R&D tax credits in UAE: What international businesses need to know
The UAE has introduced its first expenditure-based R&D tax incentive, allowing businesses to claim credits of up to 50% on qualifying research and development spend. The regime takes effect for tax periods commencing on or after 1 January 2026. The Ecovis experts explain the key provisions and what businesses should do now.
Through Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026, the Ministry of Finance has created a direct tax credit against corporate tax and domestic minimum top-up tax liabilities for businesses conducting qualifying R&D activities in the UAE. This is the first time the UAE corporate tax framework has included a dedicated innovation incentive — a significant development for multinational groups evaluating the UAE as a location for research-intensive operations.
How the tiered credit works
The credit is calculated on a progressive, marginal basis: 15% on the first AED 1 million of qualifying expenditure, 35% on the next AED 1 million, and 50% on expenditure between AED 2 million and AED 5 million. The maximum credit per entity or tax group is AED 2 million. Each tier requires a minimum average headcount of R&D staff — 2, 6 and 14 respectively — and both the expenditure and headcount thresholds must be met simultaneously.
Which activities and expenditure qualify?
Activities must satisfy all five criteria of the OECD Frascati Manual: novel, creative, uncertain, systematic and transferable. Social sciences, humanities and arts are excluded, as is any R&D performed outside the UAE. Qualifying expenditure covers staff costs (with a 30% overhead uplift), consumables, subcontracting fees and cost contribution arrangements, subject to a minimum of AED 500,000 per project per tax period. Each project requires mandatory pre-approval from the Emirates Research and Development Council.
We check whether companies’ R&D activities are eligible for the tax credit in the UAE and guide them through the mandatory pre-approval procedure.
Rashmi Rajkumar, Co-Founder & Partner, ECOVIS JRB Chartered Accountants, Dubai, United Arab Emirates
What free zone businesses should know
Qualifying free zone persons can only claim the credit if they are subject to corporate tax at 9% on income derived from R&D activities, or subject to top-up tax under the DMTT. A free zone entity earning solely qualifying income at 0% with no DMTT exposure is not eligible.
Recommendations for companies
Businesses conducting R&D in the UAE should begin tracking expenditure across the four qualifying categories from the start of the current tax period and engage with the Emirates Research and Development Council on the pre-approval process without delay. For businesses currently on small business relief, it is worth evaluating whether forgoing that relief to access the R&D tax credit delivers a superior net tax outcome.
