UAE is Soon to Implement an R&D Tax Credit in 2026
The United Arab Emirates (UAE) announced throughout 2025 its intention to introduce an R&D Tax Credit in the UAE, expected to take effect in January 2026. The regime has been developed following a consultation process with relevant stakeholders, reflecting the UAE’s broader policy objective of strengthening innovation-led growth under the UAE corporate income tax framework.
For businesses operating in Dubai and across the UAE, the new R&D tax incentive will form an important part of the evolving UAE corporate tax regime.
Why Should Businesses in Dubai and the UAE Care?
R&D tax credits in the UAE should matter to businesses because, in an economy increasingly defined by the age of information, innovation is no longer a discretionary “nice-to-have”, but rather a “must-have”: innovation is often the primary driver of competitive advantage and profit.
In most modern sectors, value is created less by physical assets and more by intellectual property, software, data-driven processes, and technical know-how (intangibles).
As opposed to the classical industrial revolution that placed tangible assets as the absolute source of profit, the third and fourth industrial revolutions prioritise intangible assets as the gold standard for success in the business world.
An R&D Tax Credit in the UAE directly reduces the net cost of building those capabilities, making it easier for Dubai businesses to invest in product development, automation, advanced analytics, and new technologies while preserving cash and improving return on investment.
Why Is the UAE Introducing an R&D Tax Incentive?
Government support for R&D has become one of the most strategically important tools in the global competition for economic leadership. Across major economies, billions are deployed every year through a mix of direct subsidies, grants, public procurement, and R&D tax incentives to accelerate the development of next-generation technologies and secure long-term advantage.
In this context, R&D incentives are designed to shift investment behaviour: reducing the cost of experimentation, attracting high-value talent and R&D operations, and enabling domestic champions to build the products and platforms that will dominate global markets in the coming decades.
For the UAE, and particularly for Dubai as a regional innovation hub, the R&D tax credit regime supports long-term economic competitiveness.
What Are Other Jurisdictions Doing?
By way of example, Europe has one of the most mature R&D support ecosystems in the world, with incentives delivered primarily through a combination of public funding (grants/subsidies) and tax relief.
Across the region, approximately EUR 21 billion is invested each year to support corporate R&D, while venture capital contributes roughly EUR 19 billion. Importantly, around EUR 11 billion of the public support is provided through R&D tax incentives, rather than direct grant funding, reflecting how governments increasingly encourage businesses to invest by reducing the net cost of innovation.
Within Europe, several jurisdictions (including Portugal, France, Germany, the United Kingdom, and Poland) stand out as particularly generous in terms of R&D tax support.
France’s Crédit d’Impôt Recherche (CIR) and Portugal’s SIFIDE are often viewed as global benchmark regimes due to the scale of relief available to eligible companies. Spain’s I+D+i regime is also highly competitive, including in practice through well-established structuring approaches (such as tax lease-style arrangements) that are commonly implemented via incorporated joint ventures.
R&D tax incentives are increasingly used as strategic leverage to attract high-performing companies to establish and scale their R&D operations locally, creating immediate investment and long-term spillovers. Beyond the tax saving, these regimes help build innovation clusters by bringing high-skilled jobs, specialist suppliers, academic partnerships, and IP development into the same ecosystem, driving synergies that ultimately translate into higher productivity and future profit growth.
What May Businesses Need to Do to Become Competitive in the UAE?
To become competitive under the UAE’s upcoming R&D Tax Credit regime, businesses in Dubai and the wider UAE should expect to do more than simply incur qualifying expenditure.
In practice, capturing the benefit will likely depend on implementing the right internal governance, documentation, and cost-tracking processes early so that claims are defensible, audit-ready, and aligned with the eligibility criteria that will ultimately be issued under UAE corporate tax law.
The key question for most companies will not be whether they conduct “innovation” in a general sense, but whether they can evidence eligible R&D activities and quantify the associated costs in a structured and verifiable manner.
In practice, the UAE’s framework may follow either:
- a self-assessment model (similar to regimes such as the UK, France, and Poland); or
- a certification-based model requiring validation by a competent authority (as seen in jurisdictions such as Portugal, Germany, and Spain).
Both approaches typically require maintaining a structured UAE R&D Tax Credit dossier capable of supporting the claim either before the certifying body (where applicable) or the UAE tax authority in the event of review or audit. This dossier commonly comprises three core components:
- Technical Eligibility File – demonstrating why the activities qualify as R&D under UAE tax rules;
- Financial Defence File – evidencing the relevant cost base, categories, and amounts; and
- Methodology File – explaining the calculation methodology and allocation approach.
In sum, without adequate documentation of this nature, the tax benefit may be challenged and, in practice, may not be safely claimable.
Key Takeaways on the Future of UAE Corporate Income Tax
The UAE’s corporate income tax regime is evolving quickly, and the upcoming UAE R&D Tax Credit is a clear sign that corporate tax will increasingly be used not only to raise revenue, but also to incentivise innovation-led growth.
For businesses in Dubai and the UAE, the key takeaway is practical: tax efficiency will depend more on substance and documentation, not just structure. Companies that can demonstrate eligible R&D activity in the UAE will be best placed to benefit from the regime and remain competitive as the rules and enforcement expectations mature.
To discuss how the UAE’s evolving corporate income tax framework may apply to your business model, group structure, and qualifying expenditure, you may contact M&CO Legal’s Corporate & Commercial Team in Dubai, which regularly advises clients on UAE tax law and corporate structuring.
Pedro Seabra Caeiro (pedro@mandcolegal.com) is part of M&CO Legal’s Corporate & Commercial practice in Dubai, advising businesses on UAE and international tax matters, VAT, cross-border structuring, and complex transactions.
Disclaimer
This publication does not provide any legal advice, and it is for information purposes only. You should not rely upon the material or information in this publication as a basis for making any business, legal, or other decisions. Any reliance you place on such material is therefore strictly at your own risk.
