The UAE today announced the launch of Phase 1 of its Research and Development (R&D) Tax Incentives Programme, marking an important step in strengthening the country’s innovation ecosystem and supporting sustainable, long-term economic growth.
Under the first phase of the programme, businesses will be able to benefit from a non-refundable R&D tax credit of up to 50% on qualifying expenditure of up to AED 5 million. The measure is designed to encourage private-sector investment in research and innovation, while supporting the UAE’s ambition to become a global hub for advanced industries and emerging technologies.
The initial design of the incentive takes into account recent developments under the OECD Pillar Two framework, recognising that in the current international tax environment a non-refundable credit is expected to deliver a more favourable and predictable effective tax rate outcome for companies operating in the UAE.
The introduction of an easy to administer, non-refundable credit also reflects the early stage of the UAE’s Corporate Tax regime, which was recently implemented. Phase 1 has therefore been structured to provide immediate and meaningful support to businesses undertaking genuine R&D activities, while enabling the Ministry of Finance to monitor uptake, assess behavioural and economic impacts, and gather the data necessary to inform future policy development.
Insights from Phase 1 will guide the design of Phase 2 of the R&D Tax Incentives Programme. During the next phase, the Ministry of Finance will evaluate potential enhancements, including consideration of a refundable credit and/or expanding the level of qualifying expenditure eligible for relief, either across the economy or within priority sectors.
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