In times of financial pressure, businesses that continue to innovate are better placed to strengthen their market position and secure long-term relevance.
The UAE has clearly recognized that, for its business environment to prosper and remain competitive, it must stay at the cutting edge and continue to push boundaries on the global stage. It is against this backdrop that the Ministry of Finance has now published one of the final building blocks of the R&D Tax Credit regime: Ministerial Decision No. 24 of 2026 (“Decision”).
The timing was perfect because subsidization and innovation support mechanisms are increasingly moving to the forefront of global economic policy, as states, institutions, and businesses tighten budgets amid persistent uncertainty in energy markets and the knock-on effects this may have on global logistics, supply chains, and industrial activity.
Companies and other stakeholders should take advantage of the UAE’s willingness to cut their tax revenue to help their taxpayers prosper and evolve.
How Do R&D Tax Credits Work?
R&D tax credits work by allowing a company that spends money on eligible research and development (“R&D”) activities to receive a tax credit equal to a percentage of eligible costs. That credit is then applied against what the taxpayer is owed in Corporate Income Tax, which reduces the overall cost of investing in innovation.
For costs to qualify, they must be directly linked to R&D activities. Most jurisdictions, including the UAE[i], rely on the OECD’s Frascati Manual to identify what constitutes an R&D activity. Under that framework, the activity must be:
- aimed at generating new findings;
- based on original, non-obvious concepts or hypotheses;
- uncertain in terms of its outcome or the means of achieving it;
- carried out in a planned and budgeted manner; and
- capable of being transferred or reproduced.
How Much May I Benefit?
The UAE’s R&D Tax Credit system is progressive. This means that multiple brackets offer different rates of credit depending on the interval of eligible costs in R&D and staff employed in the R&D activities. The potential benefits[ii] are as follows:
| Eligible R&D Cost | Minimum Staff | Rate of R&D Tax Credit |
| 0 to AED 1 million | 2 | 15% |
| AED 1 million to AED 2 million | 6 | 35% |
| AED 2 million to AED 5 million | 14 | 50% |
For example, if a Company has AED 4.56 million in eligible R&D tax costs, it may obtain a 39.04% effective rate of R&D Tax Credit because:
- The first AED 1 million at 15% produces AED 150,000;
- The second AED 1 million at 35% produces AED 350,000; and
- The remaining AED 2.56 million at 50% produces AED 1,280,000.
This equals a total tax credit of AED 1,780,000, which is 39,04% of AED 4.56 million.
Both conditions are relevant in determining the applicable rate. In other words, for a taxpayer to benefit from a given bracket, it must satisfy both the expenditure threshold and the minimum R&D staff requirement. For example, a Company cannot benefit from the 50% rate merely because it has incurred AED 50 million in R&D expenditure if it has only 2 staff engaged in R&D activities. To access that rate, it must also have at least 14 R&D staff members.
Furthermore, the benefit is capped. The maximum amount of qualifying R&D expenditure is AED 5 million per relevant period. This means that, under the current regime, the optimal amount of qualifying R&D spend for purposes of the credit is AED 5 million, which can generate a maximum R&D tax credit of AED 2 million. In effective terms, this corresponds to a 40% subsidy rate in relation to an investment of just 5 million AED.
How May I Obtain R&D Tax Credits?
For taxpayers to obtain R&D tax credits, they must first secure pre-approval from the Emirates Research and Development Council (“Council”) for the relevant R&D project[iii], provided that the project does not fall within the fields of social sciences, humanities, or the arts[iv].
In practical terms, this means that taxpayers will need to prepare a sufficiently robust technical file[v] setting out the proposed project, including what they intend to research or develop, why the activity qualifies as R&D, the underlying technical concept or hypothesis, and the anticipated qualifying expenditure, such as staffing costs and other eligible R&D costs.
This is important because access to the procedure begins not at the tax return stage, but at the project approval stage: before a taxpayer can claim the credit in its tax return, it must first obtain approval for the underlying R&D project. The Council may also require progress updates and supporting technical documentation to verify that the activities undertaken and the expenditure incurred remain consistent with what was approved.
Companies are not simply claiming relief after the cost was incurred; they are required to present the project in advance[vi], explain how it will be carried out, and identify the categories of expenditure to which the state-backed benefit will relate.
The logic is similar to that of financial aid mechanisms: the authorities will want to understand what the company plans to do, how the project is to be executed, and whether the expenditure for which support is sought is genuinely directed towards qualifying R&D activity.
Do I Need Professional Help to Navigate this System?
Although the R&D Tax Credit regime creates a significant opportunity for innovative businesses, access to that benefit is unlikely to be straightforward in practice. The regime does not simply reward commercial innovation in a broad sense; it requires taxpayers to show that a project meets specific legal and technical criteria, that the relevant expenditure is genuinely eligible.
The real challenge will often lie not in whether a business is innovating, but in whether that innovation has been properly identified, structured, documented, and presented for the purposes of the regime.
This is where legal and tax support becomes particularly important. Businesses may require assistance in assessing whether a project can qualify, identifying the categories of expenditure that may properly be included, preparing the documentation required for pre-approval, and aligning the claim with their broader corporate tax position and internal governance processes.
In that sense, professional advice is not merely supportive of the process; it may be essential to ensure that qualifying businesses are able to access the relief that the regime is designed to offer without any hiccups.
Final Thoughts
The UAE has sent a clear message: innovation is to be encouraged not only in principle, but through tangible tax support. This new law is an important step in making that policy effective in practice and gives businesses a clearer route to accessing the R&D Tax Credit regime.
For taxpayers, however, the key takeaway is straightforward. The benefit may be generous, but it is not automatic. Businesses that wish to take advantage of the regime will need to approach it with the same discipline they apply to the underlying R&D itself: with planning, structure, documentation, and careful execution.
M&CO Legal has in-house experience in R&D tax credits and grant applications through our associates. Pedro Seabra Caeiro brings over three years of experience across Portugal, Spain, and Belgium, having assisted and advised companies on obtaining subsidies from the European Development Funds and receiving R&D Tax Credits in almost all sectors in existence.
[i] Article 3 of the Decision.
[ii] Article 2 of the Decision.
[iii] Article 4 of the Decision.
[iv] Article 3 of the Decision.
[v] Article 4 of the Decision.
[vi] Article 4 of the Decision.
