Transfer Pricing Tool
for Real Estate

Transfer Pricing for Real Estate: OECD Methodology

Transfer pricing for real estate groups centres on three main transaction types: property management fees, development services, and intercompany rental arrangements. Real estate is fundamentally an asset-intensive business where the value lies in the property portfolio itself — but the management and services that support the portfolio are often provided by related-party entities within the group, creating transfer pricing obligations under OECD Guidelines and local tax laws.

For property management services — including leasing, tenant management, maintenance coordination, and financial administration — the Cost Plus method is standard. The management company's cost base (personnel, overhead, direct costs) is marked up to reflect an arm's length return for the services provided. Typical markups for routine property management services range from 5% to 15%, depending on the complexity of the portfolio, the number of properties managed, and the level of decision-making authority retained by the management company versus the property-owning entities. Where the management company performs more strategic functions (asset allocation, investment decisions, development oversight), higher markups or TNMM may be more appropriate.

For intercompany rental arrangements, the CUP method is preferred where comparable market rental data is available — and in most mature real estate markets, rental comparables are abundant. Tax authorities can readily verify intercompany rents against market rates using publicly available databases, broker reports, and local property registers. This makes real estate one of the few sectors where CUP is frequently the best method for a major transaction category. REIT structures with intercompany management add additional complexity: the management fee structure must comply with both REIT regulatory requirements and transfer pricing rules simultaneously.

Recommended Method: Cost Plus Method

For real estate entities, the cost plus method is typically the most appropriate transfer pricing method. This tool pre-selects this method based on industry best practice and OECD guidance. Typical arm's length ranges for real estate are 5–15%.

Typical Real Estate Intercompany Transactions

Property management fees — A management company within the group provides property management services (leasing, maintenance, tenant relations) to related-party property-owning entities. Cost Plus is standard for routine management. Preferred method: Cost Plus Method.

Development services — Related-party development company provides project management, construction oversight, and development services. Cost Plus markup benchmarked against independent developers. Preferred method: Cost Plus Method.

Intercompany rental arrangements — One group entity leases property from a related-party property owner. CUP applies where comparable market rental rates are available for similar properties in the same location. Preferred method: CUP (Comparable Uncontrolled Price).

Regulatory Context

Real estate TP is relatively straightforward due to market rental data availability. Key risk: management fees that extract excessive profit from property SPVs. Netherlands, Luxembourg, and Ireland — common holding jurisdictions for real estate structures — have specific substance requirements.

Limitation: This tool supports Cost Plus for management fees and CUP for rental benchmarking. For joint venture profit allocation or complex development profit sharing, consult a transfer pricing specialist.