UAE Introduces R&D Tax Credit Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026

25 March 2026 – The UAE Ministry of Finance has issued the much-anticipated Cabinet Decision No. 215 of 2025 (Cabinet Decision/CD) and Ministerial Decision No. 24 of 2026 (Ministerial Decision/MD), establishing a Research and Development (R&D) Tax Credit regime under the United Arab Emirates (UAE) Corporate Tax Law and its implementation. Effective for tax periods beginning on or after 1 January 2026, the decisions introduce a significant incentive for businesses undertaking qualifying R&D activities in the UAE.

Following are the key provisions and summarized framework as per the aforesaid Decisions:-

Research and Development

• The creative and systematic work pursued to increase the stock of knowledge, including human, cultural, and societal knowledge, with the aim of innovating new applications for available knowledge.

Qualifying Research and Development Activity

• Any activity practiced in the state as part of a Research and Development project meeting the requirements set forth.
• MD 24/2026 clarifies that activities must satisfy ALL five criteria mentioned below:
  • Novel - aims to produce new findings. 
  • Creative - involving original concepts or hypotheses. 
  • Uncertain - outcome or means of achieving it are not known in advance. 
  • Systematic - following a plan and budget. 
  • Transferable or reproducible - results can be applied or replicated in other contexts. 
• Assessment of whether an activity constitutes a Qualifying R&D Activity to be made having regard to the criteria set out in the Frascati Manual on Guidelines for Collecting and Reporting Data on Research and Experimental Development, The Measurement of Scientific, Technological and Innovation Activities issued and updated from time to time by OECD.

The MD also specifies that Qualifying R&D Activities shall not include any R&D activity conducted in the fields of social sciences, humanities, and the arts. 

Who’s eligible?

• UAE-resident juridical persons (including Free Zone entities) and foreign entities with a UAE Permanent Establishment, subject to Corporate Tax and/or Top-up Tax, carrying out qualifying R&D activities in the UAE. 

Who’s not eligible?

• Entities not subject to Corporate Tax and not subject to Top-up Tax.
• Entities that have opted for the Small Business Relief.
• Any other entity specified by a ministerial decision.

Qualifying Expenditure 

• Qualifying R&D Expenditure value should not be less than AED 500,000 for each R&D project per year.
• The expenditure should be deductible and should not include any part or percentage that is funded directly or indirectly through a grant and not be subject to any other incentive, credit, exemption, or facilitation under the Corporate Tax Law

Key Conditions to Qualify include

• Minimum number of employees involved in qualifying R&D activities. 
• Pre-approval from the Emirates Research and Development Council is required. 
• The entity must bear the financial burden of R&D activities and benefit from its results. 
• The R&D Project aims to increase the stock of knowledge or innovate new applications for available knowledge.
• Credit Rates & Staff Thresholds:

Both the expenditure threshold AND the minimum R&D Staff count must be met simultaneously. Failure to meet either threshold results in a downward rate adjustment to the highest tier where both conditions are satisfied. 

Carry forward 

• Unused credits may be carried forward to subsequent tax periods provided:
  • The same owners hold at least 50% ownership throughout; or
  • After a >50% ownership change, the entity continues the same or similar business.
• Above not applicable to Qualifying Entities whose shares are listed on a Recognised Stock Exchange.

Key mechanics

• The credit will be calculated as a percentage of the qualifying R&D expenses incurred. The credit shall be used to settle Corporate Tax and/or Top-up Tax due for the qualifying entity or any other person.
• The credit is non-refundable in accordance with MD 24/2026.
• Credits incorrectly obtained must be repaid, with administrative penalties applicable under Federal Decree-Law No. 28 of 2022.
• Unutilised credits may be transferred to group entities with at least 75% common ownership, maintained throughout the relevant period. The transferee must use the credit in the same period — it cannot carry forward or re-transfer. Usage is capped at the transferee's remaining tax liability after its own credits.
• Credits transfer to a successor on business restructuring under Corporate Tax Law Art. 27, provided the transferee continues the associated R&D activities for at least 2 years. Discontinuation within 2 years triggers full claw-back.
• Qualifying Expenditure and R&D Staff are aggregated across Tax Group members to determine the applicable rate tier. The Parent Company is responsible for pre-approval and filing. On Tax Group cessation, credits follow the Parent Company unless it ceases to be taxable.
• The R&D Tax Credit, arising to a Qualifying Entity that is a Constituent Entity, Joint Venture, or JV Subsidiary of a Domestic Group within the scope of UAE QDMTT, could be utilised against the Top-up Tax liability of the relevant Domestic Group subject to other conditions specified.
• 7-year record-keeping requirements.

Utilization sequence of R&D Credit

• Credit must first be used against the relevant period’s Corporate Tax and/or Top-up Tax liability before any amount is carried forward or transferred.
• Where there are multiple years of R&D credits, credits from earlier Tax Periods / Fiscal Years should be used first.
• For Tax Groups, the credit of a group member is first used against the Corporate Tax liability of the Tax Group. In addition, any pre-grouping R&D credits are used before the Tax Group’s own R&D credits.
• For entities within a Domestic Group for Pillar Two purposes, the credit may be utilized against the Domestic Group’s Top-up Tax liability, but only after it has first been used against the relevant Corporate Tax liability of the entity, Tax Group, or eligible transferee.
• Unutilized R&D credits may be transferred, whereby the transferee can only use the transferred amount to the extent of its remaining liability after first utilising its own R&D tax credit. 

Important deadline: Requests submitted after the deadline for filing the Corporate Tax or Top-up Tax return will not be considered unless the Authority agrees to accept them in exceptional circumstances.

Documents required for submitting the request for the R&D Tax Credit

• Evidence of obtaining the necessary pre-approval from the Emirates Research and Development Council.
• Signed statement from top management confirming the accuracy of the provided information.
• Detailed statement of qualifying R&D expenses, in accordance with the requirements specified by the authority.
• Audited financial statements of the qualifying entity.
• Any other information or documents specified by a decision issued by the minister.

Interaction with UAE QDMTT

• As indicated above, the R&D Tax Credit, arising to a Qualifying Entity that is a Constituent Entity, Joint Venture, or JV Subsidiary of a Domestic Group within the scope of UAE QDMTT, could be utilised against the Top-up Tax liability of the relevant Domestic Group subject to other conditions specified.
• For entities within a Domestic Group for Pillar Two purposes, the credit may be utilized against the Domestic Group’s Top-up Tax liability, but only after it has first been used against the relevant Corporate Tax liability of the entity, Tax Group, or eligible transferee.
• Further, as part of the Side by Side (SbS) package, the OECD recently introduced the Substance-based Tax Incentives Safe Harbour (SBTI SH). This safe harbour allows a “zero impact” treatment of Qualified Tax Incentives (QTIs) for GloBE purposes. 
• The new UAE R&D tax credit shows that it could potentially qualify as a QTI given that it is based on expenditure, reduces the CT liability and is in principle generally available. This requires a detailed analysis for each case.
• UAE Taxpayers benefitting from this tax credit could limit any additional taxation triggered under the UAE DMTT rules by the use of this tax credit, if an election is made to apply the SBTI SH. Effectively, this would mean that the tax credit can be added back to the Covered Tax amount and consequently will have a positive effect on the ETR calculation (i.e., ETR goes up). 
• However the above safe harbour is a mere guidance from the OECD as of now and for it to apply in practice, the UAE will have to introduce this SBTI SH in their local legislation as well.

Risk Areas

• Anti-Abuse: Any arrangement lacking economic substance or genuine R&D character adopted to obtain or inflate a credit will be counteracted. Additionally, within 5 years of the last credit claim, claw-back is triggered if the entity ceases to be taxable, becomes a Qualifying Free Zone Person, applies small business relief, enters liquidation, or redomiciles outside the UAE
• Artificial Business Separation: Splitting a business across multiple entities to remain within lower expenditure thresholds while collectively exceeding them is treated as an impermissible tax advantage. All credits are clawed back and unused credits forfeited.

Action Points/ Key takeaways

• Assess whether your entity and activities meet the qualifying conditions.
• Check the current R&D expenditures against eligible conditions mentioned above.
• Engage with the Emirates Research and Development Council to obtain the pre-approval in timely manner.
• Review grant agreements and its effect, if any. 
• Establish proper documentation and record-keeping of the R&D related activities.
• Monitor further guidance and announcements from the UAE authorities. 

Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026 together establish a fully operational R&D Tax Credit regime in the UAE. With credit rates reaching up to 50% on qualifying R&D expenditure above AED 2 million — subject to maintaining at least 14 R&D Staff — the potential tax benefit may be substantial. However, the decisions are compliance-intensive: mandatory pre-approval, strict UAE-nexus rules, anti-abuse provisions, a 7-year record keeping obligation and so on. Entities that proactively assess eligibility, engage with the Emirates Research and Development Council., and build robust documentation frameworks will be best placed to fully leverage the benefits of this incentive.