Until now the UAE regime rewarded businesses for sitting inside a perimeter — a free zone, the small business threshold — rather than for what they spent. This is the first incentive tied to actual expenditure. It applies to tax periods beginning on or after 1 January 2026, which means the current year already counts: the credit is built up during the financial year, through accounts that separate the costs, and cannot be reconstructed after the books are closed.
What happened
On 18 March 2026 the Ministry of Finance published Cabinet Decision No. 215 of 2025 together with Ministerial Decision No. 24 of 2026. Read as one instrument, they create a research and development (R&D) tax credit inside the UAE corporate tax system. The credit applies to tax periods beginning on or after 1 January 2026. Qualifying activities follow the definition set out in the Frascati Manual of the OECD, the Organisation for Economic Co-operation and Development — the international standard that separates genuine research from ordinary commercial development — and the work must be physically carried out in the UAE.
What changes in practice
The credit is banded, and each band carries its own headcount requirement. On the first AED 1 million of qualifying expenditure, roughly USD 272,000, the credit is 15% and at least two dedicated research staff are required. On the slice between AED 1 million and AED 2 million, roughly USD 272,000 to USD 545,000, the rate rises to 35% and the headcount requirement rises to at least six. On the slice between AED 2 million and AED 5 million, roughly USD 545,000 to USD 1.36 million, the rate reaches 50% and at least fourteen dedicated staff are required. In this first phase the credit is capped at AED 2 million per entity per tax period, roughly USD 545,000, and is applied against corporate tax payable. A single project enters the calculation only where its research expenditure exceeds AED 500,000, roughly USD 136,000.
Who it applies to
UAE companies carrying out technical or scientific development within the country: software businesses, companies developing their own product, groups running an in-house engineering function. The deciding factor is not the sector but the location — the research must physically take place in the UAE. A company incorporated in Dubai whose development team sits abroad does not qualify for that portion of the cost. The top 50% band in particular presupposes a real research function: fourteen dedicated people is not a representative office.
The exposure
The exposure here is not a penalty, it is a benefit lost through the way the books are kept. The credit has to be justified with documented spend on a project-by-project basis: staff hours allocated, costs segregated, projects identified. A business that reaches year end with a single cost centre and then tries to reconstruct retrospectively which hours were research will not hold up under review. The per-project threshold matters too: splitting the work into several small projects each below AED 500,000 means falling under the threshold on every one of them and claiming nothing.
What to do now
Businesses with technical activity in the UAE should open, on the current financial year, a separate cost trail for research by project, with timesheets for the dedicated staff. Then check two things before counting on the credit: that individual projects exceed AED 500,000 of expenditure, and that the number of dedicated staff matches the band being targeted. Where the development team sits outside the UAE, run the calculation only on the portion of work performed in the country.
Sources
- https://mof.gov.ae/en/public-finance/tax/corporate-tax/
- https://u.ae/en/information-and-services/finance-and-investment/taxation/Tax-incentives-for-innovation-driven-businesses
Published 1 September 2026 on the basis of public sources and official United Arab Emirates instruments. This is not legal or tax advice. Verify your position with a qualified professional before acting.