essentially delivering a defined scope of work for a fee. A fee based on gross development value aligns the manager's return with sales outcomes and is more defensible where the manager genuinely influences design, positioning and sales strategy. A profit-linked fee should only be used where the manager is exposed to genuine downside as well as upside — a guaranteed minimum fee dressed up as a profit share is unlikely to withstand scrutiny.
How do you test a profit-sharing arrangement between developer group entities?
A profit split should reflect each party's relative contribution of functions, assets and risks to the value created. Land, development expertise, brand, financing, construction management and market access are not automatically worth an equal share.
Where independent parties enter into similar joint development or profit-sharing arrangements, those terms provide the most direct evidence of what an arm's length split looks like. In the absence of external comparables, a residual analysis that first rewards routine functions at a market return and then allocates the remaining profit by reference to contribution of unique value — typically land and development know-how — is a common and defensible approach.
The OECD Transfer Pricing Guidelines set out the transactional profit split method that this analysis follows.
What if the land-owning entity carries most of the risk but earns a low return?
This is one of the most common weaknesses in developer structures.
If the land-owning SPV bears the market, construction and sales risk of the project — for example, because it guarantees project debt or absorbs cost overruns — but a related development or marketing entity extracts most of the profit through fixed fees, the allocation of risk and reward is misaligned.
Functions, assets and risks should be tested together. An entity that is contractually described as bearing a risk but has no financial capacity to absorb it, and no real decision-making control over it, may not be regarded as truly bearing that risk for pricing purposes.
Can a fixed percentage fee, such as 3% of GDV, be used without any benchmarking?
A round, market-sounding percentage is a starting point for discussion, not a substitute for support.
Development and project management fee percentages vary with project type, scale, complexity and the scope the manager actually performs. The file should show how the chosen percentage compares with fees charged in similar third-party development or project management agreements, or with an appropriate cost-based or profit-based benchmark, rather than asserting that the figure is "market standard."
What is the risk of trapped losses in a development SPV?
Where a development entity is remunerated on a cost-plus or fee basis regardless of project outcome, losses on a difficult project can end up concentrated in the land-owning or financing entity while the service entities remain profitable throughout.
That may be exactly what the contractual risk allocation intends, but it should be a deliberate, documented outcome of the functional and risk analysis — not an accidental consequence of pricing each fee in isolation without considering the project economics as a whole.
How should off-plan sales and staged payments be treated between related entities?
Where a related sales and marketing entity collects payments on behalf of, or sells units on behalf of, the developer, the commission or fee earned should be tested against comparable third-party sales agency terms, including how commission is affected by payment plan structure, cancellations and resales.
Staged or milestone-based commission structures common in off-plan sales should be mirrored in the intercompany arrangement where that reflects how the function is actually performed.
What should a property developer transfer pricing file contain?
Documentation requirements should also be checked against Ministerial Decision No. 97 of 2023.
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A structure chart showing every related entity involved in the project and its role.
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A functional analysis covering land ownership, development management, construction supervision, sales and financing.
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The intercompany agreements setting out fee bases, profit-share mechanics and risk allocation.
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Benchmarking or comparable data supporting each fee percentage or profit-split ratio.
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Project-level financial modelling showing how profit and loss actually flow between entities.
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Evidence of who bears cost overruns, delays and sales shortfalls in practice.
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Reconciliation of invoiced fees and profit distributions to each entity's accounts and return.
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A review point where the structure, scope or project economics change materially.
Who should coordinate transfer pricing for a property developer group?
Project finance, tax and the commercial or development team need to work from the same set of facts. Project finance understands the actual cash and risk flows; the commercial team understands what each entity really controls; tax translates that into a defensible arm's length position.
Pricing each fee line in isolation, without reference to the project's overall risk and return profile, is the most common gap in developer transfer pricing files.
Frequently asked questions
Does transfer pricing apply within a wholly-owned developer group?
Yes. Common ownership does not remove Related Party status. Intercompany fees and profit allocations within a wholly-owned group still need to be arm's length.
Can a development management fee be a fixed lump sum?
It can, provided the amount is supported by the scope of work and risk assumed, rather than simply absorbing whatever profit remains after other fees are paid.
Is a profit split only relevant for joint ventures with external parties?
No. A profit split can also be the appropriate method between related entities where each contributes unique and valuable functions, such as land and development expertise, to the same project.
How often should developer intercompany pricing be reviewed?
At key project milestones and at least annually, since project risk, scope and market conditions typically change significantly over a development's life.
Can a 3% of GDV development fee be used without support?
A round percentage can be a starting point, but it is not a substitute for comparable third-party fee evidence or an appropriate cost-based or profit-based benchmark.
Primary sources and further reading
How SBC Tax Consulting can help
SBC's transfer pricing team works with developer groups to map the project structure, test development and management fees, and document profit-sharing so land, brand and delivery risk are not misaligned. We coordinate with corporate tax so the fee model, the SPV accounts and the Related Party disclosures stay consistent. Contact SBC before the next project SPV starts billing round-percentage fees.
This publication is for general information only and does not constitute professional advice. Please consult your SBC advisor before acting on any matter covered here.