UAE R&D Tax Credit: Who Qualifies, the 15/35/50% Rates and How Pre-Approval Works

The R&D tax credit comes from Cabinet Decision No. 215 of 2025, which created the credit, and Ministerial Decision No. 24 of 2026, which set the rates and the detailed rules. Both apply to tax periods starting on or after 1 January 2026. The Ministry of Finance calls this Phase 1 of its R&D tax incentives programme and has said Phase 2 may look at a refundable credit or a higher spending limit.

This guide covers who can claim, how the rates work, which costs count, the pre-approval step and what happens to unused credit. For the wider Corporate Tax rules, start with our UAE Corporate Tax guide.

Who can claim the R&D tax credit?

A company can claim if it is a Qualifying Entity: a juridical person established in the UAE, including a Free Zone Person, that is subject to Corporate Tax and/or Top-up Tax and carries on qualifying R&D activities. A foreign company can also claim for R&D carried on through a UAE permanent establishment that is taxed in the UAE.

Three kinds of entity are excluded:

• an entity that is subject to neither Corporate Tax nor Top-up Tax;
• an entity that has elected for Article 21 of the Corporate Tax Law, which is Small Business Relief;
• any other entity that a ministerial decision excludes.

On top of that, the company must meet all of these conditions:

• it has the minimum number of R&D staff for the rate it claims;
• it has pre-approval from the Emirates Research and Development Council for the project;
• it bears the financial burden of the R&D itself;
• it is entitled to a share of the returns from the results, such as the intellectual property;
• the project has a defined objective to increase knowledge or find new applications of existing knowledge.

R&D tax credit rates: 15%, 35% and 50%

The credit is a percentage of the qualifying R&D expenditure incurred in the tax period. Each rate applies only to its own slice of spending, in the same way as the 0% and 9% Corporate Tax rate bands:

To get a rate, the company must meet both the spending threshold and the staff threshold for it. If it misses either one, the rate drops to the highest rate for which both thresholds are met. In a tax group, the spending and the staff of all qualifying members are added together.

A company with AED 3 million of qualifying R&D expenditure and an average of 15 R&D staff would earn:

• 15% of the first AED 1 million = AED 150,000
• 35% of the next AED 1 million = AED 350,000
• 50% of the last AED 1 million = AED 500,000

That is AED 1,000,000 of credit. The table stops at AED 5 million, so the most a company or tax group can earn in one period is AED 2 million of credit (15% of 1 million, plus 35% of 1 million, plus 50% of 3 million).

The average staff count is worked out month by month: add up the number of R&D staff in each month and divide by the number of months in which R&D was carried on. R&D staff are full-time or full-time-equivalent employees, or externally provided workers, who are directly and actively engaged in the qualifying activities.

What counts as qualifying R&D expenditure?

Four categories of cost qualify:

• Staff costs for R&D staff: salaries, allowances, medical insurance, pension contributions, end-of-service gratuity, bonuses, benefits in kind and training for R&D work. Employee stock option plans do not count. The staff must be in the UAE and under the company’s supervision and control.
• Consumables used up in the R&D, such as materials, water, fuel and power, non-capital licence fees, and payments to participants in clinical trials.
• Subcontracting fees paid to a person based in the UAE for R&D carried out in the UAE, provided the subcontractor does not pass the work on to someone else.
• Cost contribution arrangements: your arm’s length share of the costs of R&D carried out jointly with other companies.

Staff costs are uplifted by 30% to cover overheads. A company that spends AED 800,000 on R&D salaries and benefits counts AED 1,040,000 towards the credit.

Every cost must also pass these tests:

• it is incurred wholly and exclusively for the qualifying R&D (only the R&D share counts if a cost has several purposes);
• it is deductible for Corporate Tax;
• it is not funded by a government grant;
• it does not already benefit from another incentive or relief;
• it reaches at least AED 500,000 for each R&D project in the tax period, counted before the 30% uplift.

Costs charged between members of the same tax group do not count. That covers recharged staff, consumables bought from a group member and R&D subcontracted to one.

What counts as an R&D activity?

An activity qualifies when it is carried out in the UAE as part of an R&D project and meets five conditions. It must be:

1. novel, aiming at new findings;
2. creative, based on original concepts or hypotheses;
3. uncertain, so the outcome or the way to reach it is not known in advance;
4. systematic, following a plan and a budget;
5. transferable or reproducible, so the results can be used or repeated elsewhere.

The assessment follows the OECD Frascati Manual, the international standard for measuring research and experimental development. Only the part of a project carried out inside the UAE qualifies. Research in the social sciences, humanities and the arts is excluded.

Under the Frascati Manual, routine software development, testing and product updates are usually not R&D, even when they involve a lot of engineering work. The question is whether the project tries to resolve a scientific or technological uncertainty, and the company will need records that show it did.

Pre-approval from the Emirates R&D Council

Every R&D project needs pre-approval from the Emirates Research and Development Council before the credit can be claimed. The Council sets the form, the procedure and the timeline for the application. After approval, it can ask for a progress update on the project together with technical documentation, to check that the work matches what was approved.

When the company claims the credit, it attaches proof of pre-approval, a declaration signed by senior management, a breakdown of the qualifying expenditure and audited financial statements. In a tax group, the parent company applies for pre-approval and makes the claim.

The decisions leave the application process to the Council and do not set an opening date for applications. Check the Council’s current requirements before you plan a claim.

Can a free zone company claim?

Yes. A Free Zone Person can be a Qualifying Entity. A Qualifying Free Zone Person must also meet one of two extra conditions:

• it pays Corporate Tax at 9% on taxable income for the period, and that income comes from the qualifying R&D activities; or
• it is subject to Top-up Tax for the fiscal year in which it incurred the expenditure.

In practice, a free zone company whose income is taxed at 0% earns no credit for that income. The anti-abuse rules add a second warning: if a company becomes a Qualifying Free Zone Person within five years after it last claimed the credit, the credit it used is clawed back.

How the credit is used, carried forward and transferred

Claiming. The claim is made in the Corporate Tax return, or the Top-up Tax return, for the period in which the expenditure was incurred. A claim filed after the return’s due date is not accepted unless the FTA allows it in exceptional circumstances. For a company with a calendar financial year, the first period is 2026 and the return for it is due by 30 September 2027. Our guide on how to file a Corporate Tax return covers the return itself.

Using. The credit reduces the Corporate Tax and/or Top-up Tax payable. It is non-refundable: if it is larger than the tax due, you do not get the difference back in cash. Older credits are used before newer ones.

Carrying forward. Unused credit can be carried forward to later periods if either of these holds:

• the same person or persons continuously owned at least 50% of the company from the start of the period in which the credit arose to the end of the period in which it is used; or
• if more than 50% of the ownership changed, the company continues the same or a similar business.

The ownership test does not apply to companies listed on a recognised stock exchange.

Transferring. A company can transfer unused credit to another company that is subject to Corporate Tax and/or Top-up Tax if the two are at least 75% commonly owned, or one owns at least 75% of the other, for the whole period from when the credit arose to when it is used. The receiving company must use the transferred credit in that period, only up to its own remaining tax liability, and cannot carry it forward or pass it on.

Restructuring, claw-back and anti-abuse rules

When a company transfers its whole business, or an independent part of it, the new owner can take over the unused credit. The new owner must continue the business and its R&D for at least two years. If the R&D stops within those two years, the credit already used must be repaid and the unused part is lost.

The same applies whenever a company stops meeting the conditions for a project: any credit used for that project must be repaid to the FTA, and the unused part is forfeited. No other credits, reliefs or tax losses can be set against the repayment, and the usual tax penalties apply to it.

Credit is also clawed back if, within five years after the end of the period in which it was last claimed, the company:

• stops being a taxable person;
• becomes a Qualifying Free Zone Person;
• applies Small Business Relief;
• enters liquidation;
• moves its domicile outside the UAE.

The FTA can also cancel credits obtained through arrangements that lack economic substance, or by splitting one business across several companies to stay under the AED 5 million cap.

Records you need to keep

Keep technical documentation that shows the work was qualifying R&D and that the costs were qualifying expenditure, for seven years after the end of the tax period. The documentation should cover the project’s objectives, processes, methods, experiments and findings, in written, visual and electronic form. The Council or the FTA can ask for it within a deadline they set.

Set up a separate file for each R&D project from the start: timesheets for R&D staff, payroll records, consumables invoices, subcontracting contracts and the Council’s pre-approval. Reconstructing them at year end is much harder.

How QuickTax helps

We keep your books so R&D costs are tracked separately from the start: R&D staff time, consumables and subcontracting fees per project. Our accountants prepare your Corporate Tax return and check whether your figures meet the spending and staff thresholds before you apply for the credit.

See how our accounting and tax service works →

This material is for reference and is not tax advice. Sources: Cabinet Decision No. 215 of 2025 on R&D Tax Credit, Ministerial Decision No. 24 of 2026, and the Ministry of Finance announcement of Phase 1 of the R&D Tax Incentives Programme. Always check current requirements with the Ministry of Finance, the FTA and the Emirates Research and Development Council.

What this means for you

The R&D tax credit can return up to AED 2 million a year, but only to companies that plan for it. Three things decide whether you can claim: