ع
The Ministry of Finance introduced the R&D tax credit through Cabinet Decision No 215 of 2025 and Ministerial Decision No 24 of 2026, establishing a progressive structure that ties relief rates to both spending levels and workforce commitments. Businesses can claim 15 per cent on the first AED 1 million of qualifying expenditure provided they maintain an average of at least two R&D staff, according to the ministerial decision. The rate rises to 35 per cent on the subsequent AED 1 million with a minimum of six R&D employees and reaches 50 per cent on spending from AED 2 million up to the AED 5 million cap when 14 or more such staff are engaged on average, with the credit itself limited to AED 2 million per entity or tax group per period.
Qualifying activities must meet the five OECD Frascati Manual criteria of being novel, creative, uncertain, systematic and transferable while taking place inside the UAE, a Ministry of Finance assessment found. Projects in the social sciences, humanities or arts fall outside the scope entirely. The Federal Tax Authority guidance specifies that a minimum of AED 500,000 in qualifying expenditure is required per project before any credit can be considered.
Eligible expenditures cover staff costs, which receive a 30 per cent uplift to account for overheads, along with consumables, subcontracting payments to UAE-based contractors and arm’s-length contributions under cost-sharing arrangements, according to the decisions. Intra-group transactions, grant-funded portions and costs already benefiting from other tax incentives are excluded from calculations. The regime applies to UAE juridical persons and foreign entities with permanent establishments that are subject to corporate tax or domestic minimum top-up tax, though those electing small business relief do not qualify.
Companies must secure pre-approval from the Emirates Research and Development Council for each project prior to filing a claim, the Ministry of Finance stated in its release. Claims are submitted as part of the annual corporate tax return together with technical descriptions, financial records and other supporting documentation that demonstrates compliance with all conditions. Any unused credit can be carried forward under specified ordering rules that require current-period liabilities to be settled first.
The incentive forms part of broader measures to accelerate innovation and economic diversification beyond hydrocarbons, according to Ministry of Finance statements. Similar R&D credit programmes in other jurisdictions have historically correlated with increased private-sector investment in technology development, though the UAE version includes explicit headcount thresholds to ensure substantive local activity. The Federal Tax Authority has indicated that detailed guidance and an online portal for pre-approvals will support smooth implementation starting with 2026 tax filings.
