Global Partner. Integrated Solutions.
25 March 2026
R&D Tax Credit - A significant step towards the UAE's innovation driven tax incentives under the Corporate Tax framework
 
As the corporate tax landscape continues to evolve, new incentives are being introduced. The UAE recently introduced R&D Tax Credit regime1, and last week it issued additional implementation guidance2, bringing much-needed clarity on eligibility, calculation mechanics, compliance requirements, and anti-abuse provisions.

Important terms
 
Qualifying entity

All entities engaged in Qualifying R&D Activities, including:
  • Foreign companies having a permanent establishment in the UAE
  • Free zone entities that are subject to Corporate Tax at 9% and/or Top-up Tax.
The Following entities are excluded:
  • Entities not subject to Corporate Tax or Top-up Tax
  • Entities that have elected for Small Business Relief
  • Any other entity specified by the Minister is also excluded.
The qualifying entity must obtain pre-approval from The Emirates Research and Development Council (the Council) for any R&D Project for which the R&D Tax Credit is claimed.
 
Qualifying R&D activities

Activities carried out in the UAE as part of an R&D project, provided they are:
  • Novel, in that it aims to produce new findings.
  • Creative, involving original concepts or hypotheses.
  • Outcomes are uncertain, or the means of achieving them are not known in advance.
  • Systematic, following a plan and budget.
  • Transferable or reproducible.
The key determinative factor shall be the criteria set out in the OECD Frascati Manual.

Note: The examples below are illustrative and provided by Nexdigm for guidance only; they are not part of the official notification.

Some common examples of such Qualifying R&D activities may be:
  • designing an AI model for general or specific industry use
  • building new systems driven by technology under a defined business plan and budgets
  • developing substitutes for existing resources
It is important for businesses to document not only what is developed but also the technical uncertainties encountered and the creative solutions devised along the way.

Key Exclusions:
  • R&D activities in the fields of social sciences, humanities, and arts.
  • R&D activities performed outside the UAE.
Read More

How we can help

R&D tax credits will be available for all tax periods commencing on or after 1 January 2026. No timelines are prescribed for obtaining council approval. However, companies seeking such approval must immediately approach the council and submit the required documentation to obtain the mandatory pre-approval.

The R&D tax credit scheme aligns with substantial deductions/exemptions offered by various other jurisdictions to promote the innovation and technology sectors. However, careful workforce planning and budgeting of expenses are essential.

USA | Canada | Poland | UAE | India | Japan
Reach out to us at [email protected]
DISCLAIMER
This alert contains general information which is provided on an "as is" basis without warranties of any kind, express or implied, and is not intended to address any particular situation. The information contained herein may not be comprehensive and should not be construed as specific advice or opinion. This alert should not be substituted for any professional advice or service, and it should not be acted upon or relied upon or used as a basis for any decision or action that may affect you or your business. It is also expressly clarified that this alert is not intended to be a form of solicitation or invitation or advertisement to create any adviser-client relationship.

While every effort has been made to ensure the accuracy of the information contained in this alert, the same cannot be guaranteed. We accept no liability or responsibility to any person for any loss or damage incurred by relying on the information contained in this alert.

© 2026 Nexdigm. All rights reserved.