UAE: Introduction of R&D tax incentives
Effective for tax periods commencing on or after January 1, 2026
The Ministry of Finance (MoF) issued Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026, introducing its first dedicated tax incentive regime for research and development (R&D) under its corporate tax framework.
Effective for tax periods commencing on or after January 1, 2026, the regime introduces a tiered credit mechanism, providing credit rates of up to 50%, determined by qualifying R&D expenditure and the number of R&D personnel employed. Eligible taxpayers may use the R&D tax credit to offset their corporate tax and/or Pillar Two top‑up tax liabilities, subject to an annual cap on qualifying expenditure of AED 5 million per entity or per tax group.
In its public announcement, the MoF characterized the current framework as “Phase 1,” and indicated that potential enhancements such as refundability and/or an expansion of qualifying R&D expenditure may be considered in subsequent phases.
The key aspects covered under the decision include:
- Eligible entities
- Conditions to claim the R&D tax credit
- Additional conditions for qualifying free zone person (QFZP)
- Qualifying R&D activities
- R&D tax credit rates
- Approval requirements
- Qualifying costs
- Utilization, carry forward, and transfer provisions
- Application of the R&D tax credit to tax groups
- Interaction with UAE domestic minimum top-up tax (DMTT) rules
- OECD side-by-side package (substance-based tax incentives)
- Anti-abuse provisions
- Clawback provisions
- Documentation and record keeping
- Claim mechanism
Read an April 2026 report prepared by the KPMG member firm in the UAE