In brief
The UAE has introduced Phase 1 of its Research and Development Tax Incentives Programme, creating a new R&D Tax Credit regime under the UAE Corporate Tax framework.
The regime is introduced through Cabinet Decision No. 215 of 2025 and implemented by Ministerial Decision No. 24 of 2026. It applies to tax periods and fiscal years commencing on or after 1 January 2026.
The R&D Tax Credit is non-refundable and may be used against UAE Corporate Tax and/or Top-up Tax liabilities, subject to eligibility, pre-approval, qualifying expenditure, R&D staff thresholds and documentation requirements.
Ministry of Finance – UAE Launches Phase 1 of Research and Development Tax Incentives Programme
For businesses investing in innovation, product development, technology, manufacturing improvement, engineering, scientific research or other qualifying R&D activities in the UAE, this is an important development. However, the credit is not automatic and should be assessed at project level before making a claim.
In detail
Overview of the new R&D Tax Credit regime
The UAE R&D Tax Credit is designed to support private-sector investment in genuine research and development activities carried out in the UAE.
The credit is calculated by applying the relevant credit rate to qualifying R&D expenditure incurred by a qualifying entity or tax group during the relevant tax period or fiscal year.
The regime currently operates as a non-refundable tax credit. This means it may reduce Corporate Tax and/or Top-up Tax payable, but it does not automatically generate a cash refund where there is no tax liability.
Who may qualify?
A qualifying entity may include:
- a UAE juridical person, including a Free Zone Person, that is subject to Corporate Tax and/or Top-up Tax and carries out qualifying R&D activities; or
- a foreign juridical person carrying out qualifying R&D activities through a UAE Permanent Establishment that is subject to Corporate Tax and/or Top-up Tax.
Entities that are not subject to Corporate Tax or Top-up Tax, and entities that have elected for Small Business Relief, are excluded from the regime.
Qualifying Free Zone Persons should review their position carefully, particularly where they are seeking to maintain a 0% Corporate Tax position.
What is a qualifying R&D activity?
An activity may qualify where it is carried out in the UAE as part of an R&D project and meets the relevant conditions.
The activity should be:
- novel;
- creative;
- uncertain;
- systematic; and
- transferable or reproducible.
Where an R&D project is carried out partly inside and partly outside the UAE, only the UAE-based qualifying R&D activities may qualify.
R&D activities in the fields of social sciences, humanities and arts are excluded.
Credit rates and thresholds
The R&D Tax Credit applies on a tiered basis, linked to both qualifying R&D expenditure and the average number of R&D staff.
| Qualifying R&D expenditure | Minimum average R&D staff | Credit rate |
|---|---|---|
| First AED 1 million | At least 2 | 15% |
| Portion above AED 1 million up to AED 2 million | At least 6 | 35% |
| Portion above AED 2 million up to AED 5 million | At least 14 | 50% |
To access a specific rate, both the expenditure threshold and the R&D staff threshold must be met. If either threshold is not met, the credit rate is adjusted down to the highest rate for which both conditions are satisfied.
Minimum project spend
Qualifying R&D expenditure must be at least AED 500,000 for each R&D project in the relevant tax period or fiscal year.
This threshold excludes any staff cost uplift.
Qualifying expenditure
Qualifying R&D expenditure may include:
- staff costs;
- consumable costs;
- subcontracting fees;
- arm’s length cost contribution arrangement contributions; and
- certain capitalised costs relating to internally generated intangibles resulting from qualifying R&D activities.
The expenditure must be incurred wholly and exclusively for qualifying R&D activities. Where expenditure has mixed purposes, only the identifiable qualifying portion should be included.
Expenditure funded directly or indirectly by grants, or already benefiting from another incentive, credit, exemption or relief, should be excluded.
Staff cost uplift
Qualifying staff costs may be uplifted by 30% to reflect overheads reasonably attributable to qualifying R&D activities.
Staff costs may include salaries, wages, allowances, medical insurance, pension contributions, end-of-service gratuity, bonuses and other employment-related costs, subject to the detailed conditions.
Mandatory pre-approval
A qualifying entity must obtain pre-approval from the Emirates Research and Development Council for each R&D project for which the credit is claimed.
The Council may also require progress updates and technical documentation to demonstrate that the approved R&D activities and expenditure remain consistent with the claim.
The form, manner and timelines for pre-approval should be monitored once further procedures are issued.
Utilisation, carry-forward and transfer
The R&D Tax Credit must first be used against the qualifying entity’s Corporate Tax and/or Top-up Tax liability for the relevant period.
Unutilised credits may be carried forward to future periods, subject to ownership continuity or business continuity conditions.
Transfers of unutilised credits may also be possible between commonly owned entities, subject to conditions. Broadly, the transferor and transferee must meet the required ownership conditions, and the transferred credit cannot exceed the transferee’s Corporate Tax and/or Top-up Tax liability for the relevant period.
Transferred credits cannot be carried forward or transferred again by the transferee.
Claim submission
The R&D Tax Credit claim is submitted as part of the Corporate Tax Return or Top-up Tax Return, as applicable.
The claim should be supported by:
- proof of pre-approval from the Council;
- senior management declaration;
- breakdown of qualifying R&D expenditure;
- audited financial statements; and
- any other information required by the Authority or relevant decision.
Late claims may not be considered unless accepted by the Authority in exceptional circumstances.
Practical impact for UAE businesses
The new regime provides a potential tax benefit for businesses undertaking genuine R&D activity in the UAE. However, it also introduces a formal compliance process that requires early planning.
Businesses should not wait until the tax return filing stage. The R&D project, technical documentation, staff allocation, cost mapping and pre-approval process should be considered before or during the project lifecycle.
The regime is particularly relevant for businesses involved in technology, software development, manufacturing, pharmaceuticals, engineering, product development, industrial innovation and process improvement.
Actions to consider
Businesses should consider:
- identifying current and planned R&D projects for 2026 and later periods;
- assessing whether the activities meet the qualifying R&D criteria;
- reviewing whether the AED 500,000 project-level threshold may be met;
- mapping R&D staff numbers against the credit rate thresholds;
- preparing project-level technical documentation;
- reviewing qualifying expenditure and exclusions;
- assessing Free Zone, Tax Group and Top-up Tax implications;
- applying for pre-approval once the process is available; and
- aligning the claim with Corporate Tax and Top-up Tax return filing
Official Sources
- MoF announcement
- Cabinet Decision No. 215 of 2025
- Ministerial Decision No. 24 of 2026
- FTA Corporate Tax legislation page
How PTG Consultant L.L.C can support
PTG Consultant L.L.C can support UAE businesses with R&D Tax Credit eligibility review, qualifying activity assessment, expenditure mapping, pre-approval support, Corporate Tax impact review, Top-up Tax considerations, claim preparation and audit-ready documentation.
Businesses planning to claim the R&D Tax Credit should complete a technical and tax review before submission to ensure the claim is supportable, properly documented and aligned with the UAE Corporate Tax framework.
Assess your R&D Tax Credit eligibility before filing — speak to PTG Consultant L.L.C for a technical review and claim-readiness support. Contact Us
Frequently Asked Questions
What is the UAE R&D Tax Credit 2026?
The UAE R&D Tax Credit is a Corporate Tax incentive introduced for qualifying research and development activities carried out in the UAE. It allows eligible businesses to claim a non-refundable tax credit against their UAE Corporate Tax and/or Top-up Tax liabilities, subject to approval and qualifying conditions.
When does the UAE R&D Tax Credit apply?
The R&D Tax Credit applies to tax periods or fiscal years commencing on or after 1 January 2026.
Is the UAE R&D Tax Credit refundable?
No. Under Phase 1 of the programme, the R&D Tax Credit is non-refundable. This means it can be used to reduce eligible UAE Corporate Tax and/or Top-up Tax liabilities, but it cannot be refunded in cash.
Who can claim the UAE R&D Tax Credit?
The credit may be claimed by a qualifying entity that carries out eligible R&D activities in the UAE, meets the required conditions, incurs qualifying R&D expenditure, satisfies the relevant staff thresholds and obtains the required pre-approval for the R&D project.
Is pre-approval required before claiming the R&D Tax Credit?
Yes. Businesses must obtain pre-approval from the Emirates Research and Development Council for each qualifying R&D project before claiming the credit.
What types of expenditure may qualify for the R&D Tax Credit?
Qualifying expenditure may include eligible R&D staff costs, direct costs and other expenditure connected with approved R&D activities, subject to the conditions and limitations set out under the UAE R&D Tax Credit rules.
Can a Qualifying Free Zone Person claim the R&D Tax Credit?
A Qualifying Free Zone Person should carefully assess its position before claiming the R&D Tax Credit. The interaction between the credit, 0% Free Zone Corporate Tax treatment, taxable income and Top-up Tax should be reviewed on a case-by-case basis.
Can unused R&D Tax Credit be carried forward?
Yes. Where the credit cannot be fully used in the relevant tax period, it may generally be carried forward subject to the conditions and limitations under the R&D Tax Credit regime.
Why should businesses review R&D projects before claiming the credit?
The R&D Tax Credit is not automatic. Businesses should review each project to confirm whether the activity qualifies as R&D, whether the expenditure is eligible, whether documentation is sufficient and whether pre-approval requirements have been met.
Disclaimer
This article is prepared for general information only and should not be treated as legal or tax advice. The application of the UAE R&D Tax Credit regime depends on the facts, activities, expenditure, tax profile and documentation of each business. Professional advice should be obtained before making any claim.