R&D Tax Credit Regime in UAE

Following a public consultation process in 2024, the UAE Ministry of Finance has now formally introduced the R&D tax credit regime through Cabinet Decision No. 215 of 2025 (“C.D. 215”) and Ministerial Decision No. 24 of 2026 (“M.D. 24”), which provide the legislative framework and detailed implementation rules, applicable to financial years commencing on or after 1 January 2026.

In its current “Phase 1” design, the regime provides a non-refundable R&D Tax Credit of up to 50% on qualifying expenditure, capped at AED5 million to UAE entities undertaking eligible R&D activity in the UAE. The credit is determined based on tiered rates (15%, 35% and 50%), linked to qualifying spend and R&D headcount. The credit may be offset against corporate tax (“CT”) liabilities under UAE’s CT Law (“the CT Law”) and, subject to ordering rules, against Top-up Tax liability under the UAE’s Domestic Minimum Top Up Tax Rules (“the DMTT Law”).

The definition of R&D activity under the regime is based on the internationally recognised principles from the Organisation for Economic Cooperation and Development (“OECD”) Frascati Manual covering the guidelines for Collecting and Reporting Data on Research and Experimental Development, ensuring consistency with global standards.5 Other key features include mandatory pre-approval of projects by the UAE R&D Council and a defined scope of eligible costs, such as staff costs — with a 30% uplift — consumables, subcontracting fees and arm’s length cost contribution payments. Further, the benefit is expanded to apply in case of tax grouping, transfer of business and transfer of credit within a group, subject to specific conditions.

This update highlights key aspects of the regime and practical considerations for businesses undertaking R&D in the UAE.

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